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The Tesla Model S: So Good, New Jersey Had to Ban It


Tesla suffered a legal setback in the Garden State.

New Jersey's motto is "Liberty and Prosperity," but it will give neither one to revolutionary electric-car company Tesla Motors (NASDAQ:TSLA).

On Tuesday afternoon, the New Jersey Motor Vehicle Commission approved a proposal to ban auto manufacturers from selling vehicles to consumers without a dealer middleman, following similar moves in Arizona and Texas.

This is problematic for Tesla because it only sells direct, and so New Jersey residents will have to head to Tesla stores elsewhere to make their purchases.

Tesla claims in a blog post that Governor Chris Christie's staff had agreed that the issue would be taken up in the New Jersey legislature. That would have allowed open debate between Tesla and its antagonist, the powerful New Jersey Coalition of Automotive Retailers (NJCAR).

So why is everyone picking on Tesla? After all, they're not even remotely close to taking 1% of the US auto market.

It's a simple issue: Car dealers would love to sell Tesla vehicles like the Model S, but Tesla wants to control the customer experience every step of the way.

And if car companies were free to open their own stores, what would happen?

In all likelihood, we'd initially see a slow creep of small, highly focused manufacturer-owned retail concepts -- nothing big enough to disrupt the dealers too much. Maybe small locations that only sell hybrids or sports cars.

I'm not sure a big auto company like General Motors (NYSE:GM) or Ford (NYSE:F) would wake up one day and decide it wants to take over the dealer function altogether.

Manufacturing cars and trucks is complex enough; adding retail sales and service would be no easy operation.

But don't ignore the influence of Apple (NASDAQ:AAPL) on the world.

Apple's gotten an awful lot of marketing, branding, and customer goodwill mileage (not to mention profits) out of its stores, which of course compete with resellers like Best Buy (NYSE:BBY) and (NASDAQ:AMZN).

So to some extent, the car manufacturers would step in to compete, and in all likelihood, they'd follow the Apple model of soft selling and high-touch customer service.

Existing dealers would have to adjust to a new paradigm, so they're cutting Tesla off at the pass.

It's smart business.

However, I don't think this is necessarily damaging for Tesla in the near term.

From a units perspective, Tesla is very early in its growth stage. It is, in all likelihood, still going to attract early adopters who don't need to be sold on Tesla or electric cars in general. If someone is in New Jersey and really wants a Tesla, he or she is probably still going to get one, even if jumping through a few hoops is necessary to do so.

There's also a subtle story line at play that Tesla could exploit for marketing purposes while galvanizing its existing rabid fan base.

Forget the legalese.

What Tesla needs is advertising, and I'm offering up the copy for free:

The Tesla Model S. So Good, They Had to Ban It.

Twitter: @MichaelComeau

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