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article imageTesla chief slams New Jersey for barring direct car sales

    Mar 14, 2014 in Business

(Reuters) - Tesla Motors Inc escalated its war of words with New Jersey on Friday, lambasting a regulatory change approved by the state earlier this week that bars the "green car" company from selling vehicles directly to the public.

The electric car maker is now studying "judicial remedies" to fight the ruling, Chief Executive Elon Musk said in a sharply worded blog post. The ruling, which requires sales of all new cars to go through dealer franchises, was approved by New Jersey Governor Chris Christie's administration on Tuesday.

"The rationale given for the regulation change that requires auto companies to sell through dealers is that it ensures 'consumer protection," Musk wrote. "If you believe this, Gov. Christie has a bridge closure he wants to sell you!"

He added: "Unless they are referring to the mafia version of 'protection,' this is obviously untrue."

Christie has been under political fire over a traffic scandal at the busy George Washington Bridge

A spokesman in Christie's office referred to a statement from earlier this week that said Tesla had known for a year it would need approval from the state legislature to establish its direct-sales model.

Musk has long argued that the dealer franchise system is a bad fit for 11-year-old Tesla because he says traditional car dealers make more money from gasoline-powered cars and as a result they have less incentive to advocate for electric cars, like the Model S sedan.

But dealers say the franchise system, in which automakers rely on a network of independent dealers to sell cars, offers an extra layer of accountability for consumers. Competition between dealers also lowers vehicle prices, dealers say.

"This is the business equivalent of a temper tantrum and Elon Musk needs to take a deep breath," Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, said when asked to respond to Musk's blog post on Friday.

Starting on April 1, all of Tesla's stores in the state will convert to galleries, where potential customers can see the car and ask questions. But staff will not be able to discuss price or complete a sale of a car.

However, Musk said, New Jersey residents can still order the Model S electric car online. They can also buy the vehicle from Tesla stores in New York and near Philadelphia.

Palo Alto, California-based Tesla unveiled its Model S in 2009. The all-electric sedan costs $70,000 and up.

(Reporting by Deepa Seetharaman in San Francisco; additional reporting by Lewis Krauskopf in New York; editing by Matthew Lewis)

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