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Roadster sales - Tesla business model profitable?

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Merc Dealers?

I wonder if they've considered placing a few cars at select Mercedes Dealers?

I still get a lot of: "What kind of car is that? I've never heard of it before." and "How did you get that, I thought they weren't delivering yet?" and "I thought they were only available in California".

Clearly, they are not getting marketing penetration to an awful lot of potential car buyers.

So, now that Daimler owns a stake in Tesla, why not place a few cars at a few dealers and see what happens? Especially in places where Tesla doesn't yet have a store and may not for quite a while.

Worse case is Tesla gets a lot more exposure, the dealerships get a lot of traffic with people just coming to gawk (and possible driving off with a new Merc). Best case is they pick up a few impulse purchasers, who would never have the patience to place and order and wait several months. There are probably lots of those folks out there, I bet they could move 500 cars a year at least.
 
What does each store add to the overhead? How many cars does each dealership need to move each month to break even with rent/payrol/utilities/etc.?

I'm working from an assumption that if TM's cost-benefit analysis lead to opening of new stores in markets that are heading into non-Roadster season soon (Chicago, Seattle, Toronto, Munich), there should be some business sense to pushing stores in markets where it's always Roadster season, i.e. Miami, Dallas, Phoenix, etc.

Pushing into Mercedes dealerships, as noted by BBH, is a very good thought as well.
 
Pushing into Mercedes dealerships, as noted by BBH, is a very good thought as well.

The more I think about the Mercedes dealer idea the more complicated it becomes. First they need to give up valuable floor space for a car and charger, and one in the back on a charger then train at least one employee to answer a million EV questions. Does the person work for Tesla? That sales person also has to tell the prospective buyer that repairs are done somewhere else possibly 100s of miles away. It just seems hard.
 
The stores are the lynchpin, it seems to me, of TM's grand strategy. People being able to physically walk in someplace and literally kick the tires is a necessary component of expanding the customer base. As stores open around the country and the world, sales of the Roadster should increase. I agree with vfx that the MB idea is unworkable, and totally contrary to TM's plans.

The idea of using company-owned stores is a big a gamble as anything TM has done. It's almost totally unprecedented in the auto industry, and particularly for a start-up with relatively finite funding, it's a huge gamble. Now, in addition to building brilliant cars, you need to be managing real estate, employees, security, maintenance, local advertising etc., most of which are handled for every other automaker by franchise dealerships. Coke and Pepsi don't know how to handle bottling and distribution, and GM wouldn't be very good at running a dealership. It's ballsy, to say the least, that TM thinks it can do all of this well. But if it does, and the company store concept works, it sets them up to be MUCH more profitable than the average carmaker, because they aren't splitting profits with a dealer, and allows them to have MUCH better quality control with respect to the customer experience.

Assuming they can get the Model S up and running close to on time (2011-12), this whole company store strategy will be the biggest X factor in determining whether TM fails or suceeds.
 
re: mercedes dealerships

It isn't as straightforward as it sounds. Mercedes doesn't own the dealerships - they are independent businesses with franchise agreements. Tesla is an independent manufacturer, so even if they wanted to distribute through dealerships (which they don't) they would need to develop separate franchise agreements with the dealers. The dealers would want a pretty significant "cut" of the sale, which would eat into the marginal profit of each roadster, which is already slim. Once tesla signed franchise agreements, they could not compete by selling direct, so its a pretty significant decision to go that route.
 
re: mercedes dealerships

It isn't as straightforward as it sounds. Mercedes doesn't own the dealerships - they are independent businesses with franchise agreements. Tesla is an independent manufacturer, so even if they wanted to distribute through dealerships (which they don't) they would need to develop separate franchise agreements with the dealers. The dealers would want a pretty significant "cut" of the sale, which would eat into the marginal profit of each roadster, which is already slim. Once tesla signed franchise agreements, they could not compete by selling direct, so its a pretty significant decision to go that route.

I totally agree, it isn't a simple, easy thing. But that doesn't mean it's not doable.
I'm talking about only a very few cars, and the incentive for the dealership is mostly just attracting traffic. More of those visitors are going to drive away in a Merc because let's face it, there's a lot of people who like to see a rare, $100,000 electric sports car, but not that many who people who actually want to buy one.

