Model 3 and the impending change to a dealership sales model

[TexasEV]

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.

All this means is Tesla bought or leased a big empty building that already had the right zoning. It's not a Tesla "dealer", it's a combination Tesla store and service center. The different model (for Tesla) this represents is having sales and service in one facility. I question why that's a good idea. The earlier sales and service model had sales centers in high end shopping areas with lots of foot traffic (small stores but expensive on a per square foot basis) and service centers in industrial areas where the larger space needed for service and delivery was relatively cheap. As Tesla builds to order that still seems like the best combination to me.

 

[SuperDragon]

All this means is Tesla bought or leased a big empty building that already had the right zoning. It's not a Tesla "dealer", it's a combination Tesla store and service center.

They sell cars and have a california state dmv dealers lic.. Plus I think most ppl in the united states would say what you described above is a car dealership.

Definition of DEALERSHIP

 

[TexasEV]

The business license or permit to sell cars is called a dealer's license in most states because the laws/regs were written by the auto dealer cartel. That doesn't mean it's the only business model.

As for your dictionary definition, "authorized" is the key word. A car manufacturer may authorize another business to sell its cars. That's a dealership. If it's selling them itself (as Tesla does) then authorized doesn't apply. It doesn't authorize itself to sell its cars.

 

[SuperDragon]

ok semantics aside, this tesla store is in a auto mall off the 5 freeway in los angeles so i think most ppl would consider that a tesla dealer/ship. I do understand what you are saying about 3rd parties tho....

◔̯◔

 

[sandpiper]

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.

Yep... I agree with this point. One of the unbreakable laws of corporate dynamics is that big companies inevitably become bureaucratic, cost inefficient and will never be able to compete with a small independently owned company. Tesla will eventually hit a barrier where they cannot service their vehicles as well as they like, as long as they insist on owning the service centers.

 

[AudubonB]

...What other Tesla stores are at former car dealerships?

I believe the Tesla store in Diarmuid O'C's hometown of ??, MA is in a former dealership. Salt Lake City is right on CarDealerRow and also had been one. And what about Burbank, CA? Was that also one?

 

[Jaff]

I find the title of this thread to be highly misleading in the verbiage used.

It is the OP's opinion that this may happen, yet the verbiage used implies that Tesla IS in fact moving to a dealership model.

I would respectfully ask that the title be modified.

 

[tomas]

A little history: when I first considered roadster and then ultimately put deposit on S, sales and service were co-located. Then tesla moved sales to malls. Then they re-instituted sales capability at service centers. Many of the new openings now are large sales/service centers. Some, like highland park IL, are in a building suitably located that never housed auto services. Some, like Santa Barbara, are in former dealerships.

There is nothing new about co-located Tesla sales and service locations. There is nothing about a sales/service location being in a former auto dealership that makes it a dealer. They are all company owned and operated.

 

[SuperDragon]

They do sell certified pre owned teslas in Buena Park, so at the very least Tesla does own a used car dealership


Tesla makes used vehicles available in new California facility

 

[JohnQ]

Just change "dealership" to "franchised dealership" and everything is good from a language perspective. It's the third party ownership that's relevant here. Why would a car company want a third-party dealership? Well, one point addressed is revenue recognition. Sales can be recognized at the point the vehicle is transferred to the third-party. Second is capital outlay. It's expensive to ramp up a national network of sales and service locations.

Another issue is related to inventory. It's cheaper to keep a factory running and churn out vehicles, especially if you have union contracts regarding minimum work hours, than it is to spin production up and down. Not an issue for Tesla today, of course, but may be in the future. If you have dealerships committed to a specific number of vehicles annually then you can plan production.

 

[neroden]

The franchised model is horrible in almost all respects, with the sole exception of allowing the manufacturer to deploy *someone else's* capital. I think Tesla's already sunk enough capital in that they have nothing to gain by this. The business of recognizing revenue from fake sales is the sort of shady thing Tesla should avoid.

The service problem can be addressed by releasing the manuals to independent (non-franchised) repair shops, which already exist and have better reputations than "car dealers".

 

[hsctiger93]

Maybe, years into the future, they will consider franchise dealers as a necessary evil to handle volume. Those dealers would have to compete with the company-owned facilities.

Considering the legal battles Tesla wages in a number of states to break the dealership monopoly today I tend to believe they don't let that effort go to waste. At least for the mid-term of 3-5 years they go company-owned exclusively.

I also agree that franchise dealers and their business model no longer serve the interests of consumers. They serve the interests of investors.

 

[mzpolo]

Nope..... No dealers. Tesla sells direct forever and ever. Low overhead keeps that a go. A few employees who dont even need to be full time (ala.. no benefits, no cost)
I absolutely see franchised service centers. High overhead for the location, the tools and machinery and the employees. Pass that risk down to someone.

 

[SebastianR]

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. [...]

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 think we can say now that you were 100% wrong

I for one am really happy about that and I hope they will stand their ground. I also don't think that with more than 200k pre-orders world wide there is any concern of "lost revenue" in states that don't want to allow the sale of all American made cars on US soil.

All this leads to is that states like Texas should consider if they want any piece of the Tesla cake or of they prefer to be un-American and continue to impede free-market capitalism.

Also, I'm really happy that we're seeing an acceleration of the super chargers and none of the "come to a dealership in the middle of nowhere to charge your car but only during business hours and only if we like the look on your face" nonsense that other car makers seem to enjoy.

Let's not forget: other than in rare circumstances like in DK / Norway / some places in CA Tesla is now again production constraint and not showroom / service centre constraint. Will they need to sink a ton of cash into their Sales & Service infrastructure? YES. Will this come in one big leap? No. They have +2 years to roll-out more locations and have - simply by controlling deliveries - a fantastically tight control over how many cars will need to be serviced in which geographic area.

 

[calisnow]

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. . . to one of a traditional dealership/service center with an inventory of cars for sale. There is simply no other way they can sell . . . volumes of the Model 3.

You don't state any reasons to support your thesis. What are they? Why can't Tesla exclusively sell direct?