How to Trade on Tesla's Win Against Auto Dealerships: StockTwits

NEW YORK (TheStreet) -- Tesla  (TSLA) gained ground this week against the auto dealer lobby. And investors on StockTwits.com believe it is only a matter of time before Elon Musk & Co. secure the ability to continue selling electric cars directly to consumers.

The New Jersey assembly passed a bill Monday that would allow manufacturers of zero-emissions vehicles to sell cars without going through dealerships. The bill would overturn an earlier rule by the New Jersey Department of Motor Vehicles, adopted this year, that demands new cars be purchased from dealers with the ability to service the vehicles. The legislation must still go to the house before it can go to Governor Christie.

$TSLA After the Bill passes the Senate in NJ. Tesla will BOOM

— Kevin Van Horn (@kvanhorn829) Jun. 17 at 11:10 AM

Tesla Motors ($TSLA) Will Be Allowed to Open Two New Stores in NJ By Year-End, Says Wedbush http://stks.co/i0iv7

— SIAnalystWire (@AnalystWire) Jun. 17 at 10:39 AM

The New Jersey state assembly's action comes in the wake of New York governor Andrew Cuomo signing legislation that will allow Tesla to keep its five New York stores.

$TSLA NY agreement with auto dealers Association.

— Darryl Schmiermund (@schmiergolf) Jun. 16 at 04:46 PM

Under the New York agreement, Tesla will continue to operate its existing stores but will go through dealerships for any new stores. The electric car manufacturer initially reached the deal with the New York Automobile Dealers Association in March.

The deal shows how Tesla could resolve state-specific disputes with its direct-to-consumer business model. Investors on StockTwits.com reacted bullishly to the news. Sentiment on the stock is 83% bullish, according to site analytics. Shares rose nearly 3.5% by noon.

Most cars are sold through dealerships that buy the car from the manufacturer -- and the Automobile Dealers Association lobby intends to keep it that way. However, Tesla has insisted that, because its cars are new technology, it needs direct-to-consumer stores where its own salespeople can explain how the electric cars work. The concern for Tesla, according to CEO Musk, is that dealers will sell what they know, leading them to push gasoline cars over Tesla's Model S or coming Model X.

Given that the Dealers Association in New York was willing to accept a promise to work through dealers with future stores, investors believe that the lobby will accept similar measures in other states.

Tesla is still battling with the auto dealer lobby in other areas. In May, the company posted on its blog that the Missouri legislature, under pressure from dealers, had passed bills that would demand consumers buy new cars through dealerships. However, the Missouri House decided to delay the final vote on the bill for a year.

Tesla's most visible battle has been with New Jersey. Musk wrote a scathing blog post in April criticizing Governor Christie for favoring auto lobby demands over consumer interests after the New Jersey Department of Motor Vehicles adopted a rule that banned Tesla's business model. As a result of the rule change, Tesla converted its stores into galleries where consumers could see the cars but transactions could not be completed.

Investors have expressed frustration with the state-specific rulings barring Tesla's direct-sales model.

$TSLA law signed in New York State - but it can only sell direct through existing 5 retail stores - new sales need to go through dealerships

— Anacott Steel (@BPGAG) Jun. 17 at 07:31 AM

However, the state-specific rulings have not appeared to hurt the company's sales. Tesla buyers can log on to the Web site to purchase the car after visiting a gallery store. There is still a three-month wait for Tesla to fulfill orders.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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