Hacker News Reader

Comment by prostoalex | Hacker News Reader

Toyota’s recalls are expensive, as they involve a network of dealers who need to be paid for providing the repair and maintenance.

Tesla’s vertical integration of service centers has an interesting side effect - recalls and repairs are pretty cheap, as the costs of service centers and loaner vehicles they give out are fixed and have been borne already.

I wonder if that makes the company more dismissive of potential issues.

View on HN

If you look at how Toyota's dealership network operates in Japan (Toyopet, Netz, etc.), you'll see that Toyota is capable of vertically integrating the entire distribution chain very well. My own experience of buying (in my case a Suzuki kei model) a domestic car in Japan was quite eye-opening: my dealer came to my house and had tea with us, found us the best, least-expensive configuration of the car, dropped it off at the house some weeks later, and then stayed in touch like a member of our extended family, checking in every few months to let us know he was available. When I accidentally left the dome light on overnight night, he drove an hour each way to deliver and install a new battery, at 10PM, in the rain. And we had to beg him to invoice us. Sure enough, when I sold the car about a year later, I offered it to him first. He took the Shinkansen from Nagoya to Kyoto to pick it up, had tea with us, handed us an envelope with about 70% of the original purchase price in cash, and drove it home without even so much as an inspection. (By the way, the purchase price was $13K for a 2017 model that got around 80mpg.)

The inefficient dealership network is not something that emanates from Japan, but is Japan Auto adapting to local customs, legal requirements, and standards.

I am fascinated about this . Do you know where we can get more info about the way businesses treat their customers in Japan?

It’s basically impossible to learn about Japanese culture by reading things in English. For some reason, Japan brings out the worst kinds of cynics and misanthropes, all of whom feel the need to dispel anything positive that’s said about the place. In my experience, many businesses in Japan go beyond customer service and provide what I would characterize as hospitality or the kind of consideration that could only be repaid with goodwill and familial loyalty. Not to say that they are infallible: I bought a knife from one of the oldest blacksmiths in Kyoto and he flat-out forgot my order until we bothered him a month later. Damn good knife, though.

I am just surprised why the western companies don't copy this model more.That would be an advantage. Zappos is doing that from what I heard.

I kept this loosely-translated list of business principles from an NHK doc about thousand-plus-year-old companies in Kyoto.

- Honesty is a matter of course

- Make no sacrifice

- Examine quality

- Draw customers without words

- Do not allow your products to be defiled

- Purify yourself

- Do not overcharge

- Sell authentic items at suitable prices

I know this list may sound silly and melodramatic to some ears, but I think people should try harder to listen to lessons from the past—even if the provenance is slightly dubious.

I can't be the only person that would rather have the manufacturer of my car - for most of us the second most expensive thing we own after a house - have their incentives be to minisie the chance of shipping defects.

Those same incentives prevent those companies from fixing simple mistakes unless/until they are proven to be material.

Tesla is somewhat generous about voluntary proactive recalls on their dime http://www.businessinsider.com/tesla-recall-model-x-suv-dont...

With that said, I agree that owning a first-year production model from Tesla is an iffy proposition. Late adopters get a fairly reliable workhorse, judging from owners' forums and anecdotal personal experience.

> Tesla’s vertical integration of service centers has an interesting side effect - recalls and repairs are pretty cheap

This is assuming that Tesla's centrally managed monolithic dealer/service network will be run more efficiently than the distributed and competitive dealer networks typical of other car companies.

That assumption runs counter to typical economic thinking that competitive market based solutions will be more efficient.

Dealerships are not that competitive, though.

They are awarded on territorial basis to guarantee some monopoly within a geographic market, and the incentive system (inventory requirements, bonuses) benefits current owners opening in new markets rather than new players stepping in.

Their business model also relies on frequent customer visits for repairs/maintenance and subsequent upsell, so their incentives are somewhat misaligned with manufacturer's. So even if Tesla did a complete 180 on their service centers and started selling dealerships, they might not have many takers considering their maintenance needs and potential revenue https://www.tesla.com/support/maintenance-plans

Lastly, while a network of independent mechanic shops might be an indicator of competitive markets working properly, that market is far from transparent due to information asymmetry between the service buyer and the service provider.

This is scary because it points to a potential future where they're treating cars like software. Weekly/monthly visits to the garage to get the car equivalent of "Weekly bug fixes and performance improvements" would be absolutely off-putting.

They are doing it already, they launched the latest batch with emergency braking off, to be enabled after some real world testing.

Reply on news.ycombinator.com