NJ Auto Dealer Association President Challenges Tesla’s Allegations

Tesla Motors will be barred from selling its cars in New Jersey after April 1 following a decision yesterday by the New Jersey Motor Vehicle Commission (NJMVC), and that’s no joke.

Nor was an 11th hour Tesla blog post attempting to rouse support yesterday interpreted by New Jersey officials as funny. On the contrary, Jim Appleton, president of the New Jersey Coalition of Automotive Retailers (NJ CAR) in so many words said it was a pouting session by an influential lawbreaker used to getting its way.

In the post, Tesla did lash out saying it had been let down from “good faith” assurances by Gov. Chris Christie’s administration, and the NJMVC. It implied also it and NJ CAR had agreed to publicly discuss their differences.

But nothing could be further from the truth, said Appleton. Instead, he said, Tesla’s words smack of hypocrisy, self incrimination, and more. And if what Tesla wrote implicating the governor, NJMVC and legislature means as much as it implies, there might be trouble beyond Tesla being barred from doing business.

In its post yesterday, Tesla said it had been working with the governor’s general counsel on allowing it to keep receiving state auto dealer licenses – something New Jersey reaffirmed later in the day it has no right to receive.

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Tesla accused Gov. Chris Christie’s administration of going back on its word, and acting beyond its authority. It also insinuated a conspiracy by Christie’s office and “a private interest group” – NJ CAR – in an unforeseen “attack” against Tesla as the governor and auto dealers sought to protect a “monopoly” at consumers’ expense.

Appleton, an attorney, in turn said it was “the pot calling the kettle black” to accuse anyone of backroom dealing. Appleton said he was amazed Tesla publicly admits it had even sought such agreements.

The dealings, he said, implied Tesla was lobbying behind the scenes to get the governor’s general counsel or someone with power to pressure or convince the NJMVC to turn a blind eye to laws already on the books.

“I mean, for them to publicly say that they’ve met with the governor’s chief counsel and they had an agreement to allow the motor vehicle commission to let Tesla operate in an open and notorious unlawful manner,” said Appleton. “I mean it’s mind boggling that they would put that in writing. I mean someone could go to jail for that.“

HybridCars.com did attempt to give Tesla equal opportunity to respond. Tesla initially invited our query and sent a general response by its business development VP to a boilerplate answer by Gov. Christie’s office.

Tesla did not reply however to statements made by Appleton, which we’ll publish below.

Later in the day, Tesla edited its blog post removing the names of Gov. Christies’ legal counsel with which it said it was dealing.

The edited post is still largely similar, but we have retained an original copy (below) upon which Appleton’s responses which follow are based.

At Issue

New Jersey is one of the country’s most affluent states and has a small but growing customer base which has bought fewer than 700 Model S sedans so far, with Model S and Model X customers also waiting now in queue.

Its two existing stores are at the Garden State Plaza, and Short Hills, and a service center is in Springfield Township.

The subject of Tesla’s blog post yesterday was PRN 2013-138, a proposal to state motor vehicle regulations under title NJSA 56. This proposal would add teeth to the way car dealer license applicants would be reviewed by the state. The intent of PRN 2013-138 was to reform the applicant review process so it will not let applicants slip past already existing New Jersey law.

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Approval by the governor and NJMVC – not to mention moral support by NJ CAR – is thus for upholding existing legislation, not new legislation. It effectively means New Jersey will fully enforce the law whereas before it had not. It also means Tesla’s existing dealership licenses will likely not be renewed, and it would not get any new ones.

Tesla put things differently, however in its opening sentence:

Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.

Unfortunately, Monday we received news that Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature. The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey.

 

In response to Tesla’s alleging Gov. Christie’s office had some sort of informal word-of-mouth deal in the making, its press officer Kevin Roberts replied this was not the case.

“Since Tesla first began operating in New Jersey one year ago, it was made clear that the company would need to engage the Legislature on a bill to establish their new direct-sales operations under New Jersey law,” said Roberts. “This administration does not find it appropriate to unilaterally change the way cars are sold in New Jersey without legislation and Tesla has been aware of this position since the beginning.”

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The response by Tesla’s VP of Business Development, Diarmuid O’Connell, reiterated it had an agreement with the governor.

