The new fantasy sales framework will fail

[Brokinarrow]

So how are they going to handle trade-ins?

Or do they just expect everyone to go to CarMax?

I didn't give this any thought last night, genuinely curious.

That is my question as well, since me getting a Model 3 next year will depend on trading in my current vehicle along with a healthy down payment. Not a big deal to me if I have to drive to the nearest service center to do the trade in and pick up my 3.

 

[docbrown]

So how are they going to handle trade-ins?

Or do they just expect everyone to go to CarMax?

I didn't give this any thought last night, genuinely curious.

That is my question as well, since me getting a Model 3 next year will depend on trading in my current vehicle along with a healthy down payment. Not a big deal to me if I have to drive to the nearest service center to do the trade in and pick up my 3.

I don't know what the trade-in process is in other states, but in Texas, my trade-in was completely handled online with no involvement of any store. Tesla did not see my trade-in until I dropped it off when I picked up my new Tesla at the service center. I would think the trade-in process can continue like this.

 

[EnzoXYZ]

Some still waiting for Amazon to fail. They said online sale won’t work... like ever.

 

[electricar]

I suspect Musk understands his business pretty well by now and why they are doing what they are doing.

Over the years I've seen so many self-proclaimed "experts" predict things like:

The Model S will never clear regulatory hurdles.
The Model S will never make it to production.
There will be no demand for the Model S.
It's impossible to make a rocket that re-lands on a drone ship after boosting its payload towards space.
The Model 3 will never make it to production.
Demand for the Model 3 will never materialize.
Tesla will never be able to sell the Model 3 at a profit.
Tesla will go bankrupt before the year is over (2012, 2013, 2014, 2015, 2016, 2017, 2018 and, of course 2019)
The Model 3 will never get European regulatory approval.
There will never be a $35K Model 3.
Without Federal subsidies, nobody will buy electric cars.

I recommend that before making absolute predictions, always ask yourself "Do I have more or less knowledge with which to base my prediction on than the person(s) making the decision?" Who has a better track record of making money and running successful multi-billion dollar businesses?" Why do I think I'm a better businessman than one who is worth over 20 billion dollars?

Apologies in advance if you are a businessman with a net worth over 20 billion dollars.

No I am not a business person worth $20 billion dollars and I love my car, but Tesla does seem to be hip-shooting solutions to complex problems and making up their business plan as they go. This combined with alienating the financial services industry, pointless jousting with the SEC, employee churn, poor customer service, over-blown ego tweeting, etc creates a lot of headwind for the company. This sort of thing has gone poorly for companies doing business in mature industries in the past. we are talking about making cars here - not inventing the personal computer or cell phone. I hope they pull this off ( I am long the stock ) but all this makes the balance between going to a $1000 stock or a $0 stock tip a little closer to $0.

 

[Brokinarrow]

I don't know what the trade-in process is in other states, but in Texas, my trade-in was completely handled online with no involvement of any store. Tesla did not see my trade-in until I dropped it off when I picked up my new Tesla at the service center. I would think the trade-in process can continue like this.

Ok, cool, yeah Iowa sadly doesn't allow Tesla to have stores either, so I'm sure it would be the same here. Good to know!

 

[Chaserr]

Amazon is among the few companies shorted even more than Tesla - naysayers usually say nay because they can't understand success.

They're return to stores eventually, but for the foreseeable future $35k Model 3s will be sold out without anyone test driving them. People have waited years for these and global deliveries are in motion, so the focus should be on fulfilling those orders before selling more backlog.

 

[docbrown]

I don't know what the trade-in process is in other states, but in Texas, my trade-in was completely handled online with no involvement of any store. Tesla did not see my trade-in until I dropped it off when I picked up my new Tesla at the service center. I would think the trade-in process can continue like this.

Slight correction: Tesla did require me to upload photos of my trade-in during the process of them giving me a trade-in value.

And another pleasant surprise was that their offer did not change in the 8 weeks that it took to deliver the new car.

