diff --git a/pip/download.py b/pip/download.py
index bbef9ea89fe..e55738c7aa3 100644
--- a/pip/download.py
+++ b/pip/download.py
@@ -671,9 +671,7 @@ def unpack_file_url(link, location, download_dir=None, hashes=None):
 
     # If it's a url to a local directory
     if is_dir_url(link):
-        if os.path.isdir(location):
-            rmtree(location)
-        shutil.copytree(link_path, location, symlinks=True)
+        _copy_dist_from_dir(link_path, location)
         if download_dir:
             logger.info('Link is a directory, ignoring download_dir')
         return
@@ -719,11 +717,6 @@ def _copy_dist_from_dir(link_path, location):
 
     """
 
-    # Note: This is currently VERY SLOW if you have a lot of data in the
-    # directory, because it copies everything with `shutil.copytree`.
-    # What it should really do is build an sdist and install that.
-    # See https://github.com/pypa/pip/issues/2195
-
     if os.path.isdir(location):
         rmtree(location)
 
@@ -744,6 +737,13 @@ def _copy_dist_from_dir(link_path, location):
     logger.info('Unpacking sdist %s into %s', sdist, location)
     unpack_file(sdist, location, content_type=None, link=None)
 
+    # copy the original setup.py into `location`, since the shim's
+    # sys.argv[0] confuses distutils.command.sdist.add_defaults() into not
+    # automatically adding setup.py to the tarball
+    logger.info('Copying setup.py from original into %s', location)
+    shutil.copy(os.path.join(link_path, setup_py),
+                os.path.join(location, "setup.py"))
+
 
 class PipXmlrpcTransport(xmlrpc_client.Transport):
     """Provide a `xmlrpclib.Transport` implementation via a `PipSession`