The statute in New Jersey plainly allows Tesla to be licensed to sell cars there. Indeed, the Motor Vehicle Commission has licensed Tesla under that statute ever since October 2012, and any suggestion that Tesla was told “since the beginning” about any problem with its ability to be licensed there is false. The only thing that has changed is the Christie Administration’s sudden decision to go around the Legislature in an attempt to enact a rule that the statute doesn’t permit. Worse, it has done so without any reasonable notice or even a public hearing.

 

Appleton in turn said New Jersey’s decisions should have been upheld. He said the existing regulations under New Jersey’s motor vehicle code title 56 are very specifically worded to forbid automakers from owning and qualifying as a legal franchise.

“Clearly they are not a franchisee and because they’re not a franchisee they don’t comply with title 56, and because they don’t comply with title 56, and these regulations are intended to conform the licensing process that MVC follows to title 56,” said Appleton of Tesla, and the pending proposal PRN 2013-138. “Once it’s done they will have to take a look at Tesla upon renewal of their license to determine whether or not they are qualified to be a licensee in New Jersey, and I assure you that they are not. And they’re proud of it.”

Some news reports, and some fans commenting on the Tesla forum are largely portraying Tesla’s point of view, which it wrote above and continued, as follows:

This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market.

 
Sympathy followed in Tesla’s forum as well:

jtodtman@gmail.com | MARCH 11, 2014
It seems that NADA and its state affiliates are taking a page from Big Tobacco’s playbook . . . lawyer the opposition to death.

 

logicalthinker | MARCH 11, 2014
Oh my word. How dirty do politicians get?
In a similar vein, Christie had nothing to do with the bridge scandal, of course.
Tesla is far from sure success in this battle to be able to sell its cars. Every Tesla owner in NJ has a personal emergency today and should take a sick day to go rally for BASIC American values at
NEW JERSEY MOTOR VEHICLE COMMISSION ANNUAL REORGANIZATION MEETING OF THE BOARD MEMBERS
Commission Headquarters, 8th Floor East Wing 225 East State Street, Trenton, New Jersey
2:00 p.m., Tuesday, March 11, 2014

 

mrbarnes | MARCH 11, 2014
Unbelievable. Except, as a NJ resident, I remember this occurring when they increased the tolls on the roads, NJ transit fare increases – they left little to no public comment, and if so – it was a 1 day in advance notice at a location that would be very difficult to get to.

The NADA and NJ CAR (dealers association) must have donated heavily in Christie’s re-election, and therefore are now hoping to be repaid.

I will be contacting my assembly persons and state senator; please call yours (or any if you are from out of state):
http://www.njleg.state.nj.us/members/abcroster.asp
http://www.njleg.state.nj.us/members/legsearch.asp

 

Many more points are made on the Tesla forum and elsewhere, but in defense of the franchise system, Appleton said it was not an attack against Tesla no matter how Tesla spins it. Instead, said Appleton, it is in the interest of the consumer and public safety.

And it’s been seen as a safeguard against automakers.

A real fear expressed by other state auto dealer associations is against self-interested automakers who could ride in on precedents carved out by Tesla.

Points along this line of reasoning were aired last year by Texas state auto dealer association president, Bill Wolters.

Tesla has said at other times it sees itself in the the moral right, and explained its core rationale in yesterday’s post:

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

 
Tesla is also banned in Arizona and Texas, and faces opposition elsewhere. But while auto dealer associations express various concerns, for his part, Appleton emphasized the public safety and free market angle.

Tesla alleged collusion in New Jersey against free trade, but Appleton countered this view.

“We believe that the franchise system of automotive retailers is a system that works well to support the public and consumer interest in motor vehicles,” said Appleton. “Specifically it promotes price competition, and it encourages full and fair compliance with warranty and safety recall service.

“When an automaker sees a warranty or safety recall claim, they see expense. And if you doubt it, look at what General Motors has done with respect to the current recall that’s going on and how long it took them, how many lives it took before General Motors recognized there was a problem.

“When an automotive retailer, an independent automotive retailer sees there is a warranty or safety recall claim, they see opportunity and revenue and that’s why the legislature in its infinite wisdom in New Jersey and many other states has dictated,” he continued,

“You can’t put the fox in charge of the chicken coop. And automakers are not permitted to directly retail or own motor vehicle dealerships in the state. OK? So that’s the state of the law in New Jersey; has been for decades.”

