The Pennsylvania House and the Senate granted Tesla Motors, Inc.’s (TSLA) petition to expand its retail operations in the state through stores and service center openings.
The legislation was passed with 197-2 in the House. The petition only requires the consent of the governor before it becomes a law. Pennsylvanian legislation allows an automaker to open five stores in the state.
In Pennsylvania, Tesla has a store in King of Prussia and service centers in Devon and Norristown. Further, it plans to inaugurate a store in Devon. However, Tesla expects the 5-store limitation to restrict its operations in the state significantly.
In early May this year, Tesla faced opposition to its policy of directly selling vehicles in Missouri. Legislators proposed to impose a ban on the direct sale of vehicles in the state. As a result, customers can only purchase new vehicles through franchised dealers.
The bill was passed by the Senate but the Missouri legislature concluded its session without voting on it, thus allowing Tesla to continue selling its cars in the state.
This news came as a relief for Tesla, which has been facing substantial opposition to its direct-selling model in a few states.
Tesla previously faced direct-sales restriction in Ohio, New Jersey, New Arizona, Texas and Arizona as well. However, in Mar 2014, a Senate committee bill lifted the direct-sales ban in Arizona. In the same month, the sales restriction in Ohio was also nullified. According to a deal with a few auto dealers in the state, Tesla will be now be able to directly sell its vehicles without any dealer network.
In Apr 2014, Tesla filed a petition against the stringent licensing rules imposed by the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration. In Jun 2014, the New Jersey Assembly unanimously voted in favor of a bill that allows direct selling by zero-emission vehicle manufacturers that were licensed by the State Motor Vehicle Commission before Jan 1, 2014, provided they run a service center in the state. Thus, Tesla may soon be permitted to directly sell its cars in New Jersey. However, the bill still needs to be approved by the New Jersey Senate before it becomes a law.
Tesla believes that direct sale reduces the price and encourages buyers to opt for electric vehicles. Use of a dealer network not only reduces the profit margin of Tesla but also affects its sale as car dealers may not spend the time required to inform consumers about the benefits of electric cars.
Tesla currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked automobile stocks worth considering are Fox Factory Holding Corp (FOXF), Gentherm Incorporated (THRM) and Meritor, Inc. (MTOR). All these stocks sport a Zacks Rank #1 (Strong Buy).
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