So, Tesla would have to establish special "limited agreements" with the dealers to do this. I would expect the Roadsters to have a premium price, since the buyers don't have to wait months to get a car. That allows for the dealer to even take a cut. The connection with Daimler owning part of Tesla doesn't mean much to the dealers, but just makes it so Daimler wouldn't complain about the practice as they would if those dealers wanted to sell something like a Lexus.
 
Fisker is taking a shortcut to distribution channels, but is giving up a lot of revenue to the dealers they are working with.
I wonder which one will win. Tesla definitely has deeper pockets now with the low interest govt loan. Tesla also likely has access to more investment money since they have the Daimler investment and the govt loan.

I am not really worried about Tesla Motors anymore, which is what inspired this topic a few months ago.
The sales of the Model S appear to be strong and the financing is in place to get there in 2-3 years.

The immediate concern of Tesla Motors is that the Roadster remains viable. Are there enough sales to keep the Roadster production flowing for the next two years at a minimum level?
 
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I'm working from an assumption that if TM's cost-benefit analysis lead to opening of new stores in markets that are heading into non-Roadster season soon (Chicago, Seattle, Toronto, Munich), there should be some business sense to pushing stores in markets where it's always Roadster season, i.e. Miami, Dallas, Phoenix, etc.

It's always Roadster season in Seattle. There's not a single month without good open-top days. The winters are rainy but not that cold, and there are plenty of breaks from the rain if you're in a car that only takes a minute to remove the top. In fact, I've heard it argued that that are more convertible-friendly days in Seattle than in Southern California if you don't like being roasted alive on really hot days. Heresy, I know, but it may well be a factor to the level of sales in the Seattle area that caught Tesla by surprise.

Coke and Pepsi don't know how to handle bottling and distribution, and GM wouldn't be very good at running a dealership.

Pepsi is in the process of fully acquiring its two largest bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), making them responsible for about 80% of beverage distribution in North America. (Data obtained from the May 1, 2009 ValueLine report on Pepsi.)
 
It's always Roadster season in Seattle. There's not a single month without good open-top days. The winters are rainy but not that cold, and there are plenty of breaks from the rain if you're in a car that only takes a minute to remove the top. In fact, I've heard it argued that that are more convertible-friendly days in Seattle than in Southern California if you don't like being roasted alive on really hot days. Heresy, I know, but it may well be a factor to the level of sales in the Seattle area that caught Tesla by surprise.

Sounds like the UK - which is Europe's biggest convertible market.
 
Newest Tesla Motors store opens in Münich today — Autoblog Green

Seeing another Tesla store open in Munich raises this question in my mind.

Does it really make sense to be opening these stores when they only have the Roadster to sell?

A certain amount of overhead is involved with rent, utilities, employees, etc.
Are they really selling enough Tesla Roadsters right now to justify these stores existing?

If the Model S were being produced and 10,000 to 20,000 cars per year were being sold through the distribution network, then I would say that it does make sense.

But right now?

I think there are around 35+ Tesla Roadsters within range of the Seattle Tesla store (which is still not open, they are still renovating) and 100% of those cars were sold and delivered without the store even being there. The service has been handled by the local service manager out of his existing garage repair shop (non Tesla). So the actual high profile store is completely unneeded for the purposes of servicing the Tesla Roadsters in the Pacific Northwest.

I question whether it makes sense to have the overhead for Tesla when they clearly don't have the Roadster sales to justify this distribution network. Their production of 100 per month is about to hit a wall when the backlog expires in October/November. They seem to be stuck at this 1,200 to 1,300 number. And several hundred of those appear to be $5,000 deposits that never put up enough money for a production number. So are they really even valid?

We are hearing reports of people getting a Roadster production slot immediately upon contacting Tesla for a new order. So the waiting list is caught up. If they are producing 100 per month, they are producing them on spec to have inventory in stores with the most common colors and options. That sort of "stuffing the sales channel" can only go on for a short period of time.

