Should We Be Concerned?

[Benjanos]

Suspect the 'Display Centers' will be more prone to closure than the Service/Display Centers. Personally not worried this will effect Tesla's future, if it really does they can reverse their decision. But somehow I find the perception of this... not good.

Most people wont focus on the enormous investment/momentum they have in Fremont and the Giga Factories, they will focus more on "Tesla cant even afford a place for people to view their cars, they must be on deaths door". But since Tesla will have done their research they probably know the cost is X and the benefit 0.01X. If nothing else it's interesting watching such a big company challenge their own status quo.

Waste is the enemy.

 

[Tesomega]

I suspect that Referral Rewards are coming back....with different rewards which is sustainable and the same time provide the touch and feel aspect of car buying experience and talk to the current owners.

 

[FlatSix911]

First, I am not concerned about the financial viability of the company long term.

That said, I am concerned about the human impact of reducing the sales staff to zero.
I visited the Tesla Seaside location this afternoon to say goodbye to the remaining sales staff members... today is their last day

 

[Ken7]

I didn't get seriously interested in buying a Tesla until the Model 3 production ramped up. While researching M3 I came across TMC and learned many members had purchased a pre-owned MS instead of new M3.
Hmm, how do you make that decision without a hands on side by side and driving experience? If there had not been a Tesla SC where I was able to see, touch and drive the cars most likely I would not have purchased or bought the wrong model for me.
Currently there's no real competition in the EV market. Two years from now that's not likely to be. Tesla, in my view, will be at a huge disadvantage if potential buyers can see, touch and drive the competition but have to rely on online pictures and videos to "demo" a Tesla.

Exactly. For those that have no concern buying online, I’m assuming this applies to cars you’ve never even sat in. To those folks, you never sat in a car that was just uncomfortable? The seats didn’t feel right, you felt the center console was too close, the rear seats just weren’t right, trunk space, although seeming OK in the specs, had weird contours making it impractical for your needs, or a myriad of other issues I’ve seen in many many cars over the years. There can be endless issues that would go totally undetected buying online.

Specs alone just don’t cut it. You need to at least sit in the car and, IMO, even a 10 minute drive can be enough to uncover certain issues that would make you rule out that car.

The return policy will not be enough, in many cases, in providing enough comfort to those that have spent a lifetime test driving, sitting in & ‘feeling’ a car, examining and, often, visiting a number of dealerships of the cars in contention multiple times.

I can think of a number of friends who might consider a Tesla, but would never ever buy a car this way. I’m convinced it’s a huge mistake, but I hope I’m wrong.

 

[jerry33]

Exactly. For those that have no concern buying online, I’m assuming this applies to cars you’ve never even sat in. To those folks, you never sat in a car that was just uncomfortable? The seats didn’t feel right, you felt the center console was too close, the rear seats just weren’t right, trunk space, although seeming OK in the specs, had weird contours making it impractical for your needs, or a myriad of other issues I’ve seen in many many cars over the years. There can be endless issues that would go totally undetected buying online.

I bought a car once before I even saw a picture of it and I was pretty happy with it. I had the previous version and put an order in for the significantly refreshed model.

I don't believe for an instant that if you want a test drive you won't be able to get one. I believe the goal is to reduce the number of test drives, not eliminate them totally. Just like the store closings, some will become galleries, not that there won't be zero places to physically see and sit in the car.

My thought is that a lot of these concerns will turn out to be non-issues.

 

[Ken7]

The doom/gloom is astounding!
People said they couldn’t get to production targets. They did.
People said they wouldn’t get into China, they did.
People said they’d never make 35k car... they did.

Now, filling backlog in China and Europe, with 35K model 3 and reduced North America pricing, and Model Y imminent, they are going under?

As with all announcements, the elimination of retail sales locations is directional and gradual. And they will find other ways to provide sales info and test drives. If one approach fails, they will react quickly.

Tesla needed retail stores when there were few on the road. No longer the case. Smart to know that trading retail stores for lower price a much better demand lever now.

