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Tesla Takes on Missouri

Stocks in this article: TSLA

NEW YORK (TheStreet) -- Following confrontations with the states of New Jersey and Ohio, Tesla Motors (TSLA) is in another battle, this time, with the state of Missouri.

In a post to the company's blog yesterday, Tesla noted that automobile dealers' lobbyists in Missouri are pressuring state legislators to ban Tesla from selling its vehicles direct to consumers, much like what happened in the states of New Jersey and Ohio.

Here is the blog post in its entirety:

By The Tesla Motors Team

We have just become aware of a last-minute attempt by the auto dealers lobby, via pressure on legislators, to use a procedure that would bar Tesla from selling its vehicles direct to consumers in the state. This extraordinary final-hour maneuver amounts to a sneak attack to thwart due process and hurt consumer freedom in Missouri.

In the last week before Missouri's legislature ends its current session, dealers proposed new language in an existing bill that would force Missouri consumers to purchased new vehicles only through middleman franchised dealers. The bill, HB 1124, has been in circulation since December 2013. It was passed by the House on April 17 without the anti-Tesla language. Last night, the bill with the new anti-Tesla language passed the Senate after zero public consultation and is soon moving to the House floor for a final vote, essentially without debate.

This change is not an innocent, minor amendment. It is completely unrelated to the original bill, which was about laws regarding all-terrain vehicles, recreational off-highway vehicles, and utility vehicles. It is also a complete 180 from what the original bill proposed. The current statute only bars franchisors from competing against their franchisees (for example, Ford cannot compete against Ford dealerships).

Tesla complies with that statute because we do not compete with any franchise. Just as we saw in New Jersey, however, this bill amendment expands the scope of existing regulations well beyond their original intent. They are attempting to do so in part by redefining the word "franchisor" to mean "manufacturer," a pirouette of which the legislators may not even be aware. To be clear: this is worse than a mere case of dealers trying to protect an existing monopoly - this is a case of dealers trying to create a monopoly.

Officials at the Federal Trade Commission have already stated their support for Tesla's ability to sell vehicles direct to consumers. In a blog post, the FTC authors wrote: "Regulators should differentiate between regulations that truly protect consumers and those that protect the regulated." Separately, a letter signed by more than 70 leading economists under the banner of the International Center for Law & Economics urged Governor Chris Christie soundly dismisses every dealer argument and concludes that these bans are only motivated by "economic protectionism that favors dealers at the expense of consumers and innovative technologies."

Tesla already has a Service+ center in St Louis, MO, at which we employ 15 people. We have invested $2M in the state so far. We plan to open a larger service center in Kansas City, MO, later this year, employing another 15 people and investing an additional $1M.

This debate should be held in the full light of day with all sides being given an opportunity to make their case. Instead, the dealers are again trying to ram through a provision under the cover of darkness and without public debate. The people of Missouri deserve better from their elected officials.

To speak out against this bill, contact your legislator.

Following discussions with Ohio Automobile Dealers Association about Senate Bill 260, which would have banned Tesla from selling directly, Tesla is now free to do so in its two stores in the state, one based in Easton and the other in Cincinnati. The deal between the association and Tesla was approved by a Senate panel, according to the Associated Press.

Not only can Tesla sell directly to consumers in its two existing stores, but it allows for Tesla to open a third store in Cleveland. However the deal prohibits the Palo Alto, Calif.-based company from opening any more stores in the state. As per the agreement, Tesla is the only automaker allowed to operate its own stores in the state.

However, the outcome in New Jersey was far different.

As of April 15, Tesla was no longer allowed to sell its vehicles direct to consumers in New Jersey at its two stores in the state, in Short Hills and Springfield Township. Yet there is currently a bill being sponsored by New Jersey Assemblyman Tim Eustace (D-Bergen/Passaic) that would allow Tesla to set up four stores in the state (meaning an additional two stores), as well as being required to open a second service station in the state. The Short Hills and Springfield Township stores are currently being used as showrooms only.

The news comes just one day after Tesla reported first-quarter earnings, which saw the company earn 12 cents a share on a non-GAAP basis, generating $713 million in revenue, as it delivered 6,457 Model S units. The company produced 7,535 units for the quarter, but the rest of them are in transit to Europe and Asia, where CEO Elon Musk noted the company is seeing exceptional demand.

Also See: Tesla Is Plunging, but It's Not Why You Think

Also See: Tesla Allowed to Sell Cars in Ohio, Following N.J. Ban

Also See: Why Apple Buying Beats Doesn't Make Sense

--Written by Chris Ciaccia in New York

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