Tesla boss Elon Musk is furious with the way his car company is being treated by certain states in North America, and it’s all to do with the way Teslas are bought and sold.
There are no Tesla dealerships as such. Instead, if you want to by a Model S you do so online, and then you go to collect it from a Tesla store in much the same way that you’d go to collect a new iPhone from an Apple store. And when your Model S needs servicing, the nice people from Tesla come to your home to collect it, take it away, do the work required and then bring it back.
No direct interaction with a traditional dealership ever takes place, in other words, which means there is no haggling over prices from one dealership to another. It also means that the average Tesla costs a whole heap less than it might because the expense of a traditional dealer network doesn’t need to be factored in to the purchase price. In theory, everyone goes home happy.
And yet the governors and mayors of an increasing number of states in America are outlawing the Tesla sales methodology, refusing to grant the company a sales licence unless it has a franchised dealer network in place. Effectively this means Tesla is being banned from selling cars, not just in New Jersey but also Texas and Arizona, with New York, Ohio, Georgia and North Carolina looking like they will soon be following suit.
Why? Because, according to the president of the New Jersey Coalition of Automotive Retailers, Jim Appleton, the traditional car dealer franchise exists not to protect the people who sell cars but the people who buy them.
The heat of competition between one dealer and the next is what keeps the prices of new cars down, claims the president, and that’s good for the consumer.
Elon Musk thinks somewhat differently, however. In a blog he posted recently he accused the governor of New Jersey, Chris Christie, of acting “at the behest of a special-interest group looking to protect its monopoly at the expense of consumers”. And he called the effective banning of Tesla’s two sales stores in New Jersey “an affront to the very concept of a free market”.
So who do you believe – the dealers, who are well known throughout the United States for donating money to congress and who exist, let’s face it, in order to take their own slice of the car market pie, or Elon Musk?
I know who gets my vote, and it isn’t the dear old car dealers, who are clearly feeling so threatened by the progress of Mr Musk that they’re eradicating him in whatever way they can. But I’m equally sure there will be those who disagree, in which case feel free to state your case.
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That'll Be the Daewoo
In my view the days of the dealer are numbered with their expensive showrooms and shiny suited salesmen. My understanding is that the sales side makes next to no money but what the franchisee wants is the servicing which is where all the profit is. I predict that dealers will become pure showrooms to let us view and drive the products but the business will actually be done online.
the other side
In the longer run they will be able to control prices to a degree no maker with a franchised distribution model could ever hope to match. One would hope competition between makers themselves would provide some protection from this of course. Its not the same of course but you could draw parallels with Sky TV, who have controlled access to football viewing for many years and can (and do) charge what they like. I know there have been rivals here and there but rarely with the capital and customer base to make much of a dent.
Also there can be no competition on aftersales with only one source of supply Tesla could charge what they want, particularly in future years.
I think overall i tend to agree with the consensus that a shake up needs to happen, but beware thinking the grass is always greener. We might miss (some) of the old style dealers if they go.