Model S rampup to 20K units...

[dsm363]

Even by the time I ordered my Roadster the wait time wasn't even that long so I doubt on a largely automated assembly line that any order would take half a year. I think many people would be willing to wait a month from order to delivery to their front door so don't see it as a problem. There are some people who are impulse shoppers so you might lose those sales but many younger people have grown up with the culture of ordering something online and having to wait for it to arrive in the mail. Granted it's much shorter than a month but if that attitude can be stretched from Amazon.com to buying a car, this sales method may work.

I don't think the younger generation cares as much about going to a dealer, having the sales person say 'let me go talk with my manager and see what we can do' and then seeing their actual car on the lot. If they could simply drive a similar model once, they'd probably be fine with ordering their car online. That's just my guess though.

 

[Rifleman]

I don't think the younger generation cares as much about going to a dealer, having the sales person say 'let me go talk with my manager and see what we can do' and then seeing their actual car on the lot. If they could simply drive a similar model once, they'd probably be fine with ordering their car online. That's just my guess though.

I think you hit the nail on the head with this one, I dont think anyone enjoys the car buying experience at most dealers. Ordering a car after taking a test drive of a similar model at a store is something most people would be willing to do. Waiting several months when you need a car to get to work is something that some people are not going to be able to do.

 

[Arnold Panz]

I think you hit the nail on the head with this one, I dont think anyone enjoys the car buying experience at most dealers. Ordering a car after taking a test drive of a similar model at a store is something most people would be willing to do. Waiting several months when you need a car to get to work is something that some people are not going to be able to do.

It's one of my favorite criticisms of Tesla -- that the company-owned store model can't/won't work, and you can only sell cars successfully through a dealership model. Buying a car through a dealership is generally a miserable experience! This is a classic "this is the way its always been done" argument, and one that Tesla is very wise to try to change the paradigm so that buying a car isn't such an unpleasant experience. Have a few cars on the lot for those who simply can't wait and don't care about their options/colors, and for everyone else if they can get it within a few weeks they shoul be fine.

 

[Robert.Boston]

Agreed, some of the most successful companies have been those that took a different approach to their sales channels, even if their product wasn't otherwise particularly differentiated. Consider the initial success of Dell Computers, cutting out the middle-man and selling sight-unseen computers. Or Apple -- not only the stores, but iTunes, which put Tower Records and nearly every other specialty music retail outlet out of business. Much of McDonald's success could be laid at the feet of a highly successful franchise model, displacing all the mom-and-pop restaurants. Dell Computers, Apples' .AAC downloads, and McDonald's burgers aren't a better product than their competition (in all cases), but were sold in a better way.

That said, I do agree that to hit strong sales volumes, Tesla will need to have a small inventory of "spec" cars on hand, perhaps a dozen distributed in each sales region. Saturn tried the "build to order" model, which as I recall gradually reverted to inventory-at-the-dealer. By keeping a small inventory of popular specs available, Tesla can deliver cars within a few days to those willing to buy from inventory, or in a few weeks from those who want custom. 12 cars in 5 regional centers would only tie up about $3 million in capital.

 

[daniel]

... My guess is as a company they wouldn't be profitable on just Roadster sales (including all the overhead from the stores) and the drivetrain business. Which is why they've staked so much on the Model S...

While you may be right about their profitability, I don't think this is the REASON for staking so much on the Model S. Tesla's goal from the very start was to sell a mass-market EV. The Roadster and the Model S, while important in their own right, are steps to that goal. They are producing the Model S, not because the Roadster alone could not be profitable, but because the Roadster was just a foot in the automotive industry door.

One thing about inventory is that keeping a small (SMALL!) inventory will probably boost sales *again*, among "I want it now, not six months from now" people...

This was me. I'm not sure I would have bought my Roadster if I had had to wait half a year for it. Number 1117 was not produces AS inventory, but it was in inventory due to being an orphan car. The original orderer ended up not buying it, so it went into inventory, where it was waiting when I decided I wanted a Roadster. I went through the computer's list with my salesman, and picked the car that most nearly matched my criteria.

