The electric-car company Tesla seems like everyone’s darling these days. Its stock, even amid a pervasive selloff in the tech sector, is up nearly forty per cent this year. It has announced plans to build a five-billion-dollar battery factory, which various Southwestern states are vying to host. And it’s now starting to sell cars in China. But there is one place where Tesla is getting no love: New Jersey. Last month, the state decreed that the company would have to shut down its showrooms. In doing so, New Jersey joined states like Texas and Arizona, where it’s effectively illegal to buy a Tesla. Pretty soon, you’ll be able to get a Model S in Beijing but not in Paramus.
Why was Tesla banned? It sold cars. It built showrooms where customers could check out a vehicle, arrange a test drive, and buy a car. The hitch was that Tesla sold cars directly to the public, without going through independent dealers. In most industries, this would hardly be a radical idea. Dell built its business on selling direct to consumers, and the most successful retail phenomenon of the past decade is the manufacturer-owned Apple Store. But the auto industry is different. In its early years, companies tried all kinds of ways of selling cars; you could buy them right at the factory, or at local department stores, or even from the Sears catalogue. But by the nineteen-twenties the industry’s major players had settled on a system of local, independently owned car dealers. Today, almost every new car in the U.S. is sold this way. In forty-eight states, direct sales by car manufacturers are restricted or legally prohibited, and manufacturers are often prevented from opening a dealership that would compete with existing ones. If Ford wanted to open a flagship store on Santa Monica Boulevard, it couldn’t.