Tesla’s Stock Soars, Despite Utah Banning Company from Direct Sales

By · April 06, 2017

Tesla store

Utah’s Supreme Court this week denied Tesla the right to sell its vehicles directly to consumers. The ruling will force Tesla to rely on independent dealerships in Utah. The state’s residents can order from Tesla online, or make a trip to one of the neighboring states that allow Tesla to offer direct sales.

The ruling is a setback for Tesla after it opened a $3 million showroom in Salt Lake City in 2015. Tesla’s Salt Lake City location will now be used for vehicle maintenance and service in the region. The store can be used for selling energy storage and solar products, but employees will not be allowed to discuss vehicle sales and pricing, or to provide test drives.

Representatives from Tesla said, “The Utah ruling is disappointing for Tesla and all Utah consumers interested in consumer choice, free markets and sustainable energy.”

Tesla faces a daunting task to reach its goal of selling 500,000 electric cars a year by 2018. In September 2016, Michigan rejected Tesla’s application to directly sell vehicles to consumers. Tesla operates stores in 23 US states and the District of Columbia, but it has not been able to sell vehicles in four states: Michigan, Texas, Connecticut and Utah.

Despite these restrictions, Tesla said it delivered a record 25,000 vehicles—about 13,450 Model S cars and about 11,550 Model X SUVs—in the first quarter of 2017. That’s an increase of about 69 percent compared to the same period last year.

That good news helped Tesla’s stock surge by nearly 6 percent this week. It has surpassed Ford to become the second most valuable car company in America. Shares of Ford and General Motors are both lower for the year, while Tesla's stock has soared more than 35 percent. Although Tesla continues to lose money, investors are encouraged by Tesla's upcoming $35,000 Model 3, which could help make Tesla become a high-volume mainstream auto company.

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