Model 3 and the impending change to a dealership sales model

[eye.surgeon]

I'm going to officially predict that along with the Model 3 reveal, Tesla will announce a change in sales strategy, moving away from the current model of online ordering and factory delivery, fine for a niche vehicle, to one of a traditional dealership/service center with an inventory of cars for sale. There is simply no other way they can sell and more importantly service camry or accord volumes of the Model 3.

They will have to partner with a separate company to own and operate the dealerships given the laws restricting manufacturer ownership. But it will happen. Internet orders and factory delivery will still be available for those who want that experience.

I also suspect the dramatic slow-down in supercharger construction and permitting this year is due to this impending strategy change, where dealerships/service centers/charging stations will be built instead of stand-alone chargers.

We will see if I am right in 9 days.

 

[Nevek]

I don't see Tesla and Mr. Musk rolling over that easily. Yes, Musk can be pragmatic as he was with the Paypal merger and could rollover on the dealership model in the interests of volume and the long term goals.

But a significant portion of the battle was been won in many states and the e-commerce model has prevailed in other distribution channels eventually. At some point, the middleman is not needed, as much as they resist the change.

It could be wishful thinking, but I see Tesla doing what is needed to support an annual doubling of their sales directly for a few years at least.

They aren't afraid to think big.

 

[Fallenone]

While I do think the future you predict is likely to happen, I don't think it will come into play until late 2017 when Model 3 is actually rolling out. No need to waste money for the next 18 months or so on this.

 

[strider]

Elon is a stubborn person. I don't see it except in states where it's blocked after they've lost every other attempt. And even then I expect they'll partner with non-established people - like a Tesla fan could open a dealer so their name is on the door but it's really run by Tesla.

Tesla isn't going to be selling Camry numbers (500k/year in the US) for a VERY, VERY long time. BMW sells just over 100k 3 and 4 series per year in the US. That's where Model 3 will be for the foreseeable future. EVs are still an early adopter product and will remain so.

Tesla still has a lot of work to do on their delivery an service model - my local SC is perpetually booked 4 weeks out and that's just with Model S's running around. Model 3 is going to cause a lot of heartburn. Same goes for Superchargers.

 

[tomas]

I'll take that bet. How much? This is the future sales model that ALL manufacturers are rooting for. I see no reason to change it.

 

[Skotty]

I also suspect the dramatic slow-down in supercharger construction and permitting this year is due to this impending strategy change, where dealerships/service centers/charging stations will be built instead of stand-alone chargers.

We will see if I am right in 9 days.

Only if the dealerships are placed along major highways at 100 to 175 mile intervals. We've seen through Nissan what chargers at every dealership accomplishes for long range travel. Absolutely nothing.

 

[Akikiki]

I think that once the M3 is available in states where there is no Tesla-resistance, that we will see a revolution by the voters in those remaining states that will not permit Tesla to sell. The people with "pitch a fit" directed at their governmors and state legislature to insist on change.

I also believe that some of this could be fixed sooner. We could squeeze these Tesla-resistance states financially. Most states collect a sales tax on the sale of new cars, such as the Tesla. Each sale is worth thousands of dollars in tax revenue. Most states will honor the payment of sales tax in your home state if you drove across the state line and purchased a car there instead of your state. Maybe they might assess you the difference, but generally they will honor that you have already paid tax. And if you are from another state than where you are buying, prove you are not from that state and you can pay it in your home state. But don't. People that can't buy in their Tesla in their home state, should pay the sales tax in the neighbor state where they purchased their Tesla. And let it be known that their own state missed the opportunity for that tax revenue because it was paid elsewhere. Enough people tell their state legislature that they did this, its not going to take long for the states to allow Tesla sales versus lose that revenue.

 

[jerry33]

The legislators will do whatever whoever pays the most money says. They could care less about the voters, particularly in an issue where 90% of the voters really don't care enough about to take action. (That is, although most people favour allowing Tesla to sell direct, it's not in the top ten of things they care about.)

 

[TexasEV]

And I'm going to officially predict that eye.surgeon's prediction is 100% wrong.

 

[Akikiki]

The legislators will do whatever whoever pays the most money says. They could care less about the voters, particularly in an issue where 90% of the voters really don't care enough about to take action. (That is, although most people favour allowing Tesla to sell direct, it's not in the top ten of things they care about.)

No they don't care, until you tell them that they can't do something they want to do, like buy a Model 3.
Its just an idea. Its just my opinion. My opinion doesn't change anything. Just my thoughts.

 

[adiggs]

I don't really have an idea either way of what Tesla is thinking. However, a decision by Tesla to shift to a franchise model is one of the metrics I'm looking for. If/when I see that decision, that will trigger a decision point for me regarding whether I continue to be invested in Tesla or not.

The way I see it, a decision by Tesla to shift to the franchise model, is a decision by Tesla to distance themselves from their customers by inserting a middle man (collection of middle men), and making that middle man into their customer. It will take a long period of time, but eventually, those middle men will be Tesla's customers, not the end consumer.

