This weekend I was at Nordstrom with my wife doing some black Friday Christmas shopping. I decided to visit the Tesla store to inquire about hidden inventory/CPO cars for her. To my surprise their was an inventory S with the options she wanted at an attractive price. 10 minutes after walking into the store - I left with a printed quote, deposit receipt, and a mug (yay free swag!). I was also offered a test drive in an X (which I have yet to drive).
A few hours later I stopped at the Nissan dealer to charge my wife's 2015 LEAF. Since I had time to kill, I decided to ask them for a bid on it (even though I'll likely sell it private party). A sales rep said their used car manager would come out and write up a bid. I decided to check out a new 2017 Nissan GT-R Nismo. It was guarded behind red velvet roped stanchions and had a $75K markup added to the MSRP of $176K. A sales guy informed me they do not offer test drives on GT-Rs until sales agreement had been finalized (I had not asked to drive it).
I waited for another 15 minutes and the used car manager still never arrived to give me a bid and no one updated me on his status. The LEAF was sufficiently charged, so I left.
Tesla has so many advantages in this situation:
- If a Nissan dealer lets every interested party drive their top of the line GT-R, it will likely lead to little if any increased business at that particular store and add miles, wear and tear to their extremely limited special inventory. Even if a consumer tests a car at one dealer, there is nothing stopping the consumer from buying one somewhere else. So I understand that policy of refusing test drives. The big loser here is the manufacturer, not the individual dealer. Dealers will struggle with a mindset of "help the brand to help all dealers."
Tesla will offer a test drive in a P100D to anyone; even though very few consumers will order that model. Most consumers will leave with a very positive view of Tesla which leads to orders of lower priced vehicles, evangelism, and more cult members!
- Dealers make so little on new cars (a couple thousand bucks in most cases), that they need to make up for it by overcharging for service, adding markups to mid to high demand vehicles, and squeezing their salespeople and cutting other costs. The $75K markup on a GT-R Nismo is one thing, but they were marking up 2016 Nissan Armadas by $6K even though 2017 models are already available! The Model 3 has received unprecedented demand and will have no dealer markup.
- Negotiation and paperwork take hours for a dealer to complete on every single sale. So much so that the used car manager simply didn't have time to write up a bid on my car. If it took that long to buy or order a Tesla, there is no way I would have placed an order while my wife did some shopping. Tesla is one of the few companies that enables six figure impulse purchases.
- Trading a car in with Tesla is mostly done through the website. All details and pictures are added by the consumer, saving Tesla and the consumer a huge amount of time. A physical inspection is only needed after initial numbers are discussed/agreed to.
Dealers would have a hard time implementing a solution like this because the cost to build, roll out, maintain, and train every potential customer are exorbitant for a single dealer or dealer group. Some larger dealer groups have similar trade in appraisal processes to Tesla, but getting consumers to use the technology is not easy.
TLDR: Tesla makes it easy to spend $100K in minutes, dealer can't compete with modern purchase practices and have little to no incentive to help the manufacture if it does not immediately help them.
A few hours later I stopped at the Nissan dealer to charge my wife's 2015 LEAF. Since I had time to kill, I decided to ask them for a bid on it (even though I'll likely sell it private party). A sales rep said their used car manager would come out and write up a bid. I decided to check out a new 2017 Nissan GT-R Nismo. It was guarded behind red velvet roped stanchions and had a $75K markup added to the MSRP of $176K. A sales guy informed me they do not offer test drives on GT-Rs until sales agreement had been finalized (I had not asked to drive it).
I waited for another 15 minutes and the used car manager still never arrived to give me a bid and no one updated me on his status. The LEAF was sufficiently charged, so I left.
Tesla has so many advantages in this situation:
- If a Nissan dealer lets every interested party drive their top of the line GT-R, it will likely lead to little if any increased business at that particular store and add miles, wear and tear to their extremely limited special inventory. Even if a consumer tests a car at one dealer, there is nothing stopping the consumer from buying one somewhere else. So I understand that policy of refusing test drives. The big loser here is the manufacturer, not the individual dealer. Dealers will struggle with a mindset of "help the brand to help all dealers."
Tesla will offer a test drive in a P100D to anyone; even though very few consumers will order that model. Most consumers will leave with a very positive view of Tesla which leads to orders of lower priced vehicles, evangelism, and more cult members!
- Dealers make so little on new cars (a couple thousand bucks in most cases), that they need to make up for it by overcharging for service, adding markups to mid to high demand vehicles, and squeezing their salespeople and cutting other costs. The $75K markup on a GT-R Nismo is one thing, but they were marking up 2016 Nissan Armadas by $6K even though 2017 models are already available! The Model 3 has received unprecedented demand and will have no dealer markup.
- Negotiation and paperwork take hours for a dealer to complete on every single sale. So much so that the used car manager simply didn't have time to write up a bid on my car. If it took that long to buy or order a Tesla, there is no way I would have placed an order while my wife did some shopping. Tesla is one of the few companies that enables six figure impulse purchases.
- Trading a car in with Tesla is mostly done through the website. All details and pictures are added by the consumer, saving Tesla and the consumer a huge amount of time. A physical inspection is only needed after initial numbers are discussed/agreed to.
Dealers would have a hard time implementing a solution like this because the cost to build, roll out, maintain, and train every potential customer are exorbitant for a single dealer or dealer group. Some larger dealer groups have similar trade in appraisal processes to Tesla, but getting consumers to use the technology is not easy.
TLDR: Tesla makes it easy to spend $100K in minutes, dealer can't compete with modern purchase practices and have little to no incentive to help the manufacture if it does not immediately help them.