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Appleton said he was dismayed by Tesla’s audacity and that it ever got a license against the law which he says is “black and white,” not gray.

“Tesla comes along a year and a half ago. I assumed they have lawyers,” said Appleton. “I assumed they could read. Notwithstanding the fact that New Jersey prohibits an automaker from owning or directly retailing cars, they apply for motor vehicle licenses and much to everyone’s surprise, after the fact, they got them.

“When that fact became evident and Tesla began to openly and notoriously conduct business in an unlawful manner in the state of New Jersey, people took notice. And the motor vehicle commission was advised that they had screwed up. They looked at it, their lawyers looked at it, and sure enough they came to the conclusion that they screwed up.”

It was last October that PRN 2013-138 was proposed and at that time Tesla and NJ CAR filed comments which Appleton said were considered by the NJMVC.

“The summary of the public comments indicate that the motor vehicle commission recognized that they goofed, and that the Tesla arguments – while they might be arguments that could be made to the legislature or a court of law – are not arguments that go to the question of whether or not the motor vehicle commission can or indeed must adopt a regulation which conforms their licensing process to state law,” said Appleton, “And that’s what they are deciding today.”

Ironically, Appleton noted, while Tesla accuses the governor, and NJ CAR as trying to protect a “monopoly,” it is Tesla that would be viewed as attempting to establish a monopoly in its own right with factory control of the sales, distribution, and service.

New Jersey’s title 56 regulations, while periodically amended Appleton said, have stood substantially and been upheld intact for decades.

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“The regulators have consistently gone back and looked at it for good reason,” he said. “The public policy which is supported here is to promote competition and ensure full and fair compliance with warranty and safety recall service dictates that an independent network of motor vehicle franchisees is preferable to a monopoly system such as the one which Tesla advocates.”

Appleton also answered implications that NJ CAR was in on some form of agreement, as Tesla wrote of PRN 2013-138 in its original blog post before editing out their names.

This move comes in spite of discussions with the Governor’s departing Chief Counsel Charlie McKenna and incoming Chief Counsel Chris Porrino as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature.

 
To this implication, Appleton said the only interaction he ever had was with a Trenton lobbyist he was friends with that Tesla hired. He said they met at the state house, chuckled that they were on opposite sides, and that was the end of the discussion. Since then, he’s had no professional contact with Tesla, he said.

“I’ve never met anyone from Tesla. Let me just say again. I think Tesla is a great product, I just think they’ve chosen an unwise and illegal distribution method in New Jersey,” said Appleton. “And I look forward to the day when Tesla wakes up and realizes that if they’re going to be a real car company selling any significant number of cars in the market they’re going to need franchisees, and that’s what’s sort of silly about this whole thing. It’s just a lot of circus but it’s not very productive. I guaranty you that if Tesla goes down market and has a $40,000 car which they claim they’re going to have in the market soon – and I don’t know if that’s to pump up stock value or if that’s a real statement – but if that’s for real, then how are they going to sell enough of those $40,000 cars without dealers? Without service facilities in the neighborhoods, and God forbid there should be a serious recall like the Toyota unintended acceleration or the current GM recall.”

We asked Appleton about Tesla’s allegation that conspiracy and backroom deals may have been at play when it wrote the governor and NJMVC were working “at the behest of a special interest group.”

“It’s the kettle calling the pot black. This is a group that’s used to getting their way,” said Appleton. “Their internet billionaire, you know, who’s used to throwing his money and weight around and is frustrated, and they thought that they had an agreement in the governor’s office to turn a blind eye to the law and to allow this company to operate outside the law. And I can assure you that nobody in the governor’s office was going to agree to allow them to.”

Tesla has three choices in Appleton’s view:

1) Conform its business model to New Jersey state law.

“I believe they’ll do that sooner or later, and I would prefer sooner rather than later because this legal and regulator stuff is a sideshow,” he said.

2) Conform the law to its business model by sponsoring legislation. (Thus far there’s been none. In Texas Tesla tried that, but it was defeated.)

3) “Go to court and challenge regulations as unlawful or unconstitutional or oppressive or unfair, arbitrary, capricious. I’m a lawyer I can tell you there a hundred different ways they can challenge the law,” said Appleton. “None of them is going to do them much good” because the law is there to promote competition and “ensure that consumers get the full and fair treatment when it comes to warranty and safety recall service.”

