States Need To Get On Board And Allow Tesla Direct Sales

| About: Tesla, Inc. (TSLA)
This article is now exclusive for PRO subscribers.

Tesla Motors' (NASDAQ: TSLA) CEO Elon Musk is quite proud of the luxury electric vehicles his company is rolling out, recently telling shareholders that he expects the company's capex to be higher than Porsche's for some time to come.

That's ambitious to say the least, but that is exactly the kind of attitude Musk should have as he faces challenges that could restrict his niche vehicles from being sold in key markets. While that battle is being waged, there is another matter that may mitigate any possible losses that would affect Tesla's financial situation and it involves the respect the relatively new player in the automobile space is gaining from other well-known car makers.

Tesla Model is Cutting Edge Meets Old School

Before getting into the details about how other car makers may further boost Tesla's financials, let's look at a snafu that is growing in severity for the company. It centers on how it sells its vehicles. With its rollout of its cutting-edge, lithium-ion battery powered cars priced above $60,000, Tesla also introduced a non-traditional way to buy its vehicles. The Palo-Alta-based company is setting up retail stores and service centers throughout the country to facilitate the online sale of its vehicles.

This kind of strategy has been likened to that for Apple's retail stores, and it's no wonder that it is similar. Tesla's vice president of sales, George Blankenship, hails from Apple (NASDAQ:AAPL) where he helped design the software and iPhone manufacturer's retail stores.

The issue for Tesla is that this business model cuts out the traditional franchised dealership, or the middleman. For decades, dealers have reaped profits from the sell of autos when people buy them directly from a dealership. And let's not forget the hefty commissions that car salesman pocket when consumers buy cars directly off the lot. Under Tesla's model, there is no dealership and the retail stores are staffed by people who don't work on commission. For buyers who don't want to be haggled, or deal with other people, this is perfect. Also, considering an increasing number of consumers are buying just about everything via the Internet, Tesla's model is simply one that is in keeping with the sign of the times.

Texas A No Go

Still, because Tesla's model flies in the face of the traditional way to sell cars, it has caused a stir in states across the nation. Most recently, Texas lawmakers sided with the state's automobile dealers association, voting down bills that would have allowed Tesla to sell its vehicles directly to buyers.

Not only will Tesla not be able to sell its vehicles in the Lone Star State, but buyers who already have bought them or who manage to purchase them elsewhere won't be able to have them serviced. This clearly will be a deterrent for even the most enamored potential Tesla buyers.

What's worse is that Texas' General Assembly won't convene again until 2015, so that's two years before new legislation could even be introduced allowing Tesla to sell there.

And Texas is not the only state where dealers have banded together to keep Tesla from infringing on their turfs. Thanks in part to the National Automobile Dealers Association, lawmakers in states throughout the country are looking over their respective laws on direct sells of autos to consumers. As explained by The American Conservative, auto-dealership laws go back to the 1920s. They were established by state legislatures in the postwar era out of concern that the Big Three - Ford (NYSE:F), General Motors (NYSE:GM) and Chrysler.

Moving Pass Antiquated Rule

The key term here is "postwar era". Applying these antiquated regulations in this day and age is futile, to say the least. In fact, by restricting sales of Tesla, state lawmakers are turning down revenues that the automaker would have to pay in taxes. This seems simply dumb considering so many states are strapped for cash.

No matter. It will be some time before the true financial impact and effect of the missed opportunities Tesla will suffer as a result of the selling restrictions will be seen. In the meantime, Musk's refusal attitude to forge his company well has attracted the respect of some reputable peers.

Daimler and Toyota (NYSE: TM) invested early in the company. Forbes reports Daimler invested $50 million in 2009 for a 10% share in Tesla. In addition to also investing $50 million in Tesla, Toyota also partnered with the company to build its battery-powered crossover called the RAV4 EV.

Establishing these types of relationships with the traditional automakers may hold the key to Tesla becoming more accepted. It may also convince investors who have shorted the stock to the tune of 28.56%. Many of them are learning the hard way that there may be value to this stock as they've had to cover their positions in recent weeks as the Tesla's stock price rose instead of falling.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.