The stores seem about two years too early to me. I do the paper napkin math for the costs per store and it gets REALLY expensive per month to maintain this network for only a limited number of Tesla Roadster sales.
 
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Is Tesla able to use the government loan for general corporate purposes such as supporting this store network that also helps the Tesla Roadster?
Or does the money have to be dedicated to the Model S and drivetrain business? I wonder how much of it bleeds over into indirect subsidies for the Tesla Roadster.
 
Newest Tesla Motors store opens in Münich today — Autoblog Green

Seeing another Tesla store open in Munich raises this question in my mind.

Does it really make sense to be opening these stores when they only have the Roadster to sell?

A certain amount of overhead is involved with rent, utilities, employees, etc.
Are they really selling enough Tesla Roadsters right now to justify these stores existing?

If the Model S were being produced and 10,000 to 20,000 cars per year were being sold through the distribution network, then I would say that it does make sense.

But right now?

....

The stores seem about two years too early to me. I do the paper napkin math for the costs per store and it gets REALLY expensive per month to maintain this network for only a limited number of Tesla Roadster sales.

It's definitely a huge gamble by Tesla, but one that will pay huge dividends as long as they don't run out of money. There's no doubt that opening the stores as they have is going to cause them to burn through cash a lot faster than they otherwise would for all of the reasons you mention. But, if they want to be seen as a viable, mass market car company, they really need to have a physical brick and mortar presence in as many places as possible.

There's probably a little bit of chicken and egg here in determining the "right" time to open the stores, but assuming that they can float themselves until they're selling lots of Model S', they stand to reap enormous benefit from not using a dealer network or otherwise sharing those profits with local franchises.

The loans are earmarked for their specific purpose (development of the S and the battery technology), but obviously to the extent that Tesla doesn't have to burn its own cash on those projects, it leaves more of their investors' money, and profits from the Roadsters sold, to get and keep the retail stores open.
 
There's probably a little bit of chicken and egg here in determining the "right" time to open the stores, but assuming that they can float themselves until they're selling lots of Model S', they stand to reap enormous benefit from not using a dealer network or otherwise sharing those profits with local franchises.

We can do the math ourselves. What is the rent and the cost of two employees (sales and service)? The Seattle store is at least 5,000 sq ft and in downtown Seattle near Lake Union. I am used to paying for warehouse space, so I am not sure what a high end location goes for these days.

I am sure the employees are making $5,000 per month or more. The local service manager is excellent and VERY qualified. So I would guess that we are talking $20,000 to $30,000 per month just for the Seattle store and two or three local employees to be hired. So at least $250,000 to $350,000 per year. Multiply that by 10 to 12 stores around the world, some areas are likely much more expensive than Seattle. That is an expense of likely $5+ million per year for the dealer network.

I suppose if it is only 3 years until production of the Model S, they might think that $15 million, to support a limited high profile dealer network, might make sense.

Someone correct me if my wild ass guess is way off, which is likely.
 
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Chicken and egg continued.

Many will see a local store as confirmation that the company is real and that they can get their car repaired if they buy a Roadster and/or are considering an S.

Washington state buyers bought without a store and that's exactly why they should not be used as an example. The fact that they are the 3rd biggest market is not surprising now, but back then when orders came in it sure caught everyone off guard.

Soon there will be a Model S prototype in every store. Very important for future sales. I don't know if they will be drivable but I would bet if the cars work that they will never let customers drive them.

So James, EV Components does not have a storefront?
 
So James, EV Components does not have a storefront?

Heck no. We are a warehouse and factory operation. We pay very little for our space buried in a business park with no visibility from the street. UPS and Fedex had a hard time finding us at first. Almost everything we do is shipped via pallets (lifepo4 batteries) on fedex ground freight. Local customers from Portland to Seattle do often drive to pickup their orders and avoid ground shipping expenses. But that is less than 2% of our customers. We are shipping to just about every continent on the planet except Antarctica.

On the production side, we are doing Zilla controllers, BMS production and Tesla MC upgrades. Business is booming. We cannot keep up with it. I am worried if the recession ends. We won't be able to handle it.
 
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