NY Auto Dealers Revving Up for Battle With Tesla

24/7 Wall St.

Auto dealers in New York failed last April to get a state court to reverse a ruling by the state's motor vehicle department approving the direct sale of its cars by Tesla Motors Inc. (TSLA). But the car dealers have not given up, and a recent ban on Tesla's sales model in New Jersey and another battle shaping up in Ohio has sent the dealers in search of sympathetic state legislators.

If New York car dealers are successful in their efforts to ban direct sales by car makers, New York will join New Jersey, Arizona, Colorado and Texas, where Tesla has been prohibited from selling cars directly to customers. In Virginia the company was able to negotiate a compromise that permits the company to sell directly from one store only.

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Tesla founder and CEO Elon Musk has not impressed politicians as much as he has technocrats and investors. Perhaps that is because he does not spread any money around. The New Jersey auto dealers donated nearly $700,000 to New Jersey politicians in the years between 2003 and 2009. And in politics, money talks and bullshit walks.

According to a report in the New York Post, the Greater New York Automobile Dealers Association are "confident" that New York will be the next state to ban direct sales of Tesla cars, either through an appeal of last April's court ruling or through legislative action.

What can Musk do if he doesn't want to support the politicians with a few well-placed donations? Tesla could sue, but that might tarnish the image of Tesla and Musk as the good and the pure and the environmentally sound.

Tesla could establish its own franchisees, but the company sells too few cars to make that a financially sound option. And the company does not want to sell through established dealers for whom the long sales lead-time for a Tesla is likely a non-starter.

The company could accept the inevitable and just walk away to fight again in a state where it has a better chance of winning. But that would mean a billionaire honcho had caved in, and billionaire honchos don't do that. That is not how they became billionaire honchos.

A lawsuit seems inevitable, but that likely will take a few years to settle and almost certainly would have to go to the U.S. Supreme Court if the company did not want to fight a similar battle in every state.

And face it, the number of cars Tesla sells has nothing at all to do with company's stock price. It sold about 20,000 cars last year and its market cap is more than half that of General Motors Co. (GM), which sold 2.8 million vehicles in 2013.

Tesla shares were down about 1.2% in premarket trading Monday, at $234.98 in a 52-week range of $34.92 to $265.00.

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