It’s a continuation of the beginning. I’m impressed with the courage of this company to revolutionize the industry at every turn.

Although I agree with some of what you say, you can sell lots and lots of cars, even sell them in China, even sell a $35,000 Tesla, and still not make enough money to stay in business.

As with every business, it’s the bottom line that counts and it’s the bottom line Tesla struggles with. Now with the Model Y in the not too distant future, there will be more ‘production hell’ and more huge drains on capital for a company that can’t tolerate endless drains on capital.

It’s nice to be optimistic, but there are business realities. We’d all have to be blind to not see Tesla’s recent moves are indicative of a struggling company, not one whose health is sound.

Look, I love Tesla, I certainly love my S and the products they produce, but I’m not wearing rose colored glasses either.

 

[Ken7]

Tesla’s own data says something like 82% of buyers didn’t test drive first. Not sure you’re going to win that wager.

Assuming that’s accurate, can Tesla afford to throw away an 18% market share? Hopefully Jerry33 is correct and that 18% will still be able to take a test drive. We shall see.

 

[jerry33]

Assuming that’s accurate, can Tesla afford to throw away an 18% market share?

Sure, if they can't supply it because they are already selling production (which historically they have been), or if the revenue they get from it doesn't cover the expense of maintaining an expensive presence. As a company that is focused on growth and development, every penny they don't spend on things that don't contribute to the overall mission, is a penny wasted. It's called opportunity cost. To put it simply, if I spend $0.30 cents on electricity instead of $3.00 on gas I'll have $2.70 to spend elsewhere. And anyway, they can always reopen stores later when the economics is right for it. It's not as if closing stores today means they can never ever open new ones at some later date.

 

[DukeofURL]

I was holding a reservation for a model 3, but seeing how it had no dash cluster lead me to be interested in the S. I went to the SC, test drove an S and bought it that day. There's no way I would have spent the extra cash without being able to have experienced it myself.

THAT SAID, my buddy was in the back seat when I did my test drive and rented a model S for a week when he went on vacation shortly after that, and ordered one for himself immediately following, so I would've likely done the same if I hadn't had the opportunity otherwise. It's not a showstopper, it's just less convenient.

 

[outdoors]

Assuming that’s accurate, can Tesla afford to throw away an 18% market share? Hopefully Jerry33 is correct and that 18% will still be able to take a test drive. We shall see.

I think the assumption that all 18% had to test drive a car or would not have bought car is just that. An assumption. What is the margin on the 18% after all costs associated with that sale compared to an online sale. Elon talks about saving 5 minutes, as time is money. Which it is. It is a whole host of other costs as well.

Several new owners of 3's in my area were bombarded with calls and emails to come test drive the car in the 4th quarter of last year.
Many of those turned into sales. Could have easily been done without a brick and mortar store. Targeted drive events aren't new to the auto industry(think state ADA). Sponsoring events with cars present. The list goes on and on. Maintaining the brand identity through association to customers habits, hobbies, and values.

Has anyone given a thought on how many cars have to be sold monthly at each sales center just to keep the lights on/pay rent yet alone salaries and benefits? I think it might floor many of us. My thoughts are Tesla was kind of sick of hearing about how they lied from reservation holders. "There will never be an SR......Or they will only make one car this year in an SR." Well it's here now.

Someone flipped the apple cart again on an established way on thinking. I think it is perfectly logical for many to want to stand back and watch for a while. Especially if one hasn't participated in the new way yet.

Change happens. You can choose this Robot to do your prostate surgery or you can have the doctor holding a scalpel who has being doing them for 20 years. Sure many would run away from that robot as fast as they could. Now maybe the other way around.

Wouldn't think the auto dealers are licking their chops yet. If anything they are also standing back and watching for a bit as well. Would like to ask a few dealerships locally how much growth they have got in the online only segment of business. As in I don't want to talk to a salesperson. Just email a price and get me some forms to sign. I would guess it is growing, but I bet they aren't really investing anything in that type of business.

