Tesla says New Jersey Commission has no powers to stop direct sales

Article by Andrew Christian, on September 19, 2014

The New Jersey Motor Vehicle Commission has no authority to stop Tesla Motors Inc. from implementing its direct sales model in the state, the electric-vehicle maker said in a court filing. Tesla is appealing a move by the commission to change rules in March, which effectively disallowed its stores in the state from selling vehicles as of April 15.

Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, remarked that the issue will likely be resolved in the legislature even before the court hears Tesla’s regulatory challenge. “Something may be on the governor’s desk and signed before they even decide to grant oral arguments at all,” Appleton remarked.

Tesla’s latest brief provides detailed reasons why the Superior Court of New Jersey should overturn the commission’s rules change. Diarmuid O’Connell, Tesla vice president of business development, told Automotive News, that the change in the rules was an “error,” adding that the carmaker has prepared a legal action to deal with it.

Tesla argues in the filing that New Jersey’s franchise statute doesn’t apply to the carmaker since it has no franchisor-franchisee relationships. It also argues that the commission has limited powers and could not enforce the franchise statute.

The carmaker likewise argues that certain elements of the rule were previously found to violate the New Jersey Constitution like the requirements on minimum square footage, multiple car models on display and on-site servicing equipment.

At least two bills were passed in the New Jersey Assembly that would allow Tesla sell directly through up to four stores in the state. One of them, when signed into law, would update New Jersey auto franchise law.

Appleton said he expects the Senate to take a vote on the franchise bill in late September or October. The state Senate is bound to tackle the bill maybe late this month or in October, according to Appleton. The bill also requires Tesla to offer two service facilities, and additional stores aside from the four allowed would have to be franchised. [source: automotive news - sub. required]

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