Why Tesla is illegal in NJ

It has always bothered me that internet companies believe they can operate in disregard of the law, and then when caught simply ask that the law be changed to accommodate their business models. Even if one accepts that lots of old laws are outmoded and ban things they weren’t meant to ban, it doesn’t mean that it should be okay for companies to disregard the law.

AirBNB allows individuals to rent out their apartments or homes as hotel rooms, by the night. In NYC, this type of behavior has led to problems. One it undercuts the hotel tax and two, it turns residential properties into hotels in violation of the law. AirBNB being over the internet does not obviate these concerns and does not provide a justification for promoting violation of the law.

Now we have Tesla operating in NJ. For some reason, the Motor Vehicle Commission gave them a license for their two “dealerships” even though the law as to what a dealership must look like is clear. It must be owned by a third party, it must have an exterior sign, it must have a service department and it must have at least two cars on display.

Tesla had two NJ dealerships that clearly violated the law. They literally were not in compliance with a single aspect of the law regulating car dealerships. Tesla might believe that the law is outmoded, poorly drafted and designed to protect car dealers at the expense of manufacturers, but that is the law.

Instead of lobbying the legislature to amend the law, which would require effort, Tesla simply asked the MVC to continue licensing their existing dealerships. The MVC correctly refused to continue to ignore the law.

As to whether the motor vehicle franchise law protects consumers, that is an open question. I think that it certainly protects car dealers from being overrun by much larger manufacturers and promotes local business and investment. I believe that requiring a service department ensures that warranty repairs are locally available. One could argue as to whether display model space and signage are significant at all.

Tesla will now start selling to NJ residents over the internet or in their NY dealership only. They certainly can sell in NY, assuming they aren’t violating laws there, but I don’t see why selling directly over the internet changes their obligations to comply with NJ law. I suspect they have some litigation in their future.


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