Do EVs break the dealership model? Tesla thinks so.

Article was really about dealerships model, franchise model vs. company stores.

Beyond that, don't think Musk's side comment about conflict of interest between selling EV vs. gas vehicle is valid.

When I went in to Toyota dealership to buy a Prius C, the did not steer me to a Corolla or Scion.

With no cars in showrooms and few to service during its start up phase, Tesla can sell at the mall but Tesla stores will do what equipment stores do, showcase vehicle for customers to look at and test drive and to provide service.

 

Why do dealerships have an incentive to steer their customers towards a gas powered car? Don't they make money regardless of the type of car they sell?

 

The gas powered car is what they are familiar and comfortable with, so it is what they'll push to sell. It was, and can still be, an issue with even gasser hybrids. EVs are seen as risky, aka scary, because of their newness. Then there are the dealers concerned that EVs will mean less business for their service departments.

 

When I got my leaf the dealership signed me up for a 3 month "oil change" (seriously), which I will soon be cancelling. The maintenance on the car is basically nothing at all. I think there is a mandatory annual "battery check", which Nissan pays for the first couple of years. Otherwise you've basically got a cabin air filter and maybe coolant for the charger. There's really very, very little money in this. No belts, no oil changes, never any spark plugs or power steering fluid or anything like that (of course no belts or power steering with a prius, either!).

 

Are you kidding? With EV's requiring WAY less maintenance than an ICE - a dealership generates half its profit in the service bay.
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When Toyota was trying to break into the US market, many domestic dealers operated on low vehicle margins and high service margins, much to the loathing of the consumer who wanted a vehicle with less maintenance costs.

Who wanted a vehicle that spent half of it's life in the dealer's service garage.

Toyota, without a extensive dealer network, introduced a product with lower maintenance needs at a higher price point, and Americans' gobbled them up. American dealers eventually took up the Toyota product and applied their traditional service model to the Toyota models, and Toyota quietly adapted. Toyota even created a "Premium Service" brand, Lexus, where the service could be pre-purchased with the vehicle, alas even the Lexus dealers wanted/needed more revenues and de-featured the prepaid service, replacing them with the MB inspired equivalents.

Consumers want a maintenance free product, and EVs look like they could deliver on that demand. EV suppliers are going to target lower maintenance and operating costs to gain market share, just like Toyota did to get into the US market. At some point in the adoption curve, the need to scale up consumer delivery will probably follow the historical path and dealers will take over the sales/delivery role and they will want/need a recurring supplemental revenue stream like services, finance, or maybe fuel sales (EV charging subscriptions, battery swapping, etc ..).

The 500 planned fast charging stations for Teslas could easily become the lightweight platform for sales, delivery, and services. An automatic diagnostic performed during a fast charge could trigger the provisioning of a loaner, a mobile service garage dispatched, and the vehicle repaired, transported, and then exchanged with the loaner.

I don't think that a vehicle being transported/serviced runs afoul of state franchise laws.

 

I don't think a Tesla is the right vehicle on which to base an argument about lower service costs for electric vehicles.
It seems it's not hard to brick the Tesla - and that's a $40,000 repair.
Tesla Motors' Devastating Design Problem

That alone averages out to more than $100 for every Tesla sold - far more than the oil changes on my Prius.

 

I don't think EVs will break the model.. maybe Tesla will fix a broken dealer model.

I bought my Volt over the Phone from ~900 miles away. Showed up drove it home. Never talked the dealer again.
I gave my local dealer's staff their first rides in a volt. Still know way more than everyone but the special volt tech combined. Maybe some buyers need/want a dealer. But the forced franchise model is antiquated now that we have these things called phones and the even newer thing called the internet.

 

I dont quite understand the talk here - things will always break, car dealer dont live off oil changes alone.

Additionally, why would an Tesla dealer franchise steer customers towards other vehicles? Does anyone walk into Toyota showroom for Toyota dealer employee to tell them to buy Chevy across the street?

So what gas car would Tesla dealership steer their customers toward? Thats just crazy talk.

You need car dealers, issue here as ProximalSuns said is should they be franchises or company stores. Everything else is crazy talk.

 

A Tesla dealer may not steer customers to other brands, but many established dealers handle more than one brand. The Toyota dealer I got my Prius from also had a BMW and maybe Nissan dealership.

With seperate sites there may not be any redirecting. If the customer wanted those brands, they will go to them. Tesla though has only one model now, and in the tradational dealer network, likely would end up at dealerships selling other brands. I've been in a Jaguar showroom that also had Porsche and third, unconnected, ridiculously priced brand under the same roof.

 

so Tesla can set rules, just like Toyota.

If anything, you guys should be fighting for independent dealers. Tesla will never give you discounts and there will be no competitions between dealers to take your money.

I am sure other car companies like Toyota would like to open up their own dealerships and make even more money...cut out the middle man, firm up the prices.

 

As a Tesla owner, I certainly hope they don't get dealerships.
There is nothing worse than a bad dealer, it is part of what hit GM so hard. What could GM do about it? Not much, even when restructuring through bankruptcy GM was prevented from shutting down many GM dealers.
I far prefer Tesla's models. In my opinion dealerships only serve to harm the customer and enrich the dealers.

 

You sign franchise contract that has specific terms on how you need to operate the dealership - such as separate showrooms, etc. If you dont operate under those conditions, you will lose the contract.

Toyota would never sell for less than dealers, Toyota and other manufacturers would force higher prices and less discounts, for both new car sales and servicing.

Just like what Tesla will do if manage to get around it.

You clearly dont understand how business principles of car sales work

 

My friend, I speak from 8 years of experience in the business, in Europe, not "whatever country you are from". What you are writing here has nothing to do with reality of car dealer franchising business.

There is no car salesman that sends their customers to showroom across the road. There are multiple reasons for this - salesman would make no commission, then dealership would not meet its quotas and would lose its license. Since you have to invest millions or tens of millions, you dont want to lose your license to sell.

Main reason car companies want to open factory stores is to make more money. They do so by enforcing higher prices.

Everything else you wrote has no basis in reality.

Only reason Tesla wants to sell cars directly is to make more money by enforcing prices. Everything else is not true.

To say that Volkswagen dealer would send customer outside their store to some BMW dealer because VW is treating them badly is so wrong, that I am not sure how could anyone think of that.

These are new car sales, not used cars. You can enforce rules in contract that say that you want exclusive showroom not shared. To think that someone will invest $20 million into showroom, hire 50 people, and then tell customers to buy car across the street is idiotic.

 

I would suggest you reread the replies, you keep arguing against a point which is not raised.
No one is suggesting a salesman would send a customer to another dealer. What is being suggested is that a salesman would encourage someone to an alternate brand that the dealership also sells.

TESLA could not require a dealer be exclusive simply because they don't yet sell enough units to make that work.
Add to that, the dealer model is broken. Consumers get abused and ripped off at some dealers and not others, and the parent company can do very little about it.