Tesla considering "Hybrid Dealers"?

mklcolvin · Oct 14, 2014

According to John McElroy with Autoline Daily, Elon says that Tesla might try to have hybrid dealerships in order to have a presence in all 50 states... http://www.autoline.tv/journal/?p=33977
I would NEVER, EVER go back to a dealer, after my experience with purchasing my S! This might be enough to make me reconsider Tesla when looking for a car for my wife (we're waiting for the Model III). These guys are nothing but parasites, and bring nothing but misery to the new car buying experience. I hope that Tesla never caves in to these guys...
Thoughts?

bonnie · Oct 14, 2014

And there were plenty of reports that Tesla would be showing the Model 3 at the D event last week. We know how that turned out.

... I'd take this report with a grain of salt.

mklcolvin · Oct 14, 2014

Thanks Bonnie, for talking me down from the ledge!!!:smile:

bonnie · Oct 14, 2014

mklcolvin said:
Thanks Bonnie, for talking me down from the ledge!!!:smile:

Haha. That's what friends are for. Welcome back to reality.

sandpiper · Oct 15, 2014

bonnie said:
Haha. That's what friends are for. Welcome back to reality.

At the risk of getting flogged... dealers would seem to have more of a function when a manufacturer makes a wide range of cars. And when there isn't such demand that people are willing to wait months for delivery. If Tesla succeeds, eventually both will happen.

There will be a day when people expect to go to a local lot, do a test drive, pick from the inventory and buy. That's tough to do without some sort of "dealer-like" setup. You can't do that from small shops in malls.

Dealers shouldn't be legally mandated, but I'm not sure that they have no purpose.

bonnie · Oct 15, 2014

Why couldn't you get that same experience from one of the current stores? Why would it have to be a dealership? (Not all the current stores are 'small stores in malls' ...)

I think your argument is more about the location of the showroom, not the ownership of the showroom. Yes?

mibaro2 · Oct 15, 2014

I think he is also referring to being able to buy from a car on the lot rather than waiting a few months for it.
That I can see happening.

But I would never go back to a traditional dealership after my experience with Tesla.

JST · Oct 15, 2014

bonnie said:
Why couldn't you get that same experience from one of the current stores? Why would it have to be a dealership? (Not all the current stores are 'small stores in malls' ...)

I think your argument is more about the location of the showroom, not the ownership of the showroom. Yes?

From a car maker's perspective, one nice thing about dealers as independent businesses is that it allows you to spread the risk and cost of carrying inventory. Tesla doesn't need to worry about that too much, yet, but I suspect there will come a day when the build-to-order with a 2-3 month wait simply no longer works in order to achieve the volumes they want to achieve (and to reach the customers they want to reach). At that point, will Tesla want to keep a large inventory of cars sitting on lots, or would they rather pass that responsibility on to independent businesspeople?

The current structure of the auto industry evolved for a reason. I would never claim that it's perfect or that there aren't ways to disrupt it, but I think those people that think Tesla will somehow be completely immune from the tidal forces of the auto industry as it grows in size and market reach are not being realistic.

NigelM · Oct 15, 2014

The question is really about how to build out capacity; Tesla is going to go from ~7,000 cars per quarter to about ~7,000 cars per week in ~5 years time if Model 3 is really going to be mass market. Assume some economies of scale and Tesla still needs a sales, delivery, and service operation that can handle 10x current capacity. It would be crazy not to look at capacity build out alternatives.

Martini · Oct 15, 2014

NigelM said:
The question is really about how to build out capacity; Tesla is going to go from ~7,000 cars per quarter to about ~7,000 cars per week in ~5 years time if Model 3 is really going to be mass market. Assume some economies of scale and Tesla still needs a sales, delivery, and service operation that can handle 10x current capacity. It would be crazy not to look at capacity build out alternatives.

Exactly. Think what you will about dealers, but at a certain scale it will make sense for Tesla to look for people willing to invest. The trick is doing it without triggering dealer protection laws and keeping the unique feel of the purchasing experience (anyone remember Saturn?)

tga · Oct 15, 2014

mklcolvin said:
According to John McElroy with Autoline Daily, Elon says that Tesla might try to have hybrid dealerships in order to have a presence in all 50 states... http://www.autoline.tv/journal/?p=33977
I would NEVER, EVER go back to a dealer, after my experience with purchasing my S! This might be enough to make me reconsider Tesla when looking for a car for my wife (we're waiting for the Model III). These guys are nothing but parasites, and bring nothing but misery to the new car buying experience. I hope that Tesla never caves in to these guys...
Thoughts?

