June 30, 2014

Tesla: Free Market Antihero

Christopher Koopman

Senior Affiliated Scholar
Summary

The past few weeks have been very good for Tesla, the Palo Alto-based electric car manufacturer hailed as the most important car company in the world, and I’d like to give credit when it is due.

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The past few weeks have been very good for Tesla, the Palo Alto-based electric car manufacturer hailed as the most important car company in the world, and I’d like to give credit when it is due. However, writing here about this time last year — as Tesla repaid its $465 million low-interest loan from the Department of Energy — I explained why Tesla’s “success” wasn’t, and why the electric car company shouldn’t be hailed as such.

While I still stand by my previous point — that no firm or industry that owes its profits to government-granted privileges should be deemed a success — I must admit that Tesla has come to challenge many privileges similar to those that fueled the young car manufacturer. That’s worth cheering for.

Much of Tesla’s fight for a level playing field came in its work against restrictive “franchise laws.” These are laws in most states that make it illegal for consumers to purchase cars directly from manufacturers, barring Tesla from taking the sort of direct-to-consumer approach with its products that works so well for companies like Apple. As my colleague Matt Mitchell suggests, imagine the outrage if computer retailers pushed for laws banning Apple Stores. (Yikes!) 

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