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Tesla and Uber Are Driving Clunker Business Models to the Junkyard


New Jersey's problem with Tesla is not so much a sign of that state's cultural distance from Silicon Valley as it is an indication of Tesla's disruptive potential.

Svelte and shiny, the Tesla Model S (NASDAQ:TSLA) is already an icon of the tech lifestyle. When a new, hypermodern segment of San Francisco's Bay Bridge opened last fall, a fleet of the electric luxury sedans was the first to roll across, glinting as prettily as the white struts above and the gray waves below. Driving a Tesla across the Bay Bridge's new eastern span was a weekend activity of choice for the city's tech elite -- so it somehow doesn't feel surprising to say that you can't buy a Tesla in New Jersey. But this is not so much a sign of that state's cultural distance from Silicon Valley as it is a sign of Tesla's disruptive potential. It's not that New Jersey isn't cool enough for Tesla. It's that the sale of the cars there has been banned, in a last, likely wasted, effort expended by conventional automotive dealers threatened by its business model.

In short, Tesla sells directly to its customers. In New Jersey the law requires that auto manufacturers sell through dealers. That means customers go to a lot, meet with a salesperson, and get pressured into purchasing a vehicle for which they will almost immediately feel a great deal of buyer's remorse. Same old, same old. By contrast, there are no independent Tesla dealerships. The company operates not lots but showrooms, often located in malls. These sleek retail spaces -- with two or three cars, including the Model S, dramatically parked under spotlights in a single aisle -- are more like Apple (NASDAQ:AAPL) stores (as are their distinctly non-pushy employees) and like Apple's interactive display spaces in which customers can ask questions about products and see them in the flesh (or steel). Then they are welcome to order online, at home -- once they've fully considered a purchase; they can also schedule a test-drive at another facility.

What seems a superior way of selling cars also demonstrates the inefficiency, added expense, and decided unpleasantness of the old way. Wired's opinion on the New Jersey ban is telling: If Tesla's direct-to-buyer approach is forbidden, then "buying a car will always suck."
Recent history is rife with clashes between technology and older, more conventional businesses -- and those technologies ultimately winning, often after struggles with politicians swayed by powerful lobbies from various industries. Two years ago, San Francisco-based transportation network company Uber found itself beset with lawsuits and bans. Uber rides were forbidden in New York and Los Angeles because the taxi lobby was intent on keeping Uber vehicles off the street. Regulations forbidding the use of electronic devices on the road were leveraged to shut down the service (users summon Uber drivers using a smartphone, to which the drivers must respond in order to schedule a pickup). The same is true of Uber's major competitor, San Francisco-based Lyft.

But business models can shift almost as quickly as gears on a manual transmission. Indeed, we could say that if there's no pushback at the state or city level, then a company hasn't disrupted anything; it may have made something better or different, but it has not forced anything new into being.

To keep reading this story by Daniel Nader, click through to Institutional Investor, where the article originally appeared.
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