Tesla to Convert New Jersey Stores to Showrooms After Ban

Tesla Motors Inc. Chairman Elon Musk said the company will keep its two New Jersey stores open as showrooms after appointees of Governor Chris Christie barred it from selling directly to consumers.

Musk said Tesla’s stores, at the Garden State Plaza in Paramus and the Mall at Short Hills in Millburn, will become “galleries” on April 1, when the ban takes effect. Customers can view the cars there before ordering from the company’s website. Tesla will continue selling from locations in Manhattan and suburban Philadelphia, he said in a blog post.

The eight-member Motor Vehicle Commission, which consists of members of Christie’s cabinet and other gubernatorial appointees, voted unanimously March 11 to block Tesla from direct sales. While auto dealers said the move would protect consumers, Tesla and its supporters accused the state of favoring local dealerships.

“As anyone who has been through the conventional auto dealer purchase process knows, consumer protection is pretty much the furthest thing from the typical car dealer’s mind,” Musk wrote in the post.

Kevin Roberts, a spokesman for Christie, declined to comment yesterday on Musk’s blog post in an e-mail. He pointed to an earlier statement this week saying the governor believes Tesla needs the Legislature to lift the direct-sales prohibition.

Photographer: Emile Wamsteker/Bloomberg

A vehicle charger at the Tesla Motors Inc. store at the Short Hills Mall in New Jersey on March 12, 2014. Close

A vehicle charger at the Tesla Motors Inc. store at the Short Hills Mall in New Jersey on March 12, 2014.

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Photographer: Emile Wamsteker/Bloomberg

A vehicle charger at the Tesla Motors Inc. store at the Short Hills Mall in New Jersey on March 12, 2014.

The Christie administration “does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning,” the statement said.

State Battles

Musk, the billionaire co-founder of PayPal Inc., said Tesla is considering legal action and urged New Jersey residents to contact state lawmakers. He also thanked the almost three-dozen supporters who showed up at the hearing in Trenton, the state capital, where the vote was taken before the public was allowed to speak.

Tesla is battling dealers state by state for the right to sell its cars directly to consumers. Ohio, New York, Maryland and other states have sought to block the company, and retailers in Texas successfully backed the nation’s toughest restrictions.

Dealers fear Tesla’s model would set a precedent that could let other automakers sidestep the way independent franchisees have sold and serviced vehicles for eight decades. If Tesla succeeds in bypassing middlemen, some argue that future startups or entrants from China or elsewhere could sell directly to consumers or even create online retail outlets that sidestep dealers entirely.

New Technology

Tesla argues company-operated stores are necessary as it develops because it has to both sell vehicles and promote a new technology, Diarmuid O’Connell, the company’s vice president of business development, said in an interview last week.

“I disagree with the characterization that this is disruptive,” he said. “It’s only disruptive from their point of view. It is logical and pragmatic from our point of view.”

The company’s shares fell 2.9 percent to $230.97 yesterday in New York. They have risen 54 percent this year.

Tesla’s Model S, which starts at $71,000 and can sell for more than $100,000 with options, leads in Consumer Reports rankings as the best car of 2014. Shipments of the electric sedan from Tesla’s Fremont, California, factory are to grow more than 55 percent this year, with sales expanding in Europe and starting in China this month.

To contact the reporters on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet, Stephen West

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