Quote Of The Day: Doing Without Dealers Edition

Edward Niedermeyer
by Edward Niedermeyer

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.

Edward Niedermeyer
Edward Niedermeyer

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  • Rod Panhard Rod Panhard on Jul 28, 2010

    I could be wrong, but there probably is a great business case for dealers. Can anyone name a brand of car or motorcycle in the U.S. that seems successful and is sold out of gas stations? Or auto parts stores? I know pawnshops and such in North Carolina seem to do a decent trade in the drunksicle business, but that's an entirely different situation.

    • Moedaman Moedaman on Jul 28, 2010

      Motor vehicles are a product that does need a dealership/distrubtion network. The thing that I find pathetic is the fact that manufacturers can't directly distribute their own products. I do believe that this is the only instance where this is the case. Also it's pretty pathetic that bad dealerships can't be cut by a manufacturer. Companies and not government should be the only ones to determine the proper distributors for their products.

  • M 1 M 1 on Jul 29, 2010

    "Can anyone name a brand of car or motorcycle in the U.S. that seems successful and is sold out of gas stations? Or auto parts stores?" Er... come again???

  • MaintenanceCosts I wish more vehicles in our market would be at or under 70" wide. Narrowness makes everything easier in the city.
  • El scotto They should be supping with a very, very long spoon.
  • El scotto [list=1][*]Please make an EV that's not butt-ugly. Not Jaguar gorgeous but Buick handsome will do.[/*][*] For all the golf cart dudes: A Tesla S in Plaid mode will be the fastest ride you'll ever take.[/*][*]We have actual EV owners posting on here. Just calmly stated facts and real world experience. This always seems to bring out those who would argue math.[/*][/list=1]For some people an EV will never do, too far out in the country, taking trips where an EV will need recharged, etc. If you own a home and can charge overnight an EV makes perfect sense. You're refueling while you're sleeping.My condo association is allowing owners to install chargers. You have to pay all of the owners of the parking spaces the new electric service will cross. Suggested fee is 100$ and the one getting a charger pays all the legal and filing fees. I held out for a bottle of 30 year old single malt.Perhaps high end apartments will feature reserved parking spaces with chargers in the future. Until then non home owners are relying on public charge and one of my neighbors is in IT and he charges at work. It's call a perk.I don't see company owned delivery vehicles that are EV's. The USPS and the smiley boxes should be the 1st to do this. Nor are any of our mega car dealerships doing this and but of course advertising this fact.I think a great many of the EV haters haven't came to the self-actualization that no one really cares what you drive. I can respect and appreciate what you drive but if I was pushed to answer, no I really don't care what you drive. Before everyone goes into umbrage over my last sentence, I still like cars. Especially yours.I have heated tiles in my bathroom and my kitchen. The two places you're most likely to be barefoot. An EV may fall into to the one less thing to mess with for many people.Macallan for those who were wondering.
  • EBFlex The way things look in the next 5-10 years no. There are no breakthroughs in battery technology coming, the charging infrastructure is essentially nonexistent, and the price of entry is still way too high.As soon as an EV can meet the bar set by ICE in range, refueling times, and price it will take off.
  • Jalop1991 Way to bury the lead. "Toyota to offer two EVs in the states"!
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