“What Tesla is saying is we got by the motor vehicle commission once, and we think we should be able to get by them forever, even though our business model is unlawful under current law,” said Appleton. “And what the motor vehicle commission is saying is we’ve screwed up. We’re changing our procedures so that they conform with the longstanding existing law. And once we conform our procedures to the longstanding existing law, Tesla is at risk of losing its license.”

We asked how Appleton viewed Tesla saying the governor and NJMVC went against their “authority” in supporting proposal.

Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers.

 
“It’s just the opposite. They’re [governor and NJMVC] honoring the requirements of the legislature, and sticking to their authority to enforce the current statute,” said Appleton. “There is no bill pending before the legislature right now that I’m aware of that would allow Tesla to operate in the way they’re currently operating and the law has been in New Jersey for decades, as I stated.

“What are they saying? Is there backroom deals now with the legislature too?” said Appleton, asking rhetorically.

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So, we asked, how did the NJMVC originally make an error in allowing Tesla a license?

“Title 56 is not enforced or administered by the motor vehicle commission and as a result I think they didn’t really understand,” Appleton said conjecturing. “And frankly nobody ever asked, you know? There were no automakers coming to the state without [qualified] franchisees. So they never looked at title 56 as a precondition for licensing notwithstanding the fact the statue required it. So that’s the good faith mistake.

“The other option which now that I see that they claim they’ve been involved in all kinds of backroom dealing with the administration is somebody agreed that they turn a blind eye to the regulations and go ahead and issue the licenses and see if there were problems. And if there were problems they would agree not to enforce the law. Now I don’t believe that to be true, but looking at the Tesla statement, I’ve got to rethink that.”

HC

Original blog post:

Defending Innovation and Consumer Choice in New Jersey
By The Tesla Motors Team

Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission (NJMVC) and members of Governor Christie’s administration to defend against the New Jersey Coalition of Automotive Retailers’ (NJ CAR) attacks on Tesla’s business model and the rights of New Jersey consumers. Until yesterday, we were under the impression that all parties were working in good faith.

Unfortunately, Monday we received news that Governor Christie’s administration has gone back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature. The Administration has decided to go outside the legislative process by expediting a rule proposal that would completely change the law in New Jersey. This new rule, if adopted, would curtail Tesla’s sales operations and jeopardize our existing retail licenses in the state. Having previously issued two dealer licenses to Tesla, this regulation would be a complete reversal to the long standing position of NJMVC on Tesla’s stores. Indeed, the Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers. This is an affront to the very concept of a free market.

Proposal PRN 2013-138 seeks to impose stringent licensing rules that would, among other things, require all new motor vehicles to be sold through middlemen and block Tesla’s direct sales model. This move comes in spite of discussions with the Governor’s departing Chief Counsel Charlie McKenna and incoming Chief Counsel Chris Porrino as recently as January, when it was agreed that Tesla and NJ CAR would address their issues in a more public forum: the New Jersey Legislature. Instead, rather than engage in an open debate on such a significant policy issue, the Administration has expedited the implementation of a new law that the Commission intends to stealthily approve at a meeting in Trenton today at 2:00 PM EDT.

We are disappointed in the actions of the NJMVC and the Christie Administration, which come on the heels of more than nine months of unexplained delays in the issuing of a new sales license for Tesla, despite our numerous requests, calls, and letters. In addition, the NJMVC has also delayed the annual renewal of Tesla’s current dealer licenses without indication of the cause of the delay. The delays have handicapped Tesla in New Jersey, where, without clear licensing procedures and fair enforcement of existing law, we have been forced to delay our growth plans. This is an issue that affects not just Tesla customers, but also New Jersey citizens at large, because Tesla would be unable to create new jobs or participate in New Jersey’s economic revival.

At the same time, neither Tesla nor the taxpayers of New Jersey have been able to participate in any of the analysis or proposed rulemaking. Despite being the subject of the regulation, we were only able to obtain information about today’s meeting since we became aware of the proposed rules yesterday.

We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology. This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology.

We urge the Christie administration to act in good faith and withdraw the proposed amendment, or amend it so that it reflects the true intent of the Legislature and the people of New Jersey.