New Jersey moves to shut down Tesla sales despite protests

Oh sure, the Tesla Model S may be the "best car sold in America" per Consumer Reports, and it may be a Wall Street darling and perhaps the only electric vehicles for which demand exceeds supply. But that didn't stop regulators in New Jersey from ordering Tesla to shut down its stores by April 1 because the company doesn't use dealers like every other automaker.

In a hastily called meeting packed with Tesla supporters, the New Jersey Motor Vehicle Commission approved several rule changes that essentially shut down Tesla's two factory-direct stores in the state — not only barring automakers from selling without dealers, but also the mall showrooms that Tesla had used in place of a traditional stand-alone dealership.

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The commission had proposed the changes last year, and Tesla had asked it to hold off and allow the state legislature to weigh in on whether Tesla's model was allowed by state law. But in its order, the commission rejects Tesla's concerns about lost sales, consumer preference and the company potentially having to cut 27 jobs, saying Tesla should have to meet the same rules as any other automaker.

"There is no evidence that the franchise system results in a monopoly, the stifling of innovation, an increase in pollution, or dependency on oil," the commission wrote in its comments, adding that state franchise laws "result in fair competition among new car dealers and prevent manufacturers from creating a monopoly, which ultimately results in a benefit to consumers."

The step is just the latest battle between Tesla and car dealers over the company's insistence that it can and should sell Model S sedans directly to its customers. Texas, Virginia and Arizona have also put limits on Tesla's mall-store approach, and dealers have filed lawsuits in New York, Ohio, Massachusetts and elsewhere.

Tesla attempted to drum up support among its customers, but said in a blog that it was given less than 24 hours notice of the meeting where the commission would hold its final vote. It also accused the administration of Gov. Chris Christie of backtracking on pledges to let Tesla argue its case in the public forum of the New Jersey legislature.

Dealers — most of whom are family-owned businesses — have long contended Tesla should not be granted special treatment under state franchising laws, and that consumers are better off with dealers who don't work for the factory. Today's move adds some more juice to the debate, but it's also worth noting the diplomatic position of AutoNation, the nation's largest chain of new-car dealerships. Tesla's stance has the support of many of its buyers and fans, but there are only so many states it can lose in before it will make sense to just let dealers have the key fobs.