By Bob Needham
Michigan Law
The laws behind US auto dealer franchises prohibited direct sales from manufacturers to consumers for close to 100 years—up until Tesla and its CEO, Elon Musk, decided to challenge that system.
Antitrust expert Daniel Crane said he became interested in Tesla’s fight against US auto dealers because the dealers’ arguments “made zero economic sense [and were] protectionist and anti-consumer.”
Professor Daniel Crane—widely recognized as an expert in antitrust law and related matters—became involved in the dispute early on, testifying and writing on behalf of Tesla and other electric vehicle (EV) startups.
Now he’s telling the story in a book, Direct Hit: How Tesla Went Straight to Consumers and Smashed the Car Dealers’ Monopoly (Cambridge University Press, 2025).
“This is a story that needs to be told broadly, not only because it’s important to the American economy, it’s important to policy as well. Are we going to get EV market penetration or not?” Crane said. “It’s also just a great story.”
Crane, the Richard W. Pogue Professor of Law, recently answered five questions about that story:
1. What initially interested you about the dispute between Tesla and the auto dealers?
I got involved back in 2014, which was very early in Elon Musk’s battle with the car dealers over the question of whether these 1930s–1950s laws should apply to an EV startup that didn’t want to use independent franchisees at all.
I really had no background in that issue, and I was curious: Wait, these laws say that a manufacturer cannot sell its own product to a consumer? That’s kind of odd.
I started digging in, and I came to realize two things. One: There was this very interesting historical story as to how we got to where we are, and that’s part of the book. Two: Regarding policy questions today, it seemed to me that the arguments the dealers were making—that this is about consumer protection—were completely unfounded. They made zero economic sense. These laws are protectionist and anti-consumer.
2. What led Musk and Tesla to take on this fight?
If you think about how dealers make their money selling you an internal combustion vehicle, they make very low profit margins on new car sales—about 5 or 6 percent at most. They make much larger margins, around 30 percent, on servicing the vehicle. What they really rely on is getting you in the door, selling you a car, and then you coming back for service.
With an electric vehicle, the service profile is entirely different. There are no oil changes, fewer moving parts. That profit center just isn’t there.
In addition—and every EV startup has made the same decision—the traditional dealer structure just is not well situated to sell these new products. If they had to go through franchise dealers, they would be at a significant competitive disadvantage.
3. Given the entrenched infrastructure of the dealers and their lobbying network, how was Tesla able to pull off its win?
There’s a saying: There’s a car dealer in every district. This is why, nationwide, the dealers have an incredible amount of influence. They’re very politically active, very connected.
Yet what I really love about this story is that the usual assumptions about left/right politics don’t even map onto it. The breadth of the coalition fighting the dealers is unprecedented. There’s no public interest group that supports the dealers.
It is the dealers and their political allies and their money against a coalition that includes all the environmental groups, all the consumer groups, all the free-market groups, pro-technology groups, the American Antitrust Institute, civil rights groups, labor unions, and car companies. And still, it has been a slog.
One of the big takeaways is how money and entrenched economic interests make it a really hard fight—even against the most amazing, broad, diverse coalition you’ve ever seen.
4. What’s another takeaway from the book?
Law that is based upon one set of assumptions can continue to have effects when those assumptions have totally changed. If you go back to the 1930s, when these laws started, the dealers were family-owned businesses. They had a very sympathetic claim about grossly unequal bargaining power, that they needed protection from the Big Three. That’s what these laws were for.
The world, though, has changed so much since then. First of all, you don’t have just the Big Three any more; you have about 15 or 20 major car groups. So the dealers’ bargaining power has changed.
But more importantly, the dealers—with some exceptions—are no longer “mom and pops.” The 10 largest car dealer groups in America have collective annual revenue of more than $100 billion. They’re enormous, multistate businesses.
The takeaway is how law is very contingent upon the social, economic, and political circumstances of when the law is enacted, but it can still do lots of work in a very different context—even when all of the assumptions that originally undergirded it have long since dissipated.
5. Is the story of Tesla and the dealers the first step toward a much bigger change? Are we seeing the beginning of the end of the dealer system?
For the dealers especially, the direct-sales issue is the least of their problems. Looking forward, the future is almost certainly not going to look like the 1950s model of transportation and how cars are sold, owned, and operated.
The future is, I think, going to be much less focused on individual vehicle ownership. The long-term future is going to be transportation as a service. We are increasingly shifting toward ride-share or models where you own a right to operate a car for a period of time, or maybe you have a subscription to an autonomous vehicle that’s going to pick you up at your door.
In the long run, the question you have to ask is, how am I, as a dealer, going to remain relevant to the consumer, to the manufacturer, in a very different ecosystem? That’s not a question that the law is going to answer for you.
