New Jersey joins Texas and Arizona as the third state to ban Tesla's sales model. Ohio has legislation pending that would do the same thing, and other states have discussed similar measures.
Here's how car sales work: An independent dealer sells the cars, not the car manufacturer. So a Toyota is sold by a dealer working with Toyota.
Tesla sells the car itself, much like Apple sells iPhones at its own Apple stores. In the current auto-dealer model, Apple would be forced to sell iPhones only through Best Buy and other retailers.
This issue has been lingering for a while. Musk made a great, impassioned speech last year on the topic.
Seth Weintraub, who runs electric-car site Electrek says that any discussion of the topic must include this video.
Musk says he doesn't want to work with independent dealers because every other electric-car maker that went that route went out of business.
The dealer model is inconsistent with Tesla's beliefs, too.
"Our philosophy with respect to service is not to make a profit on service. I think it's terrible to make a profit on service," says Musk. "And unfortunately, the way the auto-dealer association is set up is that they make most of their money on service. So obviously, this would not be a good outcome."
Musk says auto dealers may pitch themselves as a small mom-and-pop group, but in reality Tesla is fighting big, entrenched, national dealerships.
Anytime people are polled about whether they're in favor of the direct-to-sales model, they are 86 percent to 99 percent in favor of Tesla's sales model.
"Clearly if democracy was working properly and legislators were implementing the will of the people, something else would be happening. And there would not be legislation trying to artificially restrict direct sales," says Musk.
Watch the full video here: