New Jersey kills the electric car -- is Ohio next?

The Buckeye State is currently weighing legislation that would ban automakers -- namely, electric-car company Tesla -- from owning a dealership outright.

By Staff Mar 12, 2014 12:29PM

Tesla dealership in Los Angeles © MCP/Rex FeaturesBy Chris Ciaccia, TheStreet

Following yesterday's ban in New Jersey, Tesla Motors (TSLA) is hoping the same fate doesn't befall it in Ohio.

In a report first seen in The Columbus Dispatch, Tesla and the Ohio Automobile Dealers Association met Tuesday regarding whether Tesla's business practice of having company-owned stores, as opposed to traditional dealerships, should be banned in the state of Ohio.

Tesla is banned from selling directly to consumers in Texas, Arizona and, as of April 1, New Jersey. logoSenate Bill 260 is currently up for debate in the Ohio Senate, which states that an auto manufacturer cannot own a dealership outright. The bill was introduced in December, as dealers have become concerned about Tesla's presence in the state.

Palo Alto, Calif.-based Tesla currently has two stores in the state of Ohio, one in Easton and another in Cincinnati. The legislation, as it currently stands, would prevent Tesla from opening any more stores.

Tesla could not be immediately be reached for comment for this story, but company spokeswoman Liz Jarvis-Shean did say the company would have more to say on the New Jersey ban in the coming days.

Shares of the electric automaker were lower in early trading Wednesday, down 1.3 percent to $231.32.

Tesla currently has two stores in New Jersey, one in Paramus and the other in Short Hills. The company also has a service station in Springfield Township. Tesla said in a blog post Tuesday, "This is an issue that affects not just Tesla customers, but also New Jersey citizens at large, because Tesla (will not) be unable to create new jobs or participate in New Jersey's economic revival."

The company held a conference call Tuesday to discuss the pending ban, which was later imposed. On the call, Tesla said it's sold "several hundred cars" in New Jersey, but declined to discuss the exact amount. Tesla's Vice President of Corporate and Business Development Diarmuid O'Connel called the ban "disappointing, if not downright outrageous."

Tesla will have to shut down its operations in New Jersey, O'Connel noted, calling it a "pretty black-and-white issue." It's likely that if the legislation passes in Ohio, it would have a similar affect.

Tesla, run by CEO Elon Musk, does not operate using the traditional local auto dealership model. Instead, it owns and operates its own retail stores, similar to a high-end luxury company or Apple (AAPL).

Consumers walk in to discuss the Model S with a product specialist, set up a test drive for the car, and can then purchase the car on Tesla's website to the consumer's exact specifications, or do so in the store. Tuesday's ban in New Jersey prevents customers from doing that.

Similar legislation is currently being discussed in New York as well.

More from TheStreet
Mar 12, 2014 12:50PM

Nothing stops progress better than regulation to benefit politicians' cronies.

Another reason NOT to live in NJ....

If I were Tesla, I would go to NYC still in view of NJ and open a dealership. In front of the dealership would be a flagpole.... The flagpole would be shaped like a middle finger.....

Lets kill free enterprise so that we can justify our protected jobs in NJ govt......

Henry Ford used to sell cars door to door.....

Mar 12, 2014 2:53PM
let the consumers decide and be responsible for their decisions.  don't need the government to tell people how to live their lives
Mar 12, 2014 2:53PM
Sounds like the automobile dealers association has friends in high places, or perhaps it's the petroleum dealers (gas stations and their suppliers). Sounds like we the people of New Jersey need to have a word with our elected officials. And before this discussion deteriorates into a name calling us vs. them, it's ALL our elected officials. Once elected, they all say how hard they are working for us citizens, but they really work for their own best interest or that of a small minority who are their buddies, or contribute to their reelection campaigns. P.S., price fixing does go on with "the big 3" and their dealer network, you should ask for a cost analysis of what it costs to build and sell a car sometime. Huge margin between manufacturing costs and MSRP, even bigger markup on options added to a base model. Adding Tesla to the mix will improve competition, not reduce it.
Mar 12, 2014 3:03PM

Eventually Tesla will win out at the Supreme Court level. This violates so many free market laws that Tesla could literally pick it's argument from a dozen previous rulings and win.

So how does this law not effect Apple and a dozen other companies doing the same thing? Do these states honestly believe they can pass laws directed at one specific company instead of others?

One specific lobby literally BUYING a law (and congressmen) to promote their own monopoly.

Rockefeller, Carnegie, and the rest would be proud!!

Mar 12, 2014 3:00PM

The auto-dealership lobby is indeed powerful.

What do consumers lose by buying direct from the manufacturer?

Mar 12, 2014 2:57PM
If you want outright failure then get the Government involved. They are all controlled by Lobbyists.
Mar 12, 2014 2:53PM

The auto dealers must have a pretty strong lobby in those states (stating the obvious).  I don't think the argument that this is protecting locally owned business holds water either.  The automakers already limit the number of dealers in a particular area.  Also, most lots are owned by a large multi-state companies (not small businesses) with multiple dealerships and selling many nameplates.  


Mar 12, 2014 2:58PM
Harder to tax electricity, than gasoline I guess. When government worries about losing money, or not making enough, it is way too big. We should be downsizing government, and not upstart companies that create jobs. If Tesla becomes big enough, they would have to have privately owned dealerships. Sounds like the big three and government trying to kill the Tucker all over again.
Mar 12, 2014 3:12PM
The only thing more un-American than the electric car is banning the right to sell electric cars.
Mar 12, 2014 3:23PM

Business 101: Competition almost always helps the consumer



Mar 12, 2014 3:28PM
I know they are supported by lots of subsidies and some people have issues with that, but not allowing them to operate as they want is ridiculous.  Our tax dollars subsidize the industry, and then the industry is told it cannot function as it sees fit to sell these cars.  They are trying to lower the overhead so that they can sell their product.  Cutting the middleman out results in a lower costs for the consumer.  It is not as if Tesla will be less profitable - consumers will just have more options.  These laws are idiotic.  Politicians are taking our money to support these companies, and then creating laws that prevent them from selling the cars to us!  Who foots the bill when a company like this fails?  WE DO!!!!!  95% of politicians are idiots.  Just another example.
Mar 12, 2014 12:57PM
Another reason I just can not see ever voting for Chris C.
Mar 12, 2014 3:42PM
That's right, if you can't compete then regulate and litigate.
Just another law that wasted the paid time of public servants far more interested in their own issues than those idiots (us) paying the wages!
Mar 12, 2014 1:57PM
maybe apple can use this strategy, get the states to ban android and microsoft products.  go competition!
Mar 12, 2014 3:27PM

I thought red states were all for saving people money and allowing the market to work.  WTF are they doing pushing through regulations that cost people more money by forcing a company to use a middle man to sell their cars?  The only thing that makes sense is the legislation is backed by the oil industry.  Because if electric cars benefit from a cost savings of being sold directly to consumers they may become as cheap if not cheaper than gas powered cars.

Mar 12, 2014 3:08PM
Such legislation won't kill the Tesla.  It's a car for those with money.  Just cross the state lines and get one elsewhere.
Mar 12, 2014 1:49PM

I'll NEVER vote for chrisi... Fat bas-turd..

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