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Tesla Appeals N.J. Ruling On Direct-Sales Ban : News

Tesla Motors Inc. appealed New Jersey’s ban on direct auto sales, arguing that the decision thwarts the carmaker’s mission of providing sustainable transportation and unfairly favors entrenched franchise dealers.

Elon Musk, Tesla’s chief executive and cofounder, is fighting with car dealer groups nationwide to let his Palo Alto, Calif., maker of electric Model S sedans sell directly to consumers from company stores.

Tesla challenged a direct-sales ban imposed by a New Jersey commission in state Superior Court, according to documents made available by the company. The filing couldn’t immediately be verified in court records.

Restrictions by US states on how Tesla sells its battery-powered Model S, priced from $71,000, would slow Musk’s plan to shift his company from a niche maker of battery-powered luxury cars to an automotive powerhouse. Tesla’s fight with dealers has increased scrutiny of US auto franchise rules that go back eight decades.

‘‘Franchise dealers have an inherent conflict of interest in selling electric vehicles,’’ Tesla said in court papers. ‘‘In order to do so effectively, they would need to enthusiastically tout the reasons why electric vehicles are superior to gasoline vehicles. This is not something that they are going to do since gasoline vehicles represent virtually all of their revenue.’’

Tesla rose 6.1 percent to $230.29 at the close in New York, the biggest one-day jump since Feb. 25. The shares have advanced 53 percent this year.

Texas and Arizona have also barred Tesla from selling cars directly to customers. Ohio’s Senate this week approved a bill allowing the company to open a third store in that state. Tesla and New York auto dealer lobbying groups last week reached an agreement for the electric-car maker to keep its five company-owned stores there and add others.

Tesla has been fighting a similar battle in the Massachusetts State House.

The company has said rules restricting direct car sales by automakers were created to protect dealers from unfair competition and mistreatment by manufacturers of the brands they sold. Since Tesla has no franchise dealers, it argues such rules shouldn’t apply to its retail operations.

Tesla’s two stores in New Jersey initially were told to halt sales on April 1 by the state’s Motor Vehicle Commission. The panel, which unanimously approved a proposal to ban direct sales by carmakers on March 11, last week extended the deadline to April 15.

The commission includes members of New Jersey Governor Chris Christie’s Cabinet. Christie, a Republican, said at a town hall meeting last month that he has told Tesla to work with state legislators to revise the rules.

‘‘I’ve also told them ‘go get the law changed, I’m happy to sign it to permit you to operate,’ ’’ Christie said, according to remarks provided by his office. ‘‘But what they wanted me to do was to give them some regulatory break that was contrary to the law. I’m not permitted to do that.’’

Kevin Roberts, a spokesman for the governor, had no immediate comment on Tesla’s court appeal.

The New Jersey commission exceeded its authority with the rule changes that violate the state’s constitution, Tesla said. The move will harm consumers and limit fair competition, the company said.

Tesla said last month, before filing the appeal, that it plans to convert its New Jersey stores to ‘‘galleries’’ that can only display cars. As is required in Texas and Arizona, workers can’t discuss pricing or tell customers how to buy a Model S.

The company should adjust its approach to conform to New Jersey law or seek legislative changes to it, James Appleton, president of the state’s dealer association, said last month.

In Ohio, where Tesla sells its cars in Columbus and Cincinnati, the state Senate passed a bill 32-to-0 to let the carmaker open an additional store. The bill now goes to the House of Representatives for approval.

Tesla backers last year posted a petition to the White House website asking President Obama to ‘‘allow Tesla Motors to sell directly to consumers in all 50 states.’’

‘‘The state legislators are trying to unfairly protect automobile dealers in their states from competition,’’ the petition said.


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