* Back in March, TeslaMondo predicted that Tesla will eventually escape its supply constraints and then find it useful to step out of the mall, adopting a dealer-like retail model aimed at selling en masse. That means stocking some inventory for quick turnaround, taking trade-ins and securing on-the-spot financing via competitive bidding to banks — functions vital to dealerships but alien to Musk et al. The prediction goes that once Tesla moves to cheaper products, it will attract middle-class, need-based buyers who cannot order a car and wait a couple of months. Those buyers need wheels TODAY. Their other car was just totaled. Or the boss deleted the company car benefit. Or they just got a $2,000 repair estimate for a 1999 Camry. That kind of thing. Tesla will need to provide wheels to these people pronto, or see them go elsewhere out of sheer necessity.
* On Oct. 14, Elon Musk speculated that Tesla might eventually shift to a “hybrid” retail system of both Tesla-owned stores and franchised dealers.
* On Nov. 6, AutoNation’s CEO* predicted Tesla will eventually cave in and use franchised dealers in Tesla’s quest for high-volume business.
OK, so perhaps Tesla will indeed gravitate to the middleman as predicted here.
But wait. Automakers are trying to dodge that same middleman. Ford and GM tried to go factory-direct in 1999. This past June, the Alliance for Automobile Manufacturers openly slapped middleman protectionism: “At the request of local dealer groups, states set up a labyrinth of protectionist laws that make the car-buying experience difficult and costly for our customers,” said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, which represents 12 automakers but not Tesla. “It’s understandable why Tesla or future competitors would want a simpler sales process. When we look at the big picture, we may be at a tipping point. If dealer groups continue their push for more onerous franchise laws, we will be forced to keep an open mind about how best to serve new-car buyers in the future.”
So while Tesla is saying it might need dealers, other automakers seem eager to avoid them.
So where is this headed? Somewhere in the middle? Will the likes of Tesla and Ford both end up with “hybrid” retail models comprising some factory-owned stores and some independent dealers? How would that work? Surely pricing would have to remain static across the board, lest customers simply gravitate to the factory-direct outlets. Finger-pointing would likely emerge as the independent dealers decry alleged favoritism toward factory-direct outlets. “Hey, how come we can’t get any Model 3 inventory but your factory stores get a dozen every month?” That kind of thing.
A hybrid system might be ugly, but no uglier than the status quo. Auto retailing is immutably ugly, and deeper automaker involvement will not fix that ugliness. In fact, automakers are already heavily involved in much of the sticky stuff that happens at car dealerships. Consider the myriad judgement calls behind the scenes at service departments. Is your issue covered under warranty or not? That’s decided by a factory rep., not the dealer’s service manager. How about your loan? Do you qualify for the zero-percent promotion? Again, a factory rep is behind the curtain, whispering to the dealer’s finance department. You return your lease and get a bill for $1,000 in excess wear and tear. That bill didn’t come from the dealer, y’all. So the middleman isn’t to blame for all of your store-level agita. Some of it goes right up the ladder. So a factory-run store won’t cure ugly unless the factory is REALLY on top of its game. So far, Tesla has mastered customer experience. Will growth, and a hybrid retailing system, ruin all of that? Criswell declares: “We are all interested in the future, for that is where we are going to spend the rest of our lives …”
*By the way, if you want a Tesla but have a trade-in, Tesla refers you to, um, AutoNation.