Will Tesla be Ready for 500,000 Model 3's?

[Red Sage]

As of today there are 807 days till the end of 2018. If we assume 500,000 Teslas in the US by then: even to keep the current (inadequate) ratio of SvCs to Teslas, the 70 or so SvCs now open would have to be supplemented by another 200. That means opening another service center every 4 days from now until 12/31/18. Opening a SvC is not nearly as easy as commissioning another SuperCharger. It has to be stocked with parts and qualified, trained technicians. Costs are much higher. There's no signs that I see suggesting they will be opened at anything like this pace.

The pessimistic case of 500,000 cars by 1/1/20 gives them 1173 days, opening one every 5.8 days. Still no joy.

I'm fairly certain that 500,000 Tesla vehicles will have to have been built before they could be on the road in the United States of America. Tesla typically announces in their quarterly reports what ratio of vehicles they have, or intend to, distribute to the US. That has ranged from as low as 40% to as much as 55% since it stopped being 100%. It seems the goal going forward will be around 45% to 50% of Deliveries to be to US Customers.

There are over 900 Cadillac dealership locations in the US. Likely, each of those locations also has a service center. Also, due to the brand being over 100 years old, there are more than 500,000 Cadillacs on the road in the US. But also, due to the brand being over 100 years old, there are literally thousands of independent shops that can service a Cadillac. But in terms of annual sales, Cadillac is far below 500,000 units per annum, even if you include their SUVs.

Cadillac hasn't sold over 200,000 units in the US since 2006. They've only crossed 180,000 units once since 2008. They've sold less than 150,000 three times in the first four years after that. So, one could look at their 900 service locations a couple of ways... Either their cars are extremely unreliable and need a lot of service that just happens to be very profitable for 'independent franchised dealerships' to provide, or the Cadillac brand prides itself on allowing convenient access to service when needed.

The ratio of Service Centers to Tesla vehicles in the US will never need to reach that of Cadillac in order to be 'adequate', and they may never be as 'convenient' either. But the cars will be far more reliable than an ICE. That will not go unnoticed. If 500,000 Tesla vehicles are Delivered in 2018, and 50% are to US Customers, that is another 250,000 units on these shores. It doesn't mean there would be another 250,000+ repeated Service Center visits that year. Most of the cars will be Delivered to Customers and not seen again inside any Service Center for a year or two, for regular scheduled maintenance. If 1% of them developed issues, that would mean 25,000 cars coming back that year, about 2,083 per month, less than 11 units per Service Center once there are 200 of them in place. That is absolutely manageable.

Don't panic.

 

[Red Sage]

Perhaps they will franchise most secondary market areas. Does Tesla really need to own the future Iowa stores?

[HECK], yes!

 

[bonaire]

They can sell franchises. They have to pay for rent/employees/taxes/upkeep of existing service/sales centers. Which can make them more money if done right? Spending to own the location or selling it (ie. Chipotle and many other franchise brands which bring in large money to the name)? Pretty soon, off-warranty cars will need service and having the rights to charge for that service is compelling for "well-meaning" dealerships, if you can find any. Or perhaps they sell a franchise only to non-automotive people who want to open a dealership of their own with strict policies and claw-backs. Let's see what Monday brings.

 

[ohmman]

As of today there are 807 days till the end of 2018. If we assume 500,000 Teslas in the US by then: even to keep the current (inadequate) ratio of SvCs to Teslas, the 70 or so SvCs now open would have to be supplemented by another 200. That means opening another service center every 4 days from now until 12/31/18. Opening a SvC is not nearly as easy as commissioning another SuperCharger. It has to be stocked with parts and qualified, trained technicians. Costs are much higher. There's no signs that I see suggesting they will be opened at anything like this pace.

The pessimistic case of 500,000 cars by 1/1/20 gives them 1173 days, opening one every 5.8 days. Still no joy.

While I share your concerns, I don't think Tesla needs to only open new Service Centers. Expanding existing ones will go a long way toward accommodating the increase in vehicles, as will adding technician shifts and other service efficiencies. In another thread, @JonMc from Tesla popped in to say exactly this. Read the original that I linked, but here are the pertinent bits.

