As an economist trained in industrial organization and competition, this is an area I'm fairly passionate about, so you'll excuse my zealous partisanship on this issue in favor of promoting competition.
One argument advanced by auto dealers is that they create competition. This is a bogus argument, except in the narrowest possible interpretation. The dealers would have you believe that they create choice for consumers. They do not; auto manufacturers create choice by creating different cars.
All competition analysis begins by asking, "what is the relevant market?" In the case of the Model S, there are only a few logical options: either the Model S is its own market, or it competes against other near-luxury large sedans.
If the Model S is its own market, then adding dealers doesn't make a difference in the choice set of consumers. Tesla is still a monopolist and can charge what it likes. The dealers are not in a position to force Tesla to change its pricing; all that will happen is that they will add their own margin on top of this. So, at best, the customer pays the same and the dealers extract some of the monopoly rent Tesla would earn from its engineering and production investments. At worst, customers pay more. The evidence compiled by the FTC conclusively shows that customers pay more.
If the market is "near-luxury sedans," then once again, adding dealers doesn't change the choice set for consumers. Dealers don't make cars, and therefore don't create options. Moreover, Tesla's market share is well below FTC/DOJ guideline thresholds for having market power, so its pricing power is limited by the other options available to consumers.
So, what is this competition of which the dealers speak? It's really only competition among themselves: which will charge the lowest markup over manufacturer's invoice. But note that direct-to-consumer approach creates correct incentives to sell efficiently: any dollars wasted in sales are lost profits to the auto manufacturer. So, no dealer can out-compete the manufacturer unless its costs are lower or it has some special ability to sell cars. As to cost, the largest costs of an auto dealer are building and land--which are competitively priced, so a local dealer is unlikely to get a better price than a national company--and capital for holding inventory. On that second point, it's not credible to suppose that a small local company can obtain working capital at a lower cost than a multinational, publicly traded corporation. Moreover, Tesla's business model minimizes capital tied up in inventory. Bottom line is that local dealers can't sell Teslas cheaper than Tesla can.
You'll read a lot of other arguments about why auto dealers are important. I challenge you to start by writing a list of companies from whom you or your parents have bought directly in the past decade. Examples might be: Apple, Dell, Toll Brothers, Exxon, Levi Strauss, perhaps your favorite brewery or distillery, a furniture or mattress manufacturer, and so on. As you read the auto dealer's arguments, test whether they seem credible in you substitute in these companies, e.g. "Homes are a major purchase that people make rarely, so it's important that only licensed brokers be allowed to sell new homes rather than a builder like Toll Brothers."
Likewise, make a list of companies that your are NOT allowed to buy from directly outside the auto sector. This will likely be a short list. Off the top of my head, I can think of the pharmaceutical companies, companies in embargoed countries like Cuba, and companies trying to sell you illegal goods. For each, explain the public policy rationale for the prohibition of direct sales, then see if that rationale is applicable to Tesla.
Good luck!
