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New Jersey Bans Tesla's Direct Sales Model

By Ian Bush

TRENTON, N.J., (CBS) -- One of the most lucrative markets for high-end car sales is closing its doors next month to one luxury brand. A rule approved this week by the New Jersey Motor Vehicle Commission effectively stops Tesla in its tracks in the state. So what's behind the move?

The regulation prevents the electric carmaker, and others who don't use franchises, from selling directly to you.

That's what Tesla's been doing at its own showrooms, two of them in North Jersey, and that's angered the local, vocal groups with the most skin in the game.

"Car dealerships, which are franchises of major manufactures, but they are independent businesses. And at the state level they are very big businesses, they employ a lot of people, they use a lot of real estate and other services, and generate enormous local taxes and state tax revenues."

Auto expert George Polgar with GT Marketing in Philadelphia says Tesla contends that franchise model is obsolete. But dealer groups say they provide better service to customers, and Tesla's way of doing things leaves too many unknowns.

"Tax revenues, legal jurisdiction, job creation, real estate, and all kinds of other economic echo effects."

Arizona and Texas have similar rules, though wanna-be Tesla owners just have to steer around some red tape.

After April 1st, when the rule takes effect in New Jersey, you might just head across the river to the location in the King of Prussia Mall to pick up your Model S.

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