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Tesla fighting dealer rule change in New Jersey

In a hearing before the New Jersey Motor Vehicle Commission today, Tesla will argue against a rule change that would eliminate its sales in the state.

Wayne Cunningham Managing Editor / Roadshow
Wayne Cunningham reviews cars and writes about automotive technology for CNET's Roadshow. Prior to the automotive beat, he covered spyware, Web building technologies, and computer hardware. He began covering technology and the Web in 1994 as an editor of The Net magazine.
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Tesla Store
Tesla sells its cars through factory-owned stores, such as this one in San Jose. Wayne Cunningham/CNET

If you were planning to buy a Tesla Model S in New Jersey, you might have to go to New York. On Monday, New Jersey fast-tracked a rule change that would effectively eliminate direct sales from a manufacturer such as Tesla to consumers. The new regulation was supported by an association of New Jersey auto dealers.

Tesla currently has two stores and one service center in New Jersey. The New Jersey Motor Vehicle Commission (NJMVC) had, up to this week, approved licenses for the stores to sell vehicles. Tesla had been in discussions with the NJMVC and members of the New Jersey administration to retain the store licensing, with proposals to put any regulatory changes before a public vote. The NJMVC informed Tesla on Monday that the new rules, which would shut down Tesla's stores, would bypass the legislature and would be passed by the bureaucracy.

Tesla will be afforded a chance to argue against the rules before the NJMVC today at 2 p.m., ET. Pro-Tesla Web site Transport Evolved will cover the hearing in a live blog.

Rules such as those in New Jersey are not uncommon. Currently, Texas and Arizona completely block Tesla stores with similar regulations designed to protect state auto dealers. Many other states changed similar rules previously on the books to allow Tesla to sell to consumers.

In a conference call ahead of the hearing, Tesla's Diarmuid O'Connell, vice president of Business Development, responded to a question about whether Tesla would argue against the state sales bans on interstate commerce grounds in Federal court. He said, "We've pursue if we have to. We don't want to be in these dust-ups. We are fundamentally an engineering company. We are not interested in legal or legislative strategies as a preference."

The US Constitution's Commerce Clause puts the power to regulate interstate commerce in the hands of Congress.

If the new rules pass in New Jersey, O'Connell said that it would have to close its stores within the next three or four weeks.