Michigan Law
The laws behind US auto dealer franchises prohibited direct sales from manufacturers to consumers for close to 100 years—up until Tesla and its CEO, Elon Musk, decided to challenge that system.
Antitrust expert Daniel Crane said he became interested in Tesla’s fight against US auto dealers because the dealers’ arguments “made zero economic sense [and were] protectionist and anti-consumer.”
Professor Daniel Crane—widely recognized as an expert in antitrust law and related matters—became involved in the dispute early on, testifying and writing on behalf of Tesla and other electric vehicle (EV) startups.
Now he’s telling the story in a book, Direct Hit: How Tesla Went Straight to Consumers and Smashed the Car Dealers’ Monopoly (Cambridge University Press, 2025).
“This is a story that needs to be told broadly, not only because it’s important to the American economy, it’s important to policy as well. Are we going to get EV market penetration or not?” Crane said. “It’s also just a great story.”
Crane, the Richard W. Pogue Professor of Law, recently answered five questions about that story:
1. What initially interested you about the dispute between Tesla and the auto dealers?
I got involved back in 2014, which was very early in Elon Musk’s battle with the car dealers over the question of whether these 1930s–1950s laws should apply to an EV startup that didn’t want to use independent franchisees at all.
I really had no background in that issue, and I was curious: Wait, these laws say that a manufacturer cannot sell its own product to a consumer? That’s kind of odd.
I started digging in, and I came to realize two things. One: There was this very interesting historical story as to how we got to where we are, and that’s part of the book. Two: Regarding policy questions today, it seemed to me that the arguments the dealers were making—that this is about consumer protection—were completely unfounded. They made zero economic sense. These laws are protectionist and anti-consumer.
2. What led Musk and Tesla to take on this fight?
If you think about how dealers make their money selling you an internal combustion vehicle, they make very low profit margins on new car sales—about 5 or 6 percent at most. They make much larger margins, around 30 percent, on servicing the vehicle. What they really rely on is getting you in the door, selling you a car, and then you coming back for service.
With an electric vehicle, the service profile is entirely different. There are no oil changes, fewer moving parts. That profit center just isn’t there.
In addition—and every EV startup has made the same decision—the traditional dealer structure just is not well situated to sell these new products. If they had to go through franchise dealers, they would be at a significant competitive disadvantage.
3. Given the entrenched infrastructure of the dealers and their lobbying network, how was Tesla able to pull off its win?
There’s a saying: There’s a car dealer in every district. This is why, nationwide, the dealers have an incredible amount of influence. They’re very politically active, very connected.
Yet what I really love about this story is that the usual assumptions about left/right politics don’t even map onto it. The breadth of the coalition fighting the dealers is unprecedented. There’s no public interest group that supports the dealers.
It is the dealers and their political allies and their money against a coalition that includes all the environmental groups, all the consumer groups, all the free-market groups, pro-technology groups, the American Antitrust Institute, civil rights groups, labor unions, and car companies. And still, it has been a slog.
One of the big takeaways is how money and entrenched economic interests make it a really hard fight—even against the most amazing, broad, diverse coalition you’ve ever seen.
4. What’s another takeaway from the book?
Law that is based upon one set of assumptions can continue to have effects when those assumptions have totally changed. If you go back to the 1930s, when these laws started, the dealers were family-owned businesses. They had a very sympathetic claim about grossly unequal bargaining power, that they needed protection from the Big Three. That’s what these laws were for.
The world, though, has changed so much since then. First of all, you don’t have just the Big Three any more; you have about 15 or 20 major car groups. So the dealers’ bargaining power has changed.
But more importantly, the dealers—with some exceptions—are no longer “mom and pops.” The 10 largest car dealer groups in America have collective annual revenue of more than $100 billion. They’re enormous, multistate businesses.
The takeaway is how law is very contingent upon the social, economic, and political circumstances of when the law is enacted, but it can still do lots of work in a very different context—even when all of the assumptions that originally undergirded it have long since dissipated.
5. Is the story of Tesla and the dealers the first step toward a much bigger change? Are we seeing the beginning of the end of the dealer system?
For the dealers especially, the direct-sales issue is the least of their problems. Looking forward, the future is almost certainly not going to look like the 1950s model of transportation and how cars are sold, owned, and operated.
The future is, I think, going to be much less focused on individual vehicle ownership. The long-term future is going to be transportation as a service. We are increasingly shifting toward ride-share or models where you own a right to operate a car for a period of time, or maybe you have a subscription to an autonomous vehicle that’s going to pick you up at your door.
In the long run, the question you have to ask is, how am I, as a dealer, going to remain relevant to the consumer, to the manufacturer, in a very different ecosystem? That’s not a question that the law is going to answer for you.
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