State Laws – a hurdle for Tesla Motors Inc (NASDAQ:TSLA)


In the U.S there are 50 states and each state has its own law. State laws can be tricky and can vary from one state to another even though these states are part of the same country. Each state law controls the relationship between the customer, dealer and automaker. State laws can also terminate franchise arrangements, barring an auto company from selling their vehicles to the customers.

Tesla Motors Inc (NASDAQ:TSLA) has always found it difficult to operate in states mainly because it has always wanted to open its own retail outlets, while the state laws clearly state that sales will be made through auto dealers. According to analysts all these state laws are actually catering to car dealers in the state and helping them make huge profits.

Four states and District of Columbia allowed Tesla Motors Inc (NASDAQ:TSLA) to sell as much as it can through retail shops; while states like New York, Colorado, California and a few others allowed sales but with restrictions – such as limited number of sales.

North Carolina House of Representatives issued a bill to stop Tesla Motors Inc (NASDAQ:TSLA) from operating in the state but the bill was rejected. Similarly, Tesla Motors Inc (NASDAQ:TSLA) had a court room scuffle with the Massachusetts law, which wanted to bar the automobile company from selling in the state. These are just a few of the hurdles Tesla Motors Inc (NASDAQ:TSLA) has been facing regarding state laws.

In Arizona, Maryland, New Jersey and Texas; Telsa is unable to sell its cars through its own outlets. They can put the cars on show and offer test drives but the citizens of these states will have to buy them either online or from other state.

There is a general feeling of concern among the automakers; especially the Chinese who are concerned about the fact that if Tesla Motors Inc (NASDAQ:TSLA) can’t operate freely in U.S states, what about foreign automakers that want to expand to the U.S markets?

These restrictions and monopoly duels take a toll on the businesses of these automakers – ultimately resulting in a dwindling stock market. What we definitely don’t want is a market with a receding profit growth.

Telsa (NASDAQ:TSLA) has been growing in terms of share price despite all the barring and restrictions. It also holds a firm position in the foreign market but if such state law presses on, Tesla Motors Inc (NASDAQ:TSLA) might just lose its domestic position.

It is imperative for law makers to take into account the hardships of the companies and allow them some compensation in this matter. Also, setting up strict rules for companies just to favor one aspect of the state is foolishness.

The U.S has a large market and if Tesla Motors Inc (NASDAQ:TSLA) started dwindling there, it’s not only Tesla Motors Inc (NASDAQ:TSLA) that would suffer; but the whole sector will feel the brunt. Tesla Motors Inc (NASDAQ:TSLA) is one of the largest auto makers that has proved its credibility over the years, it shouldn’t be forced to compromise on its own sales – laws should be unbiased and unprejudiced.