Tesla Pushing For Direct Sales In New York: What It Could Mean For Investors

Despite being the largest electric vehicle company by units in the Unites States, Tesla Inc TSLA still faces several disadvantages to traditional automakers. The prohibition against direct sales is among the stumbling blocks the company faces, and it's a challenge Tesla is now targeting.

What Happened: New York is one of numerous states that prevents Tesla from selling directly to customers. The state has “old laws” in place that protect franchise dealerships against new automakers.

Tesla is using its “Tesla Engage” platform to seek public support from Tesla fans to push for New York Governor Kathy Hochul to allow direct sales of Tesla vehicles in the state, according to Electrek. 

“Support direct sales in New York by making your voice heard. Please consider contacting Governor Hochul and NY Leadership today, and encourage them to support direct sales for electric vehicle manufacturers,” Tesla said in a post.

While many states have changed the old laws, New York is still behind on allowing new competitors, including new electric vehicle companies, from being able to grow in the state.

In 2014, Tesla made a deal with New York lawmakers and auto dealers which allowed its five direct-to-customer stores in the New York City area to remain open. Tesla agreed to open any additional new stores as dealer franchises, which has not happened so far. 

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Why It’s Important: Under current laws, traditional automakers like Ford Motor Co F and General Motors Corp GM that sell their vehicles through dealerships have a competitive advantage. As the traditional automakers transition to expanding their electric vehicle models, they may be able to maximize their competitive edge against Tesla in states like New York.

Tesla’s push to allow more direct sales in the state highlights the placement of New York in the electric vehicle market share leaderboard.

“New York State has adopted the strongest climate law in the country, yet it is 23rd in electric vehicle adoption per capita and lags behind states like California, Colorado, Florida and Massachusetts that are leading in EV adoption,” Tesla said in a post.

Florida, which allows direct sales freely, has over 50% more electric vehicle registrations per capita than New York, according to the post.

Tesla could get support from competitors like Lucid Group LCID, Rivian Automotive RIVN and Polestar, which is merging with Gores Guggenheim Inc GGPI.

Along with direct sales pressure in some states, Tesla also faces hurdles with deliveries not allowed in some states.

“Rivian vehicles are fully certified by NHTSA, EPA and CARB and are ready for sale in all 50 states,” Rivian said in 2021, which could give it a key advantage over Tesla.

Despite having a production factory in Texas, Tesla has to ship its vehicles out of the state before they can be delivered back to Texas residents.

Lucid Motors opened a New York store as one of its keys to growth. Polestar also has a New York store open. Both companies could be limited in the future as to how many New York retail locations they are allowed to operate. 

Ahead of the 2021 appearance of Tesla CEO Elon Musk on “Saturday Night Live,” Tesla showed off its electric pickup Cybertruck during several appearances in the state of New York.

As one of the top five most populous states in America, New York offers a huge opportunity for electric vehicle companies as residents look to transition from internal combustion engine vehicles. Without further legislation, traditional automakers will have the advantage going forward.

Price Action: TSLA shares are up 0.34% to $1,061.69 on Tuesday.

Disclosure: Author is long shares LCID.

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Photo: Courtesy of Duncan Rawlinson - Duncan.co on Flickr