 

[nvx1977]

No I am not a business person worth $20 billion dollars and I love my car, but Tesla does seem to be hip-shooting solutions to complex problems and making up their business plan as they go. This combined with alienating the financial services industry, pointless jousting with the SEC, employee churn, poor customer service, over-blown ego tweeting, etc creates a lot of headwind for the company. This sort of thing has gone poorly for companies doing business in mature industries in the past. we are talking about making cars here - not inventing the personal computer or cell phone. I hope they pull this off ( I am long the stock ) but all this makes the balance between going to a $1000 stock or a $0 stock tip a little closer to $0.

I'm also not a fan of the headwinds Musk is creating for himself, but to your initial point of online sales, I highly doubt the decision was made in a shoot from the hip way. Aside from you feeling like it's going to be a colossal failure, you haven't shown why it will fail, given that most of Tesla's brand appeal is DUE TO creative thinking in "mature industries" that are stuck in the past and resistant to change.

I agree that for people who require a loan, it's much harder to return a car after purchase. Tesla ought to think about reducing this hardship if they want to reach an even wider audience. For now, I suspect the lowered pricing and potential leasing is going to raise demand sufficiently for a while.

 

[electricar]

I never said it would be a colossal failure and creative thinking is why I bought the stock in the first place. There are, however, lots of things to be resolved in this new plan such as who owns the car during the 7 days. Will returned cars be used cars and what happens when they get wrecked. As someone who spent decades in the car business both in sales and service I think it is inevitable that people will abuse this system. I have seen far too many people load their luggage in demos and loaners, go for a weekend trip, and bring the car back trashed and/or wrecked despite the Borrowed Car Agreement and credit card deposit. The wealthiest clients were among the worst and good luck pursuing them for damages. Again, I hope it works, but have serious doubts.

 

[kaidou]

As long as they maintain test driving feature at service center, I think this aggressive tactic will work. If Tesla seriously believe that 7 day return policy would work for test drive purpose, NO it's not going to work. It's not like buying an iPhone Xs and return within two weeks.
I seriously hope that Test should maintain the test-drive policy. Otherwise, I don't think it will work either.

 

[JanetM]

Of course I'm not privy to all the reasons they decided to make this change, but the first thing that came to my mind is that they currently spend (waste?) a lot of energy going toe to toe with state governments and the dealership cartels to be able to sell in various states. They're often forced to fall back to online sales in the current climate anyway, so why not accept this and spend this energy elsewhere? What if this is actually a very positive move that frees them up to solve other problems?

 

[Uncle Paul]

Tesla coupled the reduction in test rides with a 6% reduction in price.

I know nobody that would choose a test ride over a $2-3,000 price cut.

All over the USA, brick and mortar stores are closing as customers vote with their wallets to prefer lower price to visiting a store. You can learn most of what you need to know before ordering, by spending some time on the internet.

Tesla knows that their competition is going to have a price advantage, as the new companies will have several years of Tax Credits that will reduce their prices. Tesla will have to do what they must to compete. They are determined to become the most efficient automanufacturer in the World.

 

[electricar]

The franchised dealers problem will not being going away with this move. In fact in may actually get worse as those dealers are now often large publicly traded companies like Automation and Sonic Group with lots of resources and lobbies. They have huge investments in real estate etc and will think that the precedent of a company selling new cars online only is an even bigger threat because it may cause other OEMs to think about doing the same thing which would be an existential threat to them.

 

[Tic-tac-toe]

It makes sense that they are closing retail stores when the emphasis is on selling the Model 3 and the soon to be out Y. The retail store in DC is located in a shopping center that caters to ultra high end luxury designers like Gucci, Hermes, Dior, etc. The rents are insane.

Since most young people are use to buying most/all their stuff online anyway, it makes sense for a mass market car brand to mainly sell online. Test drives can easily be taken care of at service centers. The one nearest me in VA where I took delivery also has a showroom... and it is located in an industrial park with other car dealerships like a huge Audi dealership right next door.

 

[smak]

Other cars always have had an advantage over Tesla, because they have car lots where you can drive off with your car.

The difference in ordering in a store to get 2 weeks later, and ordering online to get 2 weeks later is zero!

