This Law Could Give Tesla Stock a Flat Tire


If you owned stock in Tesla Motors going into this year, you've probably made a pretty penny. In fact, Tesla stock has gained more than 100% in the past month with the stock now trading around $90 a share. However, it could be a bumpy ride going forward. The electric-car maker's disruptive retail strategy is catching heat from state lawmakers and dealership associations that could prevent Tesla from selling its cars in certain states.

Road-blocking the future
North Carolina's Senate Commerce Committee unanimously approved a proposal last week for a law that, if passed, could cripple Tesla's chances of selling its zero-emissions vehicles in the state. The North Carolina Automobile Dealers Association, which supports the bill, argues that Tesla's direct sales model threatens the livelihood of the state's licensed auto dealers, according to Raleigh's News & Observer.

You have to give Tesla credit for attempting to change the retail rules of a century-old auto industry. In hopes of one day transforming the outdated dealership experience, Tesla CEO Elon Musk argues: "Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars."

Musk also makes the valid point that because Tesla doesn't have any existing franchise dealers, it isn't violating automotive franchise laws. Of course, North Carolina isn't the first state to test the brakes on Tesla's retail plan. The EV maker has testified and won the right to sell its cars directly to consumers in other states including New York, Florida, New Jersey, California, Colorado, Oregon, Washington, and Massachusetts.

Where goes the Model S?
Tesla is making progress, albeit in small doses. Musk even traveled to Texas last month to fight for the company's right to operate in the Lone Star State. Only time will tell whether Texas and North Carolina will ultimately rule in Tesla's favor. However, at this point, it isn't looking good.

Nevertheless, I stand by my long-term view that Tesla stock will reward shareholders for years to come.

Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. Despite progress, a looming question remains: Will Tesla be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

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Motley Fool contributor Tamara Rutter proudly owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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