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New York could become next state to put brakes on Tesla

If car dealerships have their way, New York could become the fourth state to effectively ban Tesla's direct sales model.

The president of the Greater New York Automobile Dealers Association told the New York Post last week that he feels confident the Empire State can follow New Jersey in blocking Tesla's business model, which cuts out dealers and sells cars directly to consumers.

The New Jersey Motor Vehicle Commission voted to block Tesla's sales model last Tuesday, drawing the ire of the electric carmaker's many fans. Tesla founder Elon Musk also lashed out at the decision, vowing to pursue legal remedies to fight the ban.

New Jersey's car dealership organization aggressively lobbied against Tesla's approach. Representatives of New York state's dealership lobby met with Gov. Andrew Cuomo last year to pitch a direct sales ban, according to Capital NY.

Doug Wells, owner of the Mercedes-Benz of Brooklyn dealership, told CNBC on Monday that the dealership model works better for consumers than Tesla's direct sales platform. It also provides a network that helps entrepreneurs grow their businesses.

"The dealer model works for consumers," Wells said on "Squawk on the Street." "One, it gives them a place to service their car. If they're traveling and their car breaks down they can go to another local dealer that's the same franchise."

(Read more: Elon Musk takes shot at Christie's 'Bridgegate')

Traditional franchised dealers sell cars on behalf of automakers, but electric automaker Tesla wants to upend that system. Dealership organizations in Texas and Arizona have successfully fought Tesla's direct sales model, and other states have limited Tesla's approach.

(Read more: New Jersey bans direct auto sales; Tesla stock inches lower)

Dealers say the franchise model increases accountability and competition, which lowers prices. But critics say dealers have created an effective monopoly on car sales.

—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street." Reuters contributed to this report.


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