It's not service center count that defines capacity. It's square footage, number of technicians and number of shifts.
<snip>
We've rolled out Fast Lanes to quickly address quick repairs, multiple shifts and a more sophisticated repair process.

 

[Red Sage]

They can sell franchises. They have to pay for rent/employees/taxes/upkeep of existing service/sales centers. Which can make them more money if done right? Spending to own the location or selling it (ie. Chipotle and many other franchise brands which bring in large money to the name)? Pretty soon, off-warranty cars will need service and having the rights to charge for that service is compelling for "well-meaning" dealerships, if you can find any. Or perhaps they sell a franchise only to non-automotive people who want to open a dealership of their own with strict policies and claw-backs. Let's see what Monday brings.

Once again... No, they cannot. Repeatedly, people note that Tesla can just 'sell franchises' then sit back, relax, and rake in the cash -- after mentioning a restaurant franchise. Sorry, no, it doesn't work that way. It should, but it doesn't. Let me tell you why...

States specifically separate the franchise laws that govern the sale of new automobiles from the franchise laws that cover EVERY other type of business. They are NOT the same, and it is that way BY DESIGN. The franchise laws that have been demanded by, lobbied for, and subjected to the entire automotive industry on behalf of 'independent franchised dealerships' go out of their way to ensure there is absolutely NO form of accountability to the manufacturer by those who sell the cars.

Literally ANYTHING that a manufacturer requests can be thoroughly IGNORED by an 'independent franchised dealership'. They can't tell them how to dress, how to advertise, how to charge for services, how to display merchandise -- NOTHING. Whatever an 'independent franchised dealership' determines is an 'unusual practice' can be declined. Any attempt by a manufacturer to delay shipments, limit access to stock, or do any other type of punishment for non-compliance with policy would be considered unlawful and would lead to fines and injunctions.

The language will NOT allow a manufacturer to even mention the vague possibility of retribution by way of a veiled whisper of a threat. A manufacturer is effectively rendered GUILTY by the very ACCUSATION of wrongdoing levied by an 'independent franchised dealership'. And just about anything that any reasonable person would consider a proper response by a manufacturer to educate, elucidate, or mandate the behavior of a franchise is considered 'wrongdoing' under franchise laws for new car sales.

A couple of years ago, the actual public change to franchise law in Michigan was pretty straightforward. It was a provision that was added to prevent manufacturers from complaining about the amounts that 'independent franchised dealerships' charged buyers for documentation fees. That is, some manufacturers had asked kindly: Pretty please, with sugar on top, could you guys please stop adding hundreds and thousands of dollars to the cost of our cars so as to not entirely piss off/rip off end users and sour them on the brand? And that simple suggestion led to a change to franchise law so that manufacturers now couldn't even make the friggin' concern KNOWN as a point of possible contention. And that provision passed by a landslide in the Michigan legislature. After it had passed, a slight alteration was made, whereby a single word was stricken from the bill, and as a loophole in Michigan law meant the details of that strike didn't have to be discussed publicly. Here is the part that changed:

A bill to amend 1981 PA 118, entitled
"An act to regulate motor vehicle manufacturers, distributors,
wholesalers, dealers, and their representatives; to regulate
dealings between manufacturers and distributors or wholesalers and
their dealers; to regulate dealings between manufacturers,
distributors, wholesalers, dealers, and consumers; to prohibit
unfair practices; to provide remedies and penalties; and to repeal
certain acts and parts of acts,"
by amending section 14 (MCL 445.1574), as amended by 2010 PA 141.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 14. (1) A manufacturer shall not do any of the following:

....

(i) Sell any new motor vehicle directly to a retail customer
other than through its franchised dealers, unless the retail customer
is a nonprofit organization or a federal, state, or local government
or agency. This subdivision does not prohibit a manufacturer from
providing information to a consumer for the purpose of marketing or
facilitating the sale of new motor vehicles or from establishing a
program to sell or offer to sell new motor vehicles through the
manufacturer's new motor vehicle dealers.

And this is what it was changed to:

A bill to amend 1981 PA 118, entitled
"An act to regulate motor vehicle manufacturers, distributors,
wholesalers, dealers, and their representatives; to regulate
dealings between manufacturers and distributors or wholesalers and
their dealers; to regulate dealings between manufacturers,
distributors, wholesalers, dealers, and consumers; to prohibit
unfair practices; to provide remedies and penalties; and to repeal
certain acts and parts of acts,"
by amending section 14 (MCL 445.1574), as amended by 2010 PA 141.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 14. (1) A manufacturer shall not do any of the following:

...

(i) Sell any new motor vehicle directly to a retail customer
other than through -its- franchised dealers, unless the retail
customer is a nonprofit organization or a federal, state, or local
government or agency. This subdivision does not prohibit a
manufacturer from providing information to a consumer for the
purpose of marketing or facilitating the sale of new motor vehicles
or from establishing a program to sell or offer to sell new motor
vehicles through -the manufacturer's- FRANCHISED new motor vehicle
dealers THAT SELL AND SERVICE NEW MOTOR VEHICLES PRODUCED BY THE
MANUFACTURER.

That slight change (the -RED- text was stricken), in a Senate Substitute for House Bill 5606, made it so that Tesla must now only sell 'through franchised dealers', when they didn't have to before. It also makes it so that Tesla cannot attend the North American International Auto Show (NAIAS) in Detroit, or advertise, or market their cars in any way -- unless it is with the intent to promote sales through 'independent franchised dealerships'. This is just one example, but trust that the language is very much the same and puts forth many of the same restrictions in many States across the US.

 

[bonaire]

What if it were a single name network, like Autonation? Or Penske?

 

[Red Sage]

What if it were a single name network, like Autonation? Or Penske?

I hope like bloody hell there will NEVER be a PENSKE Tesla location. Tesla might as well sell out to Warren Buffett instead. Do you have any idea how HUGE Penske Automotive is...?

Penske Automotive Group

 

[bonaire]

I hope like bloody hell there will NEVER be a PENSKE Tesla location. Tesla might as well sell out to Warren Buffett instead. Do you have any idea how HUGE Penske Automotive is...?

Penske Automotive Group

Well, if sales and service is worth selling, sell the whole thing and TSC (TeslaSolarCity) could concentrate solely on making the products and maybe managing the SC network. Service is run without interest in profit, currently, but down the road it could be lucrative. Dealerships themselves find that they keep the lights on via the service department.

Buffett is also a viable idea. Buffet could offer the Anti-Big3 by selling BYD, Tesla and other EV brands directly. He owns an RV company and may want to bring BYD into to US. Multiple brands would offer him more product to sell. Forest River RVs are sold via dealers now.

The point is, to make EVs ubiquitous, it may take a few big names making it happen. Computers did not grow on Gates alone, nor Jobs, nor HP, Dell, Digital, Compaq, IBM alone. It took a wide spread network. I doubt the Big 3 is going to make EVs work. Dealerships do not want to sell cars they cannot wrangle monthly repeat service business from.

 

[Red Sage]

Buffett is also a viable idea.

No. I mentioned Buffett because he bought an entire dealership network on the West coast. Likely so that he could use them to distribute BYD vehicles in North America should they come up with a compelling product. He would be a horrible partner for Tesla Motors, because he has already 'given in' to the notion that 'independent franchised dealerships' are a necessity.

 

[evp]

It's not like they're going to build a bunch of SC's now just to have them be mostly idle until the wave of M≡'s come along. Granted there are some area's that are currently overloaded and they should be adding in these areas now but I would expect there to be a lot of activity around building new SC's in the second half of '17. So we may not have an indication of how many SC's will be in operation at the end of next year until the latter part of the year.

I think we can confidently state that no SvC will go idle. Unless it's in North Dakota or something. (Even then, I might drive there from Colorado to get a service appointment less than a month away.) You could put another SvC across the street from almost any existing site and both would be busy. Waiting until mid-'17 to start seems a marvelous way to fail spectacularly. Imagine the desk of the guy in charge of opening one SvC every TWO days for a year and a half.

 

[Red Sage]

I think we can confidently state that no SvC will go idle. Unless it's in North Dakota or something. (Even then, I might drive there from Colorado to get a service appointment less than a month away.) You could put another SvC across the street from almost any existing site and both would be busy. Waiting until mid-'17 to start seems a marvelous way to fail spectacularly. Imagine the desk of the guy in charge of opening one SvC every TWO days for a year and a half.

Tesla Motors has spent most of the past THREE YEARS battling States that are determined to make sure they CANNOT expand. You cannot blame Tesla for working within the rules, and being locked out by cronies. This year, even States where Tesla had previously 'won' are doing a renege on the deals that had been agreed to previously.

Where Can Tesla Legally Sell Cars Directly To You? State-By-State Map: LATEST UPDATE

 

[FlatSix911]

Tesla Motors has spent most of the past THREE YEARS battling States that are determined to make sure they CANNOT expand. You cannot blame Tesla for working within the rules, and being locked out by cronies. This year, even States where Tesla had previously 'won' are doing a renege on the deals that had been agreed to previously.

Where Can Tesla Legally Sell Cars Directly To You? State-By-State Map: LATEST UPDATE

Wow, nearly half of the USA has denied Tesla sales locations ... hope that changes before Model 3

 

[Red Sage]

Wow, nearly half of the USA has denied Tesla sales locations ... hope that changes before Model 3

View attachment 198799

Well, that is a rather old map. There are Superchargers in Louisiana, Mississippi, and Alabama now. It is a decent article, but it would be nice if it were updated yet again, along with the graphics.

What gets me is that there are over 900 places to buy a Cadillac in the US, but if allowed as many as 200 sites, Tesla Motors would probably outsell them.

 

[BluestarE3]

Wow, nearly half of the USA has denied Tesla sales locations ... hope that changes before Model 3

Unfortunately, probably not. However, if the Model 3 proves as wildly popular as the current number of reservations implies, car buyers may start clamoring that they be allowed to buy this must-have car and to get it serviced locally. At least that's my hope.

 

[Garlan Garner]

Elon has already stated that supercharging will be an option ... why continue the debate

Where is that reference?

 

[Garlan Garner]

Well, that is a rather old map. There are Superchargers in Louisiana, Mississippi, and Alabama now. It is a decent article, but it would be nice if it were updated yet again, along with the graphics.

What gets me is that there are over 900 places to buy a Cadillac in the US, but if allowed as many as 200 sites, Tesla Motors would probably outsell them.

That's absolutely true.

 

[Garlan Garner]

Good point! But, GM is huge and if they wanted to would train thousands of mechanics for the coming EV storm. Or maybe just ignore it a little longer

That's always been my perspective. All of those options are available to them.

 

[Garlan Garner]

Well, if sales and service is worth selling, sell the whole thing and TSC (TeslaSolarCity) could concentrate solely on making the products and maybe managing the SC network. Service is run without interest in profit, currently, but down the road it could be lucrative. Dealerships themselves find that they keep the lights on via the service department.

Buffett is also a viable idea. Buffet could offer the Anti-Big3 by selling BYD, Tesla and other EV brands directly. He owns an RV company and may want to bring BYD into to US. Multiple brands would offer him more product to sell. Forest River RVs are sold via dealers now.

The point is, to make EVs ubiquitous, it may take a few big names making it happen. Computers did not grow on Gates alone, nor Jobs, nor HP, Dell, Digital, Compaq, IBM alone. It took a wide spread network. I doubt the Big 3 is going to make EVs work. Dealerships do not want to sell cars they cannot wrangle monthly repeat service business from.

Elon is just too proud to sell rights.

 

[garsh]

Where Can Tesla Legally Sell Cars Directly To You? State-By-State Map: LATEST UPDATE

Also note that several of the "yes" states have laws requiring dealership franchises to sell cars, but have made some limited exceptions for Tesla. In particular, I know that Pennsylvania has allowed Tesla to operate five locations. Even then, I think they have stipulations that those locations can only sell & service cars, so they can't advertise or sell powerwalls, for example. That may become more of an issue after a merger with SolarCity.

 

[Jayc]

You guys have some of the most innovative companies of the world and great thinkers like Elon with the leadership to make a real difference but just look at the level of opposition he has to overcome even after demonstrating to the whole world how much of a game changing company Tesla is. Not long ago, success was applauded and encouraged by all, these were the core values that differentiated the US from most other places. It's a sad state of affairs, no other way to look at it really.