Thursday, 27 July 2017

The Tesla Dealership Debacle

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We all know that Tesla Motors is a different kind of company. All you need to do is look at the products they sell to realize they at not like the car companies. The electric cars they sell are in a class by themselves, and everything else the company is involved in is just as unconventional as their cars.

Besides their product, another thing that sets them apart, that is making waves all across the country, is their method of direct sales. This means that Tesla does not set up dealerships by selling franchises to independent owners. That would actually be the easier way to set up a distribution network. Every store where a Tesla product may be purchased is a company store. These Tesla dealerships are much like any other high-end car dealership. they have a fancy showroom, a fancy service center, and free popcorn for the kiddos. Actually I’m not sure about the popcorn, but if they want to sell a car to me they better bribe my kids with popcorn.

In several states Tesla is running into legal trouble with their dealerships because the local auto dealers associations are protesting Tesla’s direct sales method. Some states even have laws on the books to prevent direct auto sales at the level which Tesla hopes to be able to sell cars. States such as Texas, New Jersey, North Carolina, Iowa, and Maryland have all been hurdles for Tesla. Officials in some of these states have told Tesla outright that they may not sell cars in their state.

Tesla inside

Model S interior

Tesla does not have any stores in Iowa but earlier this week Tesla was in West Des Moines offering test drives to the public to at least build awareness and promote their product. Someone from the Auto Dealers Association in Iowa tipped the DOT that the rouge test driving was happening and state officials shut the event down a day earlier than it was supposed to end. Too bad for Iowans who want a chance to try one of Elon Musk’s wild rides.

The reasons cited by many of these states or by the Auto Dealers Associations in many of these states is that direct sales will hurt the consumer. As a consumer this could not be more insulting. It’s as if the auto dealers are saying that we are too stupid or inept to take care of ourselves or our cars, or our car buying experience. The auto dealers say the level of service you get from your hometown dealership is much better than the service you would get at a company store. As if company stores don’t really want to sell cars so they are not going to be helpful to customers.

Tesla Back

The auto dealers say they are better able to go to bat for their customers over other things such as warranty claims, They say if the manufacturer owns the dealership, they will own the service department, which means if the customer’s vehicle needs a repair made under warranty, the manufacturer owned dealership will have tendency to ignore the customer’s needs to save money. The dealerships think the manufacturer will be difficult to deal with? Am I hearing this right? The pot calling the kettle black.

Why would a franchised dealer many of whom suffer from horrible reputations be any better? Why do they think they are able to put the manufacturer in their place on a warranty claim? This is silly. The manufacturer has just as much to lose whether they own the service department or not. They has an huge incentive to take care of the customer and are not likely to deny claims just to pinch a penny. In all the time I spent as a technician in a dealership, if a car was under warranty and some kind of failure came up, the manufacturer always took care of everything.

Tesla Base

The foundation of the Tesla Model S.

The protests against Tesla by the auto dealers is no different than the protests by the cab companies of Uber and Lyft. Just because someone found a way to do business that excludes you, does not mean you can run crying like a baby to the nearest government agency. Our free market system works in such a way that if you invent the better mouse trap you are set for life. Maybe Tesla has invented such a device.

According to Tesla they prefer to sell their vehicles directly to the consumer because they feel an independent dealership will not have their best interests at heart. Seems reasonable to think that a second party will never have the interests of the first party in mind as much as the first party. The perfect example is a dealership with multiple brands. Imagine someone who is interested in learning more about the Tesla Model S walks into Sometown Volkswagen, Audi, Tesla. They talk to a salesman for a few minutes about the Model S only to have the salesman eventually divert them towards an Audi A6 or something, because the salesman feels they have a better chance of closing the sale right away. The electric car is new technology and will probably be tougher to sell than traditional cars, especially if they sit on the same lot side by side.

The bottom line here is that Tesla has every right to reach their customers themselves if they feel that is the best way to sell their car. No argument made by the auto dealers associations is valid. No matter how much they believe them to be. Just because a new car dealer thinks the added undercoating is worth $600 does not make it so. Let the customer decide for themselves. They will do whatever is on their own best interest just like everyone else in this world.

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