Targeted marketing and spend on potential buyer. If they don't do this in a classy new way including a test drive. Well I think that would be huge mistake. Stay tuned. I think I am getting my kettle corn this time vs. just salt and butter.

 

[bob_p]

Tesla is changing the business model for the auto industry.

The stores were Tesla's short-term alternative to dealerships. And because they've been able to sell vehicles in states without stores (we've purchased 2 S and 1 X in Texas without a store, purchasing online) and there are now many more Tesla vehicles on the road, they've demonstrated the stores aren't essential for sales. Plus, by eliminating the stores, they are completely bypassing the dealership issue - removing the roadblocks the dealership lobbies have tried to place in every state and also showing how little value the dealerships are providing.

Tesla WILL offer test drives. If there isn't a gallery nearby, they could do it through service centers or periodic test drive events. Tesla could re-institute the referral program and provide a small amount of compensation to owners doing their own test drives. Musk could also claim that once FSD is working, the test drive vehicles will come to you...

This is a logical next step for the auto industry - online sales have severely impacted many brick-and-mortar stores, forcing many to close and some to go out of business. And with Tesla's shift to online sales (which they've doing for almost 7 years in states without direct sales), Tesla is making a strong push to kill the dealerships.

If successful, this is going to make it even more difficult for the other manufacturers to compete with Tesla. By selling direct from factory, they've eliminated the extra costs for maintaining a store or a dealership. The other manufacturers will have to include the overhead of their dealerships in their MSRP, along with the cost savings Tesla gets from making their own battery packs & motors, it's going to be even more difficult for to compete with Tesla on price, performance, range and features.

This probably won't be a smooth process. Replacing test drives at stores will take a while to work out. And there are clearly going to be issues with getting a 7 day/1000 mile return policy to work smoothly (such as providing the funds immediately back to the customer upon return of the vehicle, and how that works with financing or in-process license plate/sales tax/property tax).

Perhaps the dealership lobbies should have changed their strategy, and instead of fighting Tesla's stores - they should have required Tesla to sell either through stores or through a dealership, and force Tesla to absorb at leas part of the overhead required to support the dealerships... Now they're going to be in the same position brick-and-mortars are with Amazon - a difficult position to defend...

 

[HX_Guy]

Regarding the 7 day / 1,000 mile return policy, could they set it up to here they don’t actuall charge you until this “trial period” is over? How difficult would that be to implement?

 

[jerry33]

Regarding the 7 day / 1,000 mile return policy, could they set it up to here they don’t actuall charge you until this “trial period” is over? How difficult would that be to implement?

Depends upon the state. Some don't allow this.

 

[tomas]

Assuming that’s accurate, can Tesla afford to throw away an 18% market share? Hopefully Jerry33 is correct and that 18% will still be able to take a test drive. We shall see.

Oh ye of little faith. Nobody said anything about eliminating test drives. If they can find a more cost effective way to provide to those who need it for purchase decision, does shedding expensive real estate and salaries move from “desperate” to “smart”?

Is Tesla having an online fire sale? Or are they putting production efficiency found with 3 and cost of sale reduction into price competitiveness so they are positioned to address fast-following competition and reach 500k units per year and beyond?

Different people find different answers just as obvious.

 

[David29]

I bought my car more than three years ago, and would never have bought it sight unseen or without a test drive. i had 3 or 4 test drives and spent lots of time in showrooms, sitting in the cars, deciding on colors and finishes and testing the audio systems etc. How is one to do that with no showrooms? Why would any "ordinary" buyer, the ones Model 3 is aimed at, buy the car sight unseen or even without a test drive? How do you chose options? I agree with the OP and am fearful this is the wrong path. It feels like a desperate action to scrape up a few bucks to justify the $35,000 Model 3. It might have been better to say, sorry folks, we can't do a $35K car, we will sell it for $37K or $38K or whatever would work, and own up to it and move on.
Saying they will improve service and actually doing it are another fear -- they have said it before. Is the parts problem solved? No. I no longer trust that Tesla will do what they say.
This is the most negative post I ever wrote here.
Color me worried, very worried.

