Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Will Tesla Motors Inc (TSLA) Adopt Dealerships Before Any Other States Join The Ban List?

Tesla Motors Inc (NASDAQ:TSLA) was against the dealership-model and opted for dealer-free model, claiming that the dealership-model might not work well with electric vehicles. Tesla motors could also see larger profit margins with the dealer-free model that the company is currently operating at. The auto-dealers around the US are infuriated with Tesla’s decision to go with dealer-free model and are trying to push for a law which bans the companies directly selling cars to customers, quoting the anti-competitiveness reasons. Four states have already banned dealer-free model of Tesla Motors Inc (NASDAQ:TSLA); Texas, Arizona, New Jersey and Maryland. Michigan is the latest addition to the list. A ‘Washington Post’ article describes details of Michigan’s upgraded law against Tesla Motors Inc (NASDAQ:TSLA) and its implications.

Elon Musk

Michigan Governor, Rick Snyder has signed a legislative bill on Tuesday, which bans Tesla Motors Inc (NASDAQ:TSLA) from directly selling its vehicles to consumers in a dealer-free model. In the other four states which bans the dealer-free model, Tesla was allowed to display the vehicles to consumers in galleries, but the upgraded law in Michigan even bans the option for Tesla. None of the state laws has explicitly banned Tesla Motors Inc (NASDAQ:TSLA) from selling its cars, but bans the dealer-free model which the company follows. Though, the law cannot stop the company from selling its vehicles online.

Question among consumers is that why this law is applicable only to auto makers and not to phone makers like Apple Inc. (NASDAQ:AAPL) or the cloth sellers like Gap. Snyder’s support statement for the bill stated that it was just to strengthen the existing law. Article talked about the fact that four out of five state Governors, who are Republicans, except for Maryland’s Governor, O’Malley who is a Democrat.

For other industries, Snyder though is pretty much against the laws that prevents competition and affect the growth in that sector. But what is wrong with the automotive industry. This is a new story though, many former Republican politicians have slated laws which hugely favor the auto dealers. Starting from Ronald Reagan as Governor of California in 1973 till George W. Bush as Governor of Texas who first imposed the law against dealer-free sales of automobiles, this has been a continuing story of Republicans making laws to hinder the auto maker’s growth.

But what will be Tesla Motors Inc (NASDAQ:TSLA) reply to this increasing problem of not being able to sell its vehicles locally? With lower volume of sales, Tesla Motors Inc (NASDAQ:TSLA) could continue with the dealer-free model and sell, but when the more anticipated Model X launches and the volume of sales goes up, they might have to reconsider adopting the dealer based model.

 Disclosure: None

Warren Buffett and BillionairesFree Report: Warren Buffett and 12 Billionaires Are Crazy About These 7 Stocks

Let Warren Buffett, David Einhorn, George Soros, and David Tepper WORK FOR YOU. If you want to beat the low cost index funds by an average of 6 percentage points per year look no further than Warren Buffett’s stock picks. That’s the margin Buffett’s stock picks outperformed the market since 2008. In this free report, Insider Monkey’s market beating research team identified 7 stocks Warren Buffett and 12 other billionaires are crazy about. CLICK HERE NOW for all the details.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.