With groundbreaking automotive innovation and explosive sales growth, Tesla Motors (TSLA) has won over the hearts of auto enthusiasts and investors alike. Tesla shares are up 213 percent for the year and its flagship Model S vehicle has won countless awards for excellence.
However, certain groups of people aren’t so elated with Tesla’s success.
Several states are currently attempting to establish or strengthen the ban of direct automotive sales, which would force consumers to purchase cars via third-party dealers. This law currently exists only in Texas, although other states such as Colorado, Oregon, Arizona, North Carolina, and Virginia are trying to follow suit.
At the moment, Tesla is the only automaker that directly sells its vehicles to customers. It utilizes its website and self-operated Tesla stores to sell cars, so the company interprets this potential ban as a deliberate, legal attack on its business. Meanwhile, individual dealer franchisees and large car retailers such as AutoNation (AN), Penske Automotive Group (PAG), and Group 1 Automotive (GPI) stand to benefit most if the legislation passes.
Last week, CEO Elon Musk tweeted that the company won a key battle in New York:
Just heard that NY auto dealers are sneaking through a bill to shut down Tesla in NY. Please call your state senator!— Elon Musk (@elonmusk) June 21, 2013
The kill Tesla bill in NY was stopped in the 11th hour due to public outcry. Am super grateful to everyone who helped.— Elon Musk (@elonmusk) June 23, 2013
However, Tesla will continue to fight legal battles in other states unless the White House influences legislation on the issue. As a result, Musk is calling on the American people for help.
The company has posted an online petition and hopes to reach 100,000 signatures by July 5. At that point, Tesla will send the petition to the White House in hopes that the Obama administration will influence state legislation.
Although the lawmakers and car dealers are widely deemed “villains” in this legal battle, both sides present legitimate arguments. The ban in Texas exists to protect the jobs of car dealers; without the ban of direct sales, third-party dealers could face brutal competition from e-commerce websites and the automakers themselves.
On the other hand, most would consider a legal crackdown on Tesla an injustice. Tesla manufactures an outstanding car that consumers want, and the outright restriction of Tesla sales would hinder healthy competition in the automotive industry and deny the public an excellent product.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer