Quote Of The Day: Doing Without Dealers Edition

Have we scrutinized all the issues behind what they’re doing? Not really. My feeling is that a manufacturer-owned store as a business model violates the spirit of the state law here. But not a single person is complaining about it, and it’s kind of a back-burner thing for us. I imagine that if we start getting complaints from our membership, we would move it up to a front-burner thing

Tim Jackson, President of the Colorado Automobile Dealer Association tells Automotive News [sub] that Tesla’s non-franchise dealership in Colorado is not a long-term strategy, despite the company’s avowed desire to do without dealers. Well, franchised dealers, anyway (state law allows one OEM-owned dealership, and lots of EV tax breaks). Tesla admits (in its prospectus, no less) that wanting to own its own dealers will cause problems in Texas, but in the unlikely event that Tesla becomes a viable automaker, it’s easy to imagine a number of states putting up barriers to the franchise-free strategy. Especially since what we do know about Tesla’s dealer model plan is… highly irregular.

Having hired George “the brains behind the Apple Store” Blankenship, Tesla’s dealer expansion plan is still under review. Regardless, another Automotive News [sub] piece has the rough outlines.

Tesla’s approach probably will involve a small real estate footprint, with pedestrian access wherever possible, the company says. Stores will carry only a few display cars in inventory — three or four, in some cases, with no sales lot. And the company intends to continue selling cars directly over the Internet.

Sales employees are compensated with a combination of salary and sales commissions.

Tesla envisions that its EVs will create less service-related income than cars powered by internal combustion engines because oil filters, mufflers, radiators and air hoses needn’t be replaced. Initially, stores will not have a service department.

Instead, service technicians travel from Tesla headquarters in Palo Alto, Calif., to customers who have vehicle problems.

And though Tesla estimates its car’s running cost as two cents per mile, the company charges $1 per round-trip mile for a service technician to come to your recalcitrant Roadster from Palo Alto, California. And you wonder why the cars are so rare… well, anywhere outside of California. But hey, software diagnostics can be done over the internet, and remember, electric cars don’t really break. Right?

In perfect fairness, this is not the worst-ever service program for a $100k sportscar that’s sold just over 1,000 units. But what about when the Model S comes to market, and 20,000 annual units must be sold and serviced? Tesla’s new Regional Sales Manager figures

It’s working for now. If we need to change in the future, I’m sure we will…. We recognize that there are some challenges out there in some states, and we plan to work around those land mines

No biggie. It’s not like car dealers are an insanely well-connected political bloc, able to achieve such feats of political manipulation as exempting themselves from financial reform regulations… right?

Like all good revolutionaries, Tesla believes that the only barrier to a new, better business model is a lack of imagination. But by trying to explode the franchise-dealer model, Tesla is picking at a scab that covers one of the deepest fault lines in the business of automobile. As long as it only sells the Roadster, Tesla can fly under the radar as it has in Colorado, but as soon as the Model S hits projected production volumes, the game will change. Tesla will have to fight state-by-state against well-connected dealers, and faces an insane ramp-up on the service front by pursuing its “gallery” model. The franchise-dealer model is hardly perfect, and this is in no way a defense of it as the best way of organizing the business. But the fact is that the system will defend itself, and Tesla’s crusade will earn it few friends in the industry it’s trying to conquer.