Well, my first thought is that the guy in the video might be a lot less annoying if he limited his caffeine intake.

Martini said:
Exactly. Think what you will about dealers, but at a certain scale it will make sense for Tesla to look for people willing to invest. The trick is doing it without triggering dealer protection laws and keeping the unique feel of the purchasing experience (anyone remember Saturn?)

Why yes, I do remember Saturn. Quite fondly, actually. My wife and I bought 3 Saturns in the 90's, from 3 different dealers (1st was 2 hrs from home, 2nd was new, close to home, 3rd after we moved). The whole experience was very, very Tesla-like. In fact, if the Saturn dealers were company-owned vs franchised, I don't think the experience really could have been any different.

Personally, I think the bulk of people's complaints about car salespeople falls into 2 large buckets - (1) a fear that you got screwed (or someone else got a better deal), and (2) high pressure sales tactics to make a commission. Saturn dealers eliminated both of those with fixed pricing and salaried sales people. Never once did I ever feel pressured by sales, service, parts, or anyone. I dealt with the sales person for the whole transaction (no F&I manager BS). Everyone seemed really psyched about being involved with this "new thing."

Dare I say it, if Tesla followed a hybrid model with both company owned and franchised dealers, charged the same price to the consumer at all outlets, and kept a tight reign on the independents (a la Saturn), I think it could work. Think about buying an iPhone via an Apple store, Apple's site, or Best Buy.

Before anyone says "Look where Saturn is today" - GM killed it from within. They got away from Saturn-unique, quality small cars, and started going more and more to the GM parts bin, producing badge-engineered crap, and killed the division's soul.

OK, flame away!

gavine · Oct 15, 2014

tga said:
Before anyone says "Look where Saturn is today" - GM killed it from within. They got away from Saturn-unique, quality small cars, and started going more and more to the GM parts bin, producing badge-engineered crap, and killed the division's soul.

OK, flame away!

GM got rid of Oldsmobile and Pontiac for that same reason....and those were sold the traditional way.

ckessel · Oct 15, 2014

Tesla has said before that they might look at franchises when they go to the true mass market car. It was either Elon or Darmuid (maybe both) that said they weren't opposed to dealerships in concept, but that it wasn't in Tesla's or the consumer's interest to use dealerships at this point.

If/when Tesla is producing 500,000-1,000,000 cars per year, it might be in Tesla's interest to shift to focusing more purely on manufacturing. We'll see. Elon has pretty adamantly set the direction about how the stores work and, probably more importantly, how service should work. It'd be hard to believe Elon would let Tesla abandon that philosophy and create dealerships as they exist today.

I think the Saturn example might be a good one.

JST · Oct 15, 2014

tga said:
Well, my first thought is that the guy in the video might be a lot less annoying if he limited his caffeine intake.

Why yes, I do remember Saturn. Quite fondly, actually. My wife and I bought 3 Saturns in the 90's, from 3 different dealers (1st was 2 hrs from home, 2nd was new, close to home, 3rd after we moved). The whole experience was very, very Tesla-like. In fact, if the Saturn dealers were company-owned vs franchised, I don't think the experience really could have been any different.

Personally, I think the bulk of people's complaints about car salespeople falls into 2 large buckets - (1) a fear that you got screwed (or someone else got a better deal), and (2) high pressure sales tactics to make a commission. Saturn dealers eliminated both of those with fixed pricing and salaried sales people. Never once did I ever feel pressured by sales, service, parts, or anyone. I dealt with the sales person for the whole transaction (no F&I manager BS). Everyone seemed really psyched about being involved with this "new thing."

Dare I say it, if Tesla followed a hybrid model with both company owned and franchised dealers, charged the same price to the consumer at all outlets, and kept a tight reign on the independents (a la Saturn), I think it could work. Think about buying an iPhone via an Apple store, Apple's site, or Best Buy.

Before anyone says "Look where Saturn is today" - GM killed it from within. They got away from Saturn-unique, quality small cars, and started going more and more to the GM parts bin, producing badge-engineered crap, and killed the division's soul.

OK, flame away!

No flames here. Saturn was an interesting experiment that never really got the support it needed from within GM's organization. That, plus they had a period where the cars were just terrible--I mean, the Ion was awful in pretty much every way.