OTOH, if they can get the wait time down to a month, they will probably lose only very few sales to the "I want it now" buyers. Especially at first when there's nothing else like it on the market.

... Much of McDonald's success could be laid at the feet of a highly successful franchise model, displacing all the mom-and-pop restaurants. [...] McDonald's burgers aren't a better product than their competition (in all cases), but were sold in a better way.

I cannot argue that McD's is not a commercial success. But I sure don't think they sell in a "better" way. They sell in a horrid way that appeals to children, who are easily manipulated by advertising. The corner hamburger stand was IMHO a much better way. (Though it's been over four decades since I ate meat, and the first McD's I ever saw opened in my neighborhood just a few months after I had quit eating meat.)

The Tesla buying experience is certainly much nicer than other car companies. It remains to be seen if it can be scaled up to a national level and hoped-for Bluestar sales numbers.

 

[EVNow]

12 cars in 5 regional centers would only tie up about $3 million in capital.

That is one way to upsell as well. Keep cars that are slightly better equipped than what most people order.

 

[AnOutsider]

I cannot argue that McD's is not a commercial success. But I sure don't think they sell in a "better" way. They sell in a horrid way that appeals to children, who are easily manipulated by advertising.

Wasn't that the basis of this suit? Mom to Sue McDonalds in Happy Meal Battle - ABC News

On topic, I think we had this discussion elsewhere, but I'm also a big fan of the direct-to-customer setup Tesla is going with -- though I also agree they need to keep SOME inventory.

 

[jerry33]

I don't think the younger generation cares as much about going to a dealer, having the sales person say 'let me go talk with my manager and see what we can do' and then seeing their actual car on the lot. If they could simply drive a similar model once, they'd probably be fine with ordering their car online. That's just my guess though.

+1 Except that I don't think it 's only the younger generation. I purchase almost everything online--include two Prius. In both cases I purchased when Toyota had the online ordering system up and running. This avoided the dealer hassle at sales time. Unfortunately, it didn't avoid the poor service for maintenance.

Not buying or getting service from a dealer is one of the big reasons for "Why Tesla?"

 

[SByer]

--include two Prius. In both cases I purchased when Toyota had the online ordering system up and running.

Yeah, Toyota is particularly bad at the in-person sales process. I loved my MR2, but will never buy another Toyota, ever, ever, after that experience. I compare that to when I bought the 911 - used. If Tesla hadn't come along, I might have become a lifelong Porsche owner, though now that there's the Cayenne and Panamera and they've pissed away a huge chunk of their brand caché, probably not.

The franchise sales model is just broken, kills any feedback loop in either direction (building the cars customers want, quality control of the experience). Online is OK for the technologically savvy, but I don't think applies in the vast majority of cases.

 

[Larry Chanin]

Actually, I agree with you, it's not inevitable. Do note that Tesla started producing inventory of the Roadster before it ended production, however; three years is a good long time to go before producing inventory, but they did start producing inventory eventually.

One thing about inventory is that keeping a small (SMALL!) inventory will probably boost sales *again*, among "I want it now, not six months from now" people, so I think after they start producing inventory, they'll find they don't need to advertise or discount for *another* couple of years. Meanwhile they'll be focusing on releasing their next car model....

Yes, I think we're saying the same now. When I referred to avoiding inventory I didn't mean to suggest that inventory should be zero. I was just stating that Tesla should avoid the inventory practices of conventional dealerships. Robert's suggestions regarding inventory makes sense to me.

Larry

 

[tdelta1000]

Yes, I think we're saying the same now. When I referred to avoiding inventory I didn't mean to suggest that inventory should be zero. I was just stating that Tesla should avoid the inventory practices of conventional dealerships. Robert's suggestions regarding inventory makes sense to me.

Larry

I agree as well.

 

[Larry Chanin]

It's one of my favorite criticisms of Tesla -- that the company-owned store model can't/won't work, and you can only sell cars successfully through a dealership model. Buying a car through a dealership is generally a miserable experience! This is a classic "this is the way its always been done" argument, and one that Tesla is very wise to try to change the paradigm so that buying a car isn't such an unpleasant experience. Have a few cars on the lot for those who simply can't wait and don't care about their options/colors, and for everyone else if they can get it within a few weeks they shoul be fine.

