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Tesla Reaches Profitable Truce in Ohio

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After facing sales restriction in many states, things might change for Tesla Motors, Inc. (TSLA - Free Report) in Ohio soon. According to a deal with a few auto dealers in the state, Tesla will be allowed to directly sell its vehicles without any dealer network. If passed into a law, the bill will also ban other automakers from following this direct sales model.

The deal restricts the number of operating stores for Tesla in Ohio to three. Currently, Tesla operates 2 stores in the state, one in Cincinnati and the other in Columbus. Soon Tesla will open a store in Cleveland.

The restriction of selling through a maximum of three stores is likely to hinder Tesla’s development in the state. Meanwhile, it will provide the automaker a chance to demonstrate the advantages of direct sales mechanism. Tesla will continue to focus on Ohio through investment in stores and service centers, and for the Ohio-based suppliers.

Tesla offers its customers a relatively new technology which provides sustainable transportation. Electric vehicles offer more fuel efficiency and lower emissions compared to their gasoline counterparts. Tesla believes that direct sales reduce the price and facilitate electric vehicle sales.  

Tesla has a good market in Ohio. It sells around 500,000 cars annually in the state. The two popular cars of the automaker are Roadster, priced at $100,000, and Model S sedan worth $75,000. The company also plans to introduce a $35,000 economy model in the next few years.

Last week, according to a bill approved by the Senate committee of Arizona, Tesla will be allowed to directly sell its vehicles in the state without any dealer network. The Senate believes that this bill will simplify the process of vehicle purchase. Though Tesla has a showroom in Scottsdale, it was not allowed to sell the vehicles there under a 2000 law. Tesla’s sales were restricted to online orders only which hampered the company’s financials.

Tesla currently carries a Zacks Rank #2 (Buy).

Some other well-performing automobile stocks worth considering are Daimler AG (DDAIF - Free Report) , Tata Motors Limited (TTM - Free Report) and Toyota Motor Corporation (TM - Free Report) . Daimler and Tata Motors carry a Zacks Rank #1 (Strong Buy) while Toyota is Zacks Rank #2 (Buy) stock.

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