If you live in New Jersey and want to purchase a Tesla Motors Inc. (Nasdaq: TSLA) signature Model S, you have until March 31 to do so.
Tesla announced yesterday (Tuesday) that as of April 1 it will no longer sell its vehicles in New Jersey, following the New Jersey Motor Vehicle Commission's ruling that automakers must sell their vehicles through auto dealerships.
Tesla operates its own stores, including two in New Jersey, and sells its Model S sedans directly to customers. That will no longer be permitted under the ruling.
Company officials immediately took to the company's blog and posted a scathing reaction. Tesla claims New Jersey Gov. Chris Christie went back on his word to help delay the new regulation. A spokesman for the governor claims that Tesla knew it was operating outside the state's typical auto-retailer laws.
Dealership owners across the state were worried that Tesla's direct sales business model would lead other auto manufacturers in the same direction. Not surprisingly, the New Jersey Coalition of Automotive Retailers sided with the state's decision.
New Jersey is the third state to prevent direct sales of the Tesla Model S to consumers, joining Texas and Arizona.
Tesla has shown a tenacious unwillingness to budge. Rather than sell its vehicles through dealerships, it's completely ending sales in New Jersey - a state in which there is a high market for luxury vehicles.
Right now, the company follows a similar model to Apple Inc. (Nasdaq: AAPL), which uses its Apple Stores as part of its branding. And to Tesla, selling vehicles "its" way is more important than bottom-line sales figures.
While it may concern some investors that additional states are preventing direct sales, this is far from a death knell for Tesla and TSLA stock...
Tesla (Nasdaq: TSLA) Stock Still Strong Long Term
Tesla stock was down nearly 2% yesterday following the news. Today it regained those losses and was trading back over $240 per share.
TSLA has posted a gain of 60% in 2014 and is up an incredible 622% since the start of 2013.
Last month, the stock was fueled by news that the company would be constructing the world's largest lithium-ion battery factory for $5 billion. The Tesla Gigafactory is expected to produce more lithium-ion batteries annually in 2020 than were produced in the world in 2013. TSLA has forecast production of 500,000 vehicles a year thanks to the Gigafactory.
Before that, shareholders were rewarded with strong 2014 guidance figures in Tesla's earnings report. At the time, Chief Executive Officer Elon Musk projected sales of 35,000 Model S sedans in 2014, up from 22,447 in 2013.
But that wasn't the end of the good news...
Last week, Musk detailed his plan for European and Asian expansion of the Tesla brand. That expansion is expected to bring global sales growth of 55% this year.
Those bullish trends don't just disappear because the state of New Jersey is tightening its grip on auto sales...
Moreover, the vehicles themselves have not been banned in the state, just how they are sold. If sales figures drop drastically, the company still has the option to begin selling through dealerships.
A stock version of Tesla's model S retails at $71,000, while the fully loaded version costs more than $120,000. Consumers in New Jersey spending that much on an electric vehicle likely have the means to purchase one from a neighboring state.
The drama unfolding around the New Jersey decision should remain a blip on the radar. If numerous states follow suit, the regulation will be more noteworthy for investors. Until then, there are just too many bullish signs in TSLA stock to ignore.
What do you think about the regulation in New Jersey? Is this a big deal for Tesla and its shareholders? Give us your thoughts on Twitter @moneymorning using #Tesla.
This stock has a huge profit opportunity ahead of it, and you're going to want to buy shares now... before Google does.
- The Wall Street Journal:
Tesla to Stop Selling Electric Cars in New Jersey