by Daniel A. Crane
Cato Institute
July 24, 2014
Tesla Motors is a marquee story of American technological dynamism and innovation, yet it faces enormous challenges in penetrating an automotive market that is dominated by a powerful car dealers’ lobby. Tesla has chosen direct-to-consumer distribution model that bypasses traditional franchised dealer networks. Dealers have responded by invoking decades-old laws aimed at curbing direct distribution, and by seeking new legislative or regulatory decisions to prohibit Tesla from distributing directly. In the past, small groups of people with a large economic interest in protectionist legislation will often be successful at implementation, so long as the costs are spread out across a large public. Yet direct distribution of cars has emerged as a national issue, one that could actually spur public action, because of the environmental and technological salience of electric cars. Car manufacturers should have the right to choose the most efficient means of distribution, and so should everyone else.

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