3 reasons Tesla and car dealers need to hug it out

'It is the way the world is going'
'It is the way the world is going'

Electric auto maker Tesla is going to have a hard time breaking the car dealers' retail grip with its direct-to-the-consumer business model, former Chrysler Chairman and CEO Robert Nardelli told CNBC Wednesday.

Last week, the New Jersey Motor Vehicle Commission voted to ban the direct sale of automobiles in the Garden State, which joins Texas and Arizona in the prohibition of the practice.

(Read more: New Jersey bans direct auto sales)

In a "Squawk Box" interview, Nardelli said dealers should not be afraid of the competition from direct sales because consumers want choice, and they already compete on the Internet. "It is the way the world is going."

To hear Nardelli's three reasons, watch the above video.

(Read more: This opens Pandora's box for GM: Nardelli)

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.