Still, I am curious about how well Tesla will be able to resist cutting prices once volume ramps up (and the newness wears off). I've said it before, but the best (and most cautionary) example may be MINI. When it launched ten years or so ago, it was a relatively low-volume car sold through a limited number of outlets with no pricing flexibility. They were making fewer than they could sell, so almost every car was a special order. Even by the time I bought my 2006 Cooper S, there wasn't any haggling--just "here's the price, your car will be here in 3 months."

That's changed quite a bit. When I bought another MINI in 2011, discounts were pretty common--they weren't big, but they were there, even on the hot new model that had just launched. I've not shopped for them recently, but I get a steady stream of adverts telling me about sales and incentives and lease deals from MINI these days.

tga · Oct 15, 2014

JST said:
No flames here. Saturn was an interesting experiment that never really got the support it needed from within GM's organization. That, plus they had a period where the cars were just terrible--I mean, the Ion was awful in pretty much every way.

I agree with both points. Our cars were all "Z platform" original S-series cars (90 SL1, 93 SC2, 00 SC2). The Ion came out in 02, and was the start of the Delta platform badge engineered crap.

JST said:
Still, I am curious about how well Tesla will be able to resist cutting prices once volume ramps up (and the newness wears off). I've said it before, but the best (and most cautionary) example may be MINI. When it launched ten years or so ago, it was a relatively low-volume car sold through a limited number of outlets with no pricing flexibility. They were making fewer than they could sell, so almost every car was a special order. Even by the time I bought my 2006 Cooper S, there wasn't any haggling--just "here's the price, your car will be here in 3 months."

That's changed quite a bit. When I bought another MINI in 2011, discounts were pretty common--they weren't big, but they were there, even on the hot new model that had just launched. I've not shopped for them recently, but I get a steady stream of adverts telling me about sales and incentives and lease deals from MINI these days.

Interesting comparison. I have an 04 Cooper S, but I'm the third owner, so I can't speak to the purchase experience. I've only been in a dealership 2 or 3 times, and that was to pick up parts when I didn't want to wait for mail order.

ElSupreme · Oct 15, 2014

mibaro2 said:
I think he is also referring to being able to buy from a car on the lot rather than waiting a few months for it.
That I can see happening.

As a few of my car purchases have been 'emergency' purchases where I only had a couple weeks at best to purchase a vehicle I definitely understand.

I was sort of hoping that Tesla expands their loaner fleet a bit. And loans (rents) the loaner car out to people for a month at whatever their monthly car payment would be and they get the car they ordered. While they wait a month for their car to be built to suit.

I would think taking some depreciation hits on 'new' vehicles might be cheaper than all that overproduction, inventory, and then subsequent discounting of the vehicles. Not to mention lots of the impatient people will opt for the $5k off almost new car with a complete new car warranty. This kills half the 'emergency' buyers with loaners, and the other half with the previously loaned cars.

I doubt that Tesla gets away from planned semi-scarcity, and a build to order model.

TexasEV · Oct 15, 2014

The host's conclusion that dealers' model is superior is quite a leap from what he quoted Elon as saying. If Tesla will need some dealers to be able to sell and service in all 50 states it will be because of legal constraints imposed by political pressure from the auto dealer cartel, not because of any superiority of the franchised dealer model.

evme · Oct 15, 2014

Guys, maybe we are looking at things all wrong? Maybe the hybrid dealerships is not for new cars but for used cars? You don't need a franchise to sell used cars do you? So Tesla can stick to selling new cars and sell some used cars through dealers.

The issue with used cars is ordering online is a bit more tricky then a new car and you actually want to drive the used car before buying.

Uncle Paul · Oct 15, 2014

Maybe they will make Apple a Master dealer, and sell Tesla's through their stores

With Apple margins, however, the car prices would double overnight.

aznt1217 · Oct 15, 2014

It's for both used and new. Elon and Diarmuid are both on record saying that dealers will probably be needed when they go mass market. Right now, dealers are not the appropriate model due to

1. Conflict of interest
2. Misinformation/Poor education
3. No need because Tesla is not at scale
4. Need to capture as much margin to re-invest cash and get to mass market as quickly as possible

When Gen III rolls around and when Tesla gets capacity, there definitely can be SOME dealers but for cars "in stock." Also it's for when there is no need to ask the question: Gas or electric.

Tesla considering "Hybrid Dealers"?

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