Tesla Stock Will Gain from This Major Win
Tesla Motors Inc (NASDAQ:TSLA) stock began this week subdued, and news that the company was facing the ire of the U.S. Securities and Exchange Commission (SEC) over “tailored” accounting did not make things better. However, this latest piece of news is bound to bring cheer to Tesla fans and provide the much-needed breath of fresh air to TSLA stock.
Tesla Motors Inc has won the right to open and operate its own dealership in Richmond, Virginia, after the state Department of Motor Vehicles (DMV) commissioner reversed a ruling from September denying Tesla a license. In his decision, commissioner Richard D. Holcomb cited great public support, as well as unique sales and service requirements, as reasons for his finding that only Tesla is the best fit for the job. (Source: “Tesla will move to open Richmond store after DMV win,” TechCrunch, November 30, 2016.)
Tesla praised the decision, saying it will swiftly begin construction of its new store and service center. This ruling is significant for the energy company as it tries to increase sales locations ahead of the arrival of its mass-market “Model 3.” The low-priced electric car will be a big boost for Tesla stock.
Moreover, following the acquisition of SolarCity Corp (NASDAQ:SCTY), Tesla is looking at expanding its product portfolio, which will now also include the new solar roof tiles. “Powerwall 2” is the recently updated energy storage product for residential customers, and select Tesla stores started selling it last month.
More distribution channels and an expanding product line will help Tesla boost its sales, which is likely to buoy Tesla stock. As more states realize that Tesla’s different business model would not work for third-party dealers, the chances of the company winning more licenses are likely to go up.
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Even the commissioner acknowledged that it would be difficult for independent dealers to make a profit selling Tesla cars. Moreover, the electric cars need less servicing and have little long-term maintenance. This makes Tesla the only dealer that can do justice to its customers. Tesla has a loyal fan base, which is one of the major strengths of Tesla stock.
Although Tesla must obtain a license from Virginia’s Motor Vehicle Dealer Board, this is a huge win for Tesla Motors Inc and TSLA stock.
The state of Michigan had denied Tesla’s request for a dealership license in September this year, which forced the company to initiate legal action. As per the state laws, an auto manufacturer cannot sell vehicles directly to consumers. It would be interesting to see the developments on this front, as Tesla is no longer just an auto manufacturer. Even states like Arizona and Texas have laws that ban direct sales. Tesla can have a showroom in these states, where consumers can look at its “Model S” and “Model X,” but not buy them.
Tesla Stock to Gain More in Future
This ruling will set a good precedent as the company fights for the right to open and run dealerships for its vehicles across the country. Not only Tesla cars, but the company’s energy products will also make their way into Tesla stores in the coming years.
Tesla’s focus on selling a totally new lifestyle to customers is likely to bear fruit in the coming years. Tesla’s independent stores are a way to promote great customer experience, which will lead to more sales.
As Elon Musk looks to open more Tesla retail stores in shopping centers around the world, things may get better for this integrated sustainable energy company. This bodes well for TSLA stock.