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Tesla Gets Key Backing in New Jersey

A Senate committee backed a bill doesn't mention Tesla by name, but would allow a maker of so-called zero-emissions vehicles to open four outlets and a retail service center in the state.

(Tribune News Service) -- Tesla Motors moved a step closer Monday to resuming selling its electric cars in New Jersey when a Senate committee backed a bill that would allow the car company to operate four outlets in the state. Tesla’s three existing showrooms, at Westfield Garden State Plaza and on Route 17 west, both in Paramus, and in Short Hills, have been prohibited from selling cars directly to consumers since last spring, when the state Motor Vehicle Commission enacted rules requiring all new-vehicle sales to be completed through a franchise dealership.

Tesla has no franchises, and so customers can see the vehicles in the New Jersey outlets — called “galleries” — but purchase them only either online or in another state.

The bill approved by the Senate committee does not mention Tesla by name but would allow a maker of so-called zero-emissions vehicles to open four outlets and a retail service center in the state.

In December, the company opened a 25,000-square-foot Paramus center, in a former Sixth Avenue Electronics store, with room to display about a half-dozen cars, and operate a service center.

The committee voted unanimously for the bill after a brief hearing with no opposition.

James Chen, Tesla’s vice president for regulatory affairs, urged the committee to pass the bill, saying each outlet would bring “$7 million to $10 million of economic activity in its first year” to the state.

“We hire local residents. It provides for jobs. It is good for New Jersey,” he said. “By moving forward with this bill, Tesla Motors will be able to continue its investment in the state of New Jersey.” Teslas sell for $71,000 to $140,000.

The committee vote is the latest development in Tesla’s ongoing nationwide struggle to pursue its direct-to-consumer business model, which is illegal in many states and opposed by dealership associations.

Tesla says selling directly to the consumer works better with its relatively low sales volume and the complicated technology of its vehicles. Dealers, however, say franchises benefit consumers by enabling price competition and giving better customer protection in cases of safety issues and recalls.

The bill approved Monday secured the backing of the Assembly in June but has been stalled since.

The New Jersey Coalition of Automotive Retailers, a Ewing Township trade group known as NJCAR, did not submit testimony, or attend the hearing, but released a statement opposing the bill, reflecting its opposition to Tesla’s direct-to-consumer models in the past.

The group said it “opposes special legislation that would allow Tesla Motors to bypass the franchise system of neighborhood new-car dealerships.”

The group added that Tesla’s sales model “creates a vertical monopoly and eliminates competition,” and added that it prefers another bill, which has not moved in the Legislature since it was introduced in May. The bill would allow manufacturers of zero emissions vehicles to sell directly to consumers providing the sales of all such manufacturers in the state total less than 4 percent of the total number of vehicles sold in New Jersey.

Tesla has fought a similar battle over its direct-to-consumer sales model in several states, including in New York, which last year agreed to allow it to continuing operating its five existing stores in the state. New stores must be operated as franchise dealerships.

Last October, Michigan Gov. Rick Snyder signed legislation banning direct car purchases. Texas, Arizona and Virginia also have limited the Tesla sales model.

The fight is now unfolding in Connecticut, where a bill before the Legislature would make an exception for Tesla to the state’s laws banning direct-to-consumer sales. It is opposed by auto dealers.

The company in its annual report, released in February, said it has sold about 60,000 cars total to date, and had revenues of about $3.2 billion and a loss of $294 million.

©2015 The Record (Hackensack, N.J.) Distributed by Tribune Content Agency, LLC