 

[GoTzillaR]

Oh ye of little faith. Nobody said anything about eliminating test drives.

Different people find different answers just as obvious.

Nobody said that for sure but that does raise a concern when Tesla is saying 83% model 3 owners buy a Tesla without test drive, cutting down workforce from showrooms and offering 7days/1000 miles refund policy at the same time.

 

[Ken7]

Oh ye of little faith. Nobody said anything about eliminating test drives. If they can find a more cost effective way to provide to those who need it for purchase decision, does shedding expensive real estate and salaries move from “desperate” to “smart”?

Is Tesla having an online fire sale? Or are they putting production efficiency found with 3 and cost of sale reduction into price competitiveness so they are positioned to address fast-following competition and reach 500k units per year and beyond?

Different people find different answers just as obvious.

Well let me address those that think ‘test drive events’ are a good substitute for taking a test drive at a local dealership. I don’t buy that. Why? Because these test drive events are random, scheduled for a certain date/dates and are generally not at a set, repeatable location, as would be with a known dealership’s location.

IOW the event is generally better suited for the enthusiast who actively looks for and is aware of these things. Most people in the market for a car don’t fall into this category. They have ‘Car X’ on their radar and they say to their spouse, “Let’s go for a test drive this weekend”. What if there is no event scheduled that weekend? What if the Car X is dropped out of consideration simply because it’s simply not as convenient to take a test drive? I believe this will happen.

As Dave mentioned above, and I agree 100%, spending this much money will generally necessitate not one test drive, but multiple test drives. Then, as Dave correctly points out, a prospective buyer wants to sort through and see different colors and options. An online sales approach just isn’t as viable as one that is ‘touchy feely’...not when you could be spending $80,000-$100,000.

BTW, speaking of cutting back, there was a new SC that was supposed to be constructed on Long Island to relieve some of the huge pressure that the only SC on LI, Syosset, has had to bear. Nothing has been heard for nearly a year and when I drove by a few weeks ago, the site was still abandoned. Yet another bad sign especially in light of Elon’s promise to address service issues.

This has less to do with ‘faith’ and more to do with reality.

 

[Impala1ss]

My concern is about the SCs in the same building as the showroom. I don't care if they sell cars but I do care about the servicing. It's 50 miles away now. How much farther should I expect to drive? I can't believe mobile techs will be able to do everything a SC can do. Sometimes a lift is necessary., for example.

 

[jerry33]

My concern is about the SCs in the same building as the showroom. I don't care if they sell cars but I do care about the servicing. It's 50 miles away now. How much farther should I expect to drive? I can't believe mobile techs will be able to do everything a SC can do. Sometimes a lift is necessary., for example.

There just won't be anyone in the showroom part most of the time. That's how the showrooms attached to the SCs here are. Depending upon the layout they could: leave them as is, convert to more service space, convert to more delivery space.

 

[Uncle Paul]

The trend in used cars is to search all over the country for the used car of your choice and pick the best priced one. Then a trucker picks it up and delivers it to your door. Seller send buyer a description and pictures, along with a car fax report and the buyer uses that to make his decision.

Same with new cars. Not unusual for a buyer to get internet quotes from many states away. This give buyer a better price and greater selection. The car is again shipped to the buyers home or office. All financials are handled over the internet as well with deposits and payments made by wire transfers.

Instead of 15 minute test drives, the buyer will rely on internet research to get the vehicle than best serves there needs.

Even at legacy dealerships a customer may also desire a vehicle that dealership does not have in stock. That dealership will do a dealer trade with another dealership. They will send a driver to that dealership to swap another equilivent car and drive your car back to you for pickup.

More typically a test ride at a dealership is mostly used to validate your already preselected vehicle. It gives you a warm fuzzy feeling, but rarely will be the only deciding factor in your choice.

Rare is the person that would agree to pay 6% more for their car if it included a short test drive.