 

[ggnykk]

This new "all online" sales framework is pure fantasy and is doomed to fail.

Even with its stores and sales force, Tesla's sales department is widely seen as one of the worst in the car industry. Many buyers on this forum, myself included, have experienced significant frustration with Tesla's sales and delivery process. Now they plan to get rid of its sales force and stores and make all sales online. This is not only doomed to fail, but will also seriously damage Tesla's financial health and brand value.

I want to discuss two primary reasons. First, many have experience poor sales and delivery from Tesla. For example, it's difficult or impossible to actually get a hold of someone who can give you accurate information about an order or delivery. Moreover, there are frequent and significant delivery issues. Currently, at least you could get a hold of a real person at a store, and try to get some answers. Many have experienced that calls and emails just don't work because you either get slow responses or no responses at all; and even when you get them they may not actually answer your questions or resolve your problems. Without a dedicated sales force with real people that you can actually reach, there will be even greater issues around sales and delivery, increasing customer frustration, and decrease sales.

Second (the main issue), people actually want to test cars before just ordering one online... The car is a major purchase (like just after a house), and it feels ludicrous to just buy one without even testing to see if it fits one's needs. Also the experience of spending time in a store to hear about the car's features propels more to actually buy the car.

Yes there will be a 7-day return, but most people can't afford that. Honestly can you REALLY return a car after spending hours with a bank and completing lots of paperwork to get a loan and then what, just return the car and wait for Tesla to refund you the full amount hopefully quickly enough to pay off the bank before the next loan payment is due? Oh of course you ll need another loan like immediately afterwards since you ll still need a car; good luck explaining that to the bank...

Moreover for most people, a car purchase needs to be simultaneous with a car sale... many people use the money they get on their old cars for a down payment on the new car... like what are they going to do? Can people really afford to keep their old cars and just order the Tesla, and just test it for 7 days? In many cases they would have to have sold their old car when the Tesla arrives so really they wouldn't be able to return the car since they wouldn't have a car if they did... Moreover these transactions would not be simultaneous, creating HUGE hassle on the part of the buyer.

There are many other issues and problems with this new fantasy sales framework. It just wont work. This experiment will fail and Tesla will pay dearly for its failure (loss of sales + customer frustration+ loss of brand value + eventual costs to re-build sales functions and locations).

can't agree more! Online-sale model will end up in massive disaster for Tesla and its customers.

 

[IchDochNicht]

Let's not forget how many Tesla owners are willing to give others rides and talk about their cars in detail. We all love these things, and are happy to show our pride.

 

[PWlakewood]

Let's not forget how many Tesla owners are willing to give others rides and talk about their cars in detail. We all love these things, and are happy to show our pride.

Word of mouth is a very powerful marketing strategy. Tesla will do just fine

 

[ggnykk]

It makes sense that they are closing retail stores when the emphasis is on selling the Model 3 and the soon to be out Y. The retail store in DC is located in a shopping center that caters to ultra high end luxury designers like Gucci, Hermes, Dior, etc. The rents are insane.

Since most young people are use to buying most/all their stuff online anyway, it makes sense for a mass market car brand to mainly sell online. Test drives can easily be taken care of at service centers. The one nearest me in VA where I took delivery also has a showroom... and it is located in an industrial park with other car dealerships like a huge Audi dealership right next door.

For people who know Tesla already and wants their car, they would drive to far away or hard to find location in some industrial park to do test drive or see the car.
But the problem is that Tesla is still relatively an unknown brand unless you are really into tech, car or finance. Believe it or not, vast majority of the general public has NEVER heard of Tesla, if you don't put a Tesla store in a busy shopping mall, how is Tesla going to expand their customer base and sell more cars? Tesla expect these people that don't know Tesla all of a sudden show up in an industrial park to see the car?

 

[Mike Robinson]

I went to a showroom the other day and while they had cars it was mostly empty. Most people order online anyway.

The online only sales model will work. It will have some growing pains but it will work.

My concern is used cars. How are they going to sell used cars without a store/dealership?

The LenoxMall store in Atlanta gets very heavy traffic. I think it would be a huge mistake for Tesla to close it