Pub. 11 2012-2013 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 5 new jersey auto retailer W W W . N J C A R . O R G President’s MESSAGE | BY JAMES B. APPLETON NJ CAR has called upon State officials to en - force dealer franchise and licensing statutes, automotive sales and advertising regulations against Tesla, which recently opened two re- tail facilities in New Jersey. NJ CAR has called on the New Jersey Motor Vehicle Commission (NJMVC) to revoke the licenses they issued Tesla for its Short Hills Mall and Garden State Plaza locations, because Tesla is not qualified to hold a license and the storefronts do not meet minimum State facilities requirements. The Coalition has also called on the Attorney General and the Division of Consumer Affairs to investigate and prosecute Tesla for numerous violations of consumer sales and advertising regulations. NJ CAR contends that Tesla is not eligible to be licensed in New Jersey because State Law specifically prohibits direct motor vehicle sales by manufacturers. Tesla has publicly stated that it has no plans to utilize franchisees to market and distribute their electric cars. But the Tesla business model clearly violates New Jersey law and is also prohibited under similar statutes in many other states. Franchise protections have been enacted, not just to protect business owners, but also to protect the public interest in a competitive automotive marketplace and to promote an extensive network of independent shops qualified and equipped to carry out warranty service and perform safety recalls. NJ CAR has also noted that Tesla’s retail facilities inmall locations do not meet statutory and regulatory requirements for a new car dealer license. New Jersey law requires anyone engaging in the sale of new motor vehicles to prove their physical premises are adequate to service those automobiles. And the NJMVC requires an applicant to prove that the business use of automotive sales and service is permitted under local zoning laws at the proposed location. The facilities that Tesla is operating in its shopping mall locations clearly do not meet the minimum statutory facilities requirements, as they have no repair facilities or service equipment whatsoever. Tesla maintains that all motor vehicle service will be done via the web, by roving repair vans or at their east coast repair facility in Long Island. Tesla portrays itself as an innovative newcomer trying to break free from the traditional way of selling motor vehicles. In doing so, Tesla is undermining the State’s well-established consumer protection laws, which have been specifically designed to protect automotive consumers. An automobile is an enormous invest- ment. Customer support, service, repair, warranty service, and safety recall repairs, are of critical importance. That is why the State’s dealer licensing statute requires dealers to demonstrate service capabilities and facilities. The Tesla business model appears to be specifically engineered to evade many of the important legal protections applicable to auto- motive sales. Tesla claims it is not “selling” vehicles, because they sit customers at a computer terminal to complete the transaction. Yet, Tesla is taking substantial deposits of $5,000 from consumers, without any kind of written contract or agreement stating exactly what the consumer is getting for their $5,000. Apparently, $5,000 at the Tesla store buys customers a vague promise of the delivery of an unidentified vehicle at some point in the distant future, for a price subject to change, with who knows what additional fees and under unspecified terms and conditions. In order to avoid the prohibition on Sunday sales, Tesla takes a credit card num- ber on Sunday, but runs it through the system on Monday. This unregulated way of doing business subjects consumers to unnec- essary risk. For the nine or more months the customer waits for delivery of their vehicle, they bear the risk that Tesla may cease doing business, go into bankruptcy, be acquired by some other company, cease producing the vehicle in question, or any number of alternative possiblities. One of the primary targets of New Jersey’s motor vehicle advertis- ing regulations is the practice known as “bait and switch.” Simply NJ CAR Calls On State of New Jersey To Apply Dealer Licensing, Consumer Sales And Advertising Rules To Tesla PRESIDENT’S MESSAGE  continued on page 11