Updated from 9:03 a.m. to include analysts thoughts in the seventh paragraph.
In a report first seen in The Columbus Dispatch, Tesla and the Ohio Automobile Dealers Association met yesterday regarding whether Tesla's business model of having company owned stores as opposed to traditional dealerships, should be banned in the state of Ohio. Currently, Tesla is banned from selling directly to consumers in Texas and Arizona, and as of April 1, New Jersey.
Senate Bill 260 is currently up for debate in the Ohio Senate, which states that an auto manufacturer cannot own a dealership outright. The bill was introduced in December, as dealers have become concerned about Tesla's presence in the state. Palo Alto, Calif.-based Tesla currently has two stores in the state of Ohio, one in Easton and another in Cincinnati. The legislation, as it currently stands, would prevent Tesla from opening any more stores.
Tesla could not be immediately be reached for comment for this story, but company spokeswoman Liz Jarvis-Shean did say the company would have more to say on the New Jersey ban in the coming days.
Shares of the electric automaker were higher in Wednesday trading, gaining 2.8% to $2340.86.
The company held a conference call yesterday to discuss the pending ban, which was later imposed. On the call, Tesla said it's sold "several hundred cars" in New Jersey, but declined to discuss the exact amount. Tesla's Vice President of Corporate and Business Development Diarmuid O'Connel said the decision would be "disappointing, if not downright outrageous." If the issue passes, Tesla would have to shut down its operations in New Jersey, O'Connel noted, calling it a "pretty black-and-white issue." It's likely that if the legislation passes in Ohio, it would have a similar affect.
While it wouldn't be a material affect to Tesla's sales, it would have some impact. Wedbush Securities analyst Craig Irwin believes it's a minor inconvience for customers, and Tesla alike. "We see this as only a minor inconvenience for Tesla, pending litigation, as the company has relatively few sales in NJ, and customers can easily circumvent the rule change by purchasing vehicles online and taking delivery in other locations," Irwin wrote in a note to clients. He rates shares "outpeform" with a $295 price target.
Tesla, run by CEO Elon Musk, does not operate in the traditional model, instead owning its own retail stores, similar to a high-end luxury company, or Apple (AAPL) owning its own Retail Stores. Consumers walk in to discuss the Model S with a product specialist, set up a test drive for the car, and can then purchase the car on Tesla's Web site to the consumer's exact specifications, or do so in the store -- yesterday's ban in New Jersey prevents customers from doing that.
Similar legislation is currently being discussed in New York as well.
--Written by Chris Ciaccia in New York
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