Tesla Motors, Inc. TSLA will be able to sell its vehicles directly to customers in Indiana as the Senate panel of the state has backed down from banning direct sales. The Commerce and Technology Committee voted against the amendment restricting direct sales, and insisted on investigating the issue further.
A ban on direct sales stands in sharp contrast to conventional free market philosophies of the Republican lawmakers who dominate the Legislature. Under the American free market strategy, all companies, irrespective of size, are allowed to compete with each other under the same rules and conditions.
Per the current law, automakers will be allowed to sell their vehicles directly to customers. Tesla has one store in Indianapolis since two years, through which it can sell its electric vehicles in Indiana.
However, this law poses a concern for major traditional automakers, including Ford Motor Co. F and General Motors Company GM, which sell their vehicles through franchised dealerships. General Motors’ dealerships support the ban on direct sales and are of the opinion that direct sales are unfair for automakers who sell vehicles through dealerships.
On the other hand, Tesla thinks that General Motors is supporting the ban on direct sales in order to avoid competition. Both companies will be launching low-priced, long-range electric vehicles by next year. While Tesla will unveil Model 3, General Motors will introduce its Chevy Bolt.
Tesla is facing opposition to its direct-selling model in some U.S. states such as Texas, Arizona, Michigan and West Virginia that have banned the direct sales of vehicles by any automaker. This restricts Tesla’s ability to sell cars, as it relies solely on direct sales. The most recent addition to this list is Michigan, which not only banned direct car sales by automakers, but also made use of franchised dealers compulsory in Oct 20Array4. This effectively bars Tesla from even opening galleries to display its cars.
Currently, Tesla carries a Zacks Rank #3 (Hold). Superior Industries International, Inc. SUP, with a Zacks Rank #Array (Strong Buy), is a better-ranked automobile stock.
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