Tesla Rides High, But Faces Formidable Foe: Car Dealers
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> "Buying an iPad is not buying a car," says David Hyatt of the national association
Well, it should be.
Far too many people are trying to cling to the old method of purchasing a car as if it is something that was efficient, cost effective and transparent.
Car dealers can go rust in hell.
What do I want - I want to customize my car online and buy it for a known price and have it exactly as I expected to cost.
I also want to never put another penny toward gasoline purchases. Period.
I will never go back to buying a car from a dealership. Ever.
Looking forward to the day when consumer gets the same best price from manufacturer owned stores everywhere.
That's a major oversimplification. Car dealers can provide a lot of value to individuals looking to purchase a vehicle, both at the time of purchase and after the fact via test drives, financing, and discounts for future maintenance at their service centers. There are plenty of shady car salesmen that take advantage of vulnerable people, but that should not negate the benefits that many dealerships provide.
The stock issue is tricky, as many local dealers can't afford to carry a wide range of models and configurations. Stopping by the local dealership looking to buy a specific model vehicle same-day may result in disappointment. However, dealerships are very good about acquiring a vehicle that you are interested in purchasing. All you need to do is ask.
That being said, I agree with you that buying a car should be more similar to buying an iPad than it currently is. There are ludicrous laws that stifle innovation in the vehicle purchasing process, such as the Massachusetts Franchise law 93B[1] that prohibits manufacturers from owning dealerships. I think Tesla's vision[2] for first party dealerships and vehicle distribution is a step in the right direction.
[1] http://www.malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/...
[2] http://www.teslamotors.com/nl_NL/blog/tesla-approach-distrib...
none of those things are exclusive to dealers for any reason other than the law requires it. a manufacturer-owned store could provide the same (or better) service in all cases. they add no value above and beyond what a first-party dealership would provide.
It's the same issue over and over. Just because you did work does not mean it is worth anything.
This isn't true. While dealers are slimy and have miles to go, there's still a consumer need to (a) a place to see/touch/drive a vehicle and (b) go in for service and repairs. You can't simply fix this with manufacturer-owned stores because the capital cost is so high. Major manufacturers like Ford and GM have over 3,000 dealers in the US. Maintaining that kind of network is something that dealers can't afford. Tesla only has a few dozen service centers right now, and they're centered around high-population urban areas with wealthy customers.
I'd like to see franchise laws change to encourage competition in the space, but I think we still need dealers in some form or another.
Because obviously we need not institute new laws if basic economic reasoning can bring about the change.
Relax, no need for accusations or jumping to conclusions. I think Tesla will be a terrific company and I look forward to owning one someday.
I just don't think it's reasonable to assume that just because Tesla can do it, everyone else can and should do it the same way. If you were Alan Mulally, CEO of Ford, would you do exactly what Tesla is doing? Would you close the 3k franchised dealerships and install manufacturer-owned ones instead? How would you finance that much real estate, inventory, and employees? Or would you close down a large portion of the dealers and go with fewer? How would you service the millions of Fords sold every year?
We're all mostly upset that the dinosaur automakers are trying to dictate the terms of Tesla's business.
They may grow using capital on hand which temporarily increases the stock price. They may have trouble with expansion as they move into new territories which is a long way away. Failure isn't always immediate.
Also "The Market Can Remain Irrational Longer Than You Can Remain Solvent"
The above is a general statement about company failure and shorting a stock. I personally believe that Tesla is the future of the car industry and it's likely to be a successful company for the foreseeable future.
It doesn't help that in public debate, this argument is usually espoused by people on the right who mix it in with other unrelated arguments. So people end up thinking that if they support the free market, they also have to support cutting all welfare.
I don't see why 1 company couldn't maintain that many locations. Walmart has 10,857 stores[1]. Over 4,000 in the U.S. and over 6,000 internationally. I would argue that maintaining a single Walmart store is more difficult than maintaining a dealership and yet they're able to make it happen.
[1]http://stock.walmart.com/financial-reporting/unit-counts-squ...
I could see Tesla one day letting a company like Amazon sell the cars and handle the logistics of delivering them to the customer.
If you want to talk about core business competency, that's another issue. I don't think it's a leap to think a car manufacturer could also have a division that sells the vehicles.
Changing the current company models, in their current forms, is exactly what Tesla is trying to do.
Even though they're is 2 sides of this argument (ex. it benefits the end consumer by reducing costs :: it'll kill jobs at dealerships if manufactures follow suit), a company that refuses to innovate or change with their industry will fail...or in this case lobby politicians to block Tesla's success.
FYI: Nothing is stopping used car dealers from selling a "like new, 1 owner, low miles" Tesla in Texas ;)
http://www.businessweek.com/news/2012-10-23/dealer-group-lea...
Ebooks helped people read more I think and publishers to cut printing costs and ultimately benefited the consumer.
Music in iTunes, Pandora, and Spotify, I think I remember reading that piracy was down for the music industry.
Tesla helps the environment and the end consumer by cutting a useless middle men. They may be out of jobs (if they're ignorant...lol, have you even haggled with a dealer), but new jobs are always created with innovation!
Sure it sucks to be a car dealer if this goes down, but that's the price of progress.
I had got my used car dealer license JUST to cut out the middle man and find out, even though it's expired now, I still have access to the ACTUAL SALES results for the dealer only auctions. Below is the link to the Dealer-Only auction post sales result in the bay area. Mark up is crazy!
On the NADA argument, I think they have a legitimate concern about wanting protection for dealer franchisees from competition by the manufacturers. But Tesla doesn't have dealer franchisees. So the concern really doesn't apply.
Service would be a tough problem though.
Excerpt from the SeekingAlpha Transcript:
Amy Carroll - JPMorgan
The first question was just basically like when somebody comes to the door,
how do your stores – like what you're converting in terms of like actual sales?
[..]
Elon Musk - Chairman, CEO, and Product Architect
It's a low percentage conversion.
I mean a lot of people in and educate them about Tesla and the brand.
So that's our marketing strategy which is different from a typical car company.
And so just a typical metric of conversion for traffic is not exactly applicable.
I mean there's a lot of people that buy T-shirt.
Our apparel sales are actually not bad.
I think we could actually do a lot more on that front.
We actually have millions of dollars in apparel sales, but we're not really trying hard.
I think probably a better metric would be conversion after – of a qualified lead after a test drive.
And we're seeing something like 25% conversion after a test drive which is quite high.Isn't that the case now?
http://www.teslamotors.com/findus
It looks like the sell in many states. There's a Tesla "store" (if that's the correct term) where I live. I've been there but never asked anyone there about the whole buying process.
Just because you can look, doesn't mean you can buy, hence the workaround.
With cars, things are even worse. Having a multi-dealer and dealer inventory sales model necessarily creates a multi-price model. I think most consumers would be much happier knowing they got the best price possible without any extra work than dealing with all of the information asymmetry in buying a car.
Dealerships also allow manufacturers to have a "presence" in many smaller towns. In return, the dealers demanded (and largely won) protection from a manufacturer coming in and setting up shop in a market that the dealer worked to develop.
Tesla don't care about all that. They are fine with having a select few stores in large markets. They are fine taking all the risk of actually being able to sell their cars to consumers. They are fine with providing all the service. So I don't see what the NADA are complaining about, really.
And honestly, if and when Tesla really starts to get big enough to compete with traditional manufactures, some kind of dealer/franchise network is probably going to start to make more sense for them. Large centrally-planned organizations don't tend to do very well.
I won't miss these vultures when they're gone. Go Tesla!