I don't really expect to see this decision any time soon (and if pressed, my guess is that Tesla will never make this change, and will instead invest in a big sales channel, and start training and certifying 3rd party repair shops to extend their Service reach).

 

[jbcarioca]

I'll take that bet. How much? This is the future sales model that ALL manufacturers are rooting for. I see no reason to change it.

I recall doing consulting for three different major auto manufacturers to help try to find a way to circumvent dealers. They include names mentioned being anti-Tesla. Zero question auto makers would like to control their dealers but they also quite like to be able to force inventory on dealers because they recognize sales that are not to the end consumer. The last few months for example:
BMW buoyed U.S. sales numbers by paying dealers to buy loaners, report says

Because Tesla simply has no fake sales, what we see is what they did. Their demo car are unregistered and sold as "inventory" cars so do not have sales recorded until their are sold. Not too many car builders want the inventor problem since their cars are "sold" not "bought". The question remains: at what point may Tesla each the limits, if they exist, of current distribution techniques. Methinks that will be a long time coming.

 

[jeffro01]

No, no, and again, no. The direct to consumer model is working just fine, the issue is the lack of service centers. I would be profoundly disappointed if Tesla were to shift strategy now. I don't want, or need, an entity between me and Tesla. If Tesla decides to put one there, it makes them no different than any other brand.

Jeff

 

[sandpiper]

I'm going to officially predict that along with the Model 3 reveal, Tesla will announce a change in sales strategy, moving away from the current model of online ordering and factory delivery, fine for a niche vehicle, to one of a traditional dealership/service center with an inventory of cars for sale. There is simply no other way they can sell and more importantly service camry or accord volumes of the Model 3.

They will have to partner with a separate company to own and operate the dealerships given the laws restricting manufacturer ownership. But it will happen. Internet orders and factory delivery will still be available for those who want that experience.

I also suspect the dramatic slow-down in supercharger construction and permitting this year is due to this impending strategy change, where dealerships/service centers/charging stations will be built instead of stand-alone chargers.

We will see if I am right in 9 days.

I see them going to a mixed model. Apple has apple stores and apple also sells through other resellers. Tesla will never forego selling online. And I'm sure that they will keep their mall outlets. But there is no reason to not permit authorized third party shops to offer and service the vehicles.

Timing... I figure that this will happen sometime in the next year or so - before delivery of the model 3. But there's no reason to muddy the launch of the product with something that most people would see as a rather minor detail.

 

[tomas]

Cars are far different from Apple products. Sales people need to have technical knowledge. Tesla already has big challenges hiring, educating and communicating consistently with their own employed reps. Which results in many misrepresentation problems. Just read this forum, examples abound. I doubt they would go to a hybrid model.

 

[SuperDragon]

I think the Buena Park Tesla dealer is how Elon is testing a more traditional dealership model for Tesla. It was a old Chevy dealer if i remember correctly.

 

[tomas]

I think the Buena Park Tesla dealer is how Elon is testing a more traditional dealership model for Tesla. It was a old Chevy dealer if i remember correctly.

That is a Tesla owned store and service center, just like all the others. None are (independent) dealers. Just because they purchased or leased a former auto dealership to serve as location does not mean it is a different model. Many of the stores/service centers are in former auto dealerships.

 

[SuperDragon]

I agree that they are not going to a 3rd party/independent dealer network but I do believe they are planning to go to a more traditional dealer model probably owned by Tesla them selfs. It would allow for more room and control over Tesla charging stations at their own leased/purchased dealerships.

What other Tesla stores are at former car dealerships?

 

[Ardie]

I get the feeling that Tesla's resistance to a traditional dealership model will not go away anytime soon, if at all. We all buy stuff online all the time. Maybe not something as expensive as a car, but a number of us do shop online to find the best car lease deal or mortgage re-fi.

Buying directly from the manufacturer is not the basic problem with vehicle ownership; ongoing after-sales service, warranty handling, and maintenance is.
So for more mainstream acceptance, I think that Tesla will have to expand their after-sales presence with company-owned service centers or Tesla-certified repair shops.
The states have already figured out how to zap us for tax, title, and registration even if we go to South America, buy a new car there, and ship it home.
So the primary resistance probably is for the customer to travel to another state and take delivery of her hew Tesla.

Imagine if Tesla uses something like Tesla/Uber to use a Tesla company/loaner car to pick you up, travel in Autopilot mode to the delivery location across the border where you take delivery. Then drive (or Autopilot) yourself back home in your new car. Or have an agent accept your car on your behalf while you stay at home and sip the congratulatory Champagne. Maybe not as civilized as what Rolls-Royce used to do many a year ago, but it just might work anyway.

 

[mikevbf]

I think the interesting question that eye.surgeon brings up is how Tesla is going to service the exponentially increasing numbers of Tesla cars once the Model 3 starts to ramp up? I have more confidence that Tesla will scale super chargers with increased numbers of Tesla cars than service. Service has always seemed like the weak link to me for the company as numbers of cars dramatically increases.