I'm interested to know why Tesla's in house sales and service centres should cost them more than using a dealer network. The dealers do put money up front to equip their stores but then reap the rewards of their investment by buying cars in bulk from the OEM at below market rates and selling them at a premium to customers. The more cars they agree to buy up front the lower the price. The point however is the difference is what funds the dealer network and pays for their investment plus generating a nice healthy profit. If you strip that out then the profit in the dealer network becomes the OEMs. Upfront investment will of course be higher, but in Tesla's case the vehicles are significantly simpler and almost certainly require less investment.
There is an additional but related problem that dealerships make a lot of money from servicing which on a BEV should be a lot lower (much lower level of consumables for one thing). There is therefore a disincentive for them to promote BEV sales over ICE whether under the same roof or within the same business network.
The laws protecting dealers from OEM competition in the US came about because the dealers could not be competitive against an OEM store because they had less margin to sell and it amounted to unfair competition. If that wasn't the case then the laws wouldn't have been enacted - does that not support the Tesla model
I've read Bob Lutz's comments but while I have a huge amount of respect for him personally, in this case I think the Tesla model is so far away from the Ford/Chrysler/GM one that he's been steeped in that I think he's unable to see the wood for the trees.
I would be very interested if anyone can explain why using a dealer network would make financial sense.
I'm no insider to the car business, but I think it's a cash flow thing. For a manufacturer, the faster you can get your money for the finished goods, the faster you can plow that back into building more stuff. Dealers buy the newly built cars from the factory, which gets the builder their money. In most cases the dealer is probably buying the cars on a line of credit hoping to flip the cars as fast as possible to make as much as they can. But the builder doesn't care that much as long as enough dealers stay in business selling their cars, the individual dealers are taking the risks that the cars won't sell. If a dealer buys a bunch of sub-compacts in Oklahoma and all the people walking into the dealer want pickups, the dealer made a bad move and might go bankrupt, but there is another franchise in the next town over that bought a slew of the right vehicle and they sell out.
I do see one point Bob Lutz has. The dealer system does buffer the manufacturer against downturns in the market. A short downturn would be rough on dealers, but the factory may only slow down production a bit for a little while. With a direct sales model like Tesla has, it works great as long as the demand is there, but if demand gets soft, there is no inventory buffer and the ripples get back to the factory much faster. Tesla has never really had to deal with that, and who knows what will happen when it does. If there isn't another financial crisis like 2008, it will probably be a while before Tesla has to face that question. Right now there is a huge pool of potential customers who want a Tesla, but can't afford a Model S or X, but could afford a Model 3 when it comes out. If they don't make any major mistakes with the Model 3, demand will probably outstrip supply for years after introduction.
As for the laws against competition in the car business, some of the laws are fairly recent. For example the US state of Georgia did a major overhaul to protect car dealers as recently as 1999. The dealers were probably getting concerned in the 1990s because people could shop for cars on the internet. Some US states allow car brokers who will shop many dealers throughout a region and arrange to have the car shipped to you from the dealer which is the cheapest. A lot of these laws came about to shut down brokers. It does make dealers in cities where expenses are high compete with dealers in rural areas. Here in Washington State, the sale taxes can vary quite a bit from county to county and the county with the lowest tax rate has dealers for every car you can imagine. The last time my SO bought a car, she got the best deal from a dealer in that county so we drove up there to pick it up (about 50 miles for us). She saved about $500 in sales tax alone, plus they sold it to her a little cheaper than the local dealer would.
Back in 1992 I talked to a broker when I bought my last car, but I ended up going with the local dealer which was about the same price that round. The broker was working with a dealer 120 miles away who would ship the car to me so I didn't even have to go there.
My state isn't as protectionist of car dealers, so I don't think Tesla has had any problems here. The laws vary quite a bit from one state to the next.