Hi Arnold,

I ran across this posting today which supports your argument that Tesla needs to continue their store concept in favor of conventional dealerships.

A week ago I would have brushed off your post as "no longer true". But last week I went to visit the local Nissan and Chevy dealers to see if they would like to bring cars or brochures to a planned screening of Revenge. I was surprised at what I encountered especially since the local Toyota dealer is dying to get EVs on their lot, and upset that Toyota is dragging their feet with the Rav4. The Nissan dealer had nobody who cared or was the least bit interested in selling the Leaf. Although they are listed on several EVSE maps as having recently installed a Blink charger, they said "we don't have any charger and don't expect to get one anytime soon." They have no plans to start selling the Leaf before 2013.

The Chevy dealer said they have sold 6 Volts but every one was a special order and they have no plans to keep any in inventory. They acted like the few customers who bought them were crazy. They are making no effort whatsoever to learn about the car or promote it to their customer base. One salesman joined the conversation and said "I'm pretty sure the payments for that car work out to about $1,000 per month. I'm not going to push that on anybody."

Missing the boat... The level of misinformation continues to astound me.

Larry

 

[EVNow]

I ran across this posting today which supports your argument that Tesla needs to continue their store concept in favor of conventional dealerships.

Even though Tesla dealers won't diss EVs (if they do, they won't have anything else to sell, unlike Nissan or GM dealers), it makes sense to have company owned stores. That is because of very restrictive state laws that dealer lobbies have managed to get into the books of most states.

 

[dsm363]

Even though Tesla dealers won't diss EVs (if they do, they won't have anything else to sell, unlike Nissan or GM dealers), it makes sense to have company owned stores. That is because of very restrictive state laws that dealer lobbies have managed to get into the books of most states.

Yeah, it's amazing how laws like this can even exist. Even for states the say they embrace 'small government'/'free enterprise' such as Texas, they managed to get laws like this passed. Tesla is trying to find a way around even opening a service center here now as I don't think that's currently legal. What happened to letting the markets work?

 

[tdelta1000]

Yeah, it's amazing how laws like this can even exist. Even for states the say they embrace 'small government'/'free enterprise' such as Texas, they managed to get laws like this passed. Tesla is trying to find a way around even opening a service center here now as I don't think that's currently legal. What happened to letting the markets work?

+1... it seems that they what 'small government' and 'closed enterprise' to regulate the future of automobiles.

 

[smorgasbord]

Even for states the say they embrace 'small government'/'free enterprise' such as Texas, they managed to get laws like this passed.

Read and weep:

http://www.motherjones.com/politics/2009/02/why-you-cant-buy-new-car-online

 

[GSP]

Read and weep:

http://www.motherjones.com/politics/2009/02/why-you-cant-buy-new-car-online

Nice summary of our nation's sad, anti-free market situation.

I highly doubt the following quote from the owner of a chain of dealers:

"Right now, he says, dealerships actually pay about $2,500 more for a car from the manufacturer than they sell it for."

Truth has never been a dealer strong point.

GSP

 

[sp4rk]

Hate to be real stupid, (as I am a newbie here I am allowed to be?)

If it is illegal to sell direct, how are our "friends" able to do it?

I'd never even thought or realised that with Tesla you're going direct.

 

[VolkerP]

They have a "BUY" button on their web site, but you initiate a reservation. When sending the reservation fee, you don't buy a car. This seems appropriate to circumvent the "no online sales" restriction.
The act of buying follows, including exchange of contract, signatures, final payment which are escorted with online communication but are done offline/in paper (greenbacks? ). Doesn't count as an online car sale, too, otherwise a lot of people would have tried to sue TM to smithereens.

 

[tdelta1000]

The recent quarterly call revealed that Tesla Motors will move carefully and slowly to that 20K units annually. More information will become available when TM gets its crash ratings, its EPA MPGe ratings and the first several hundred reservation holder Model S' on the road. I'm excited.