Tesla “Secret Weapon” To Grow Demand & Fight Dealers?
If you follow Tesla, one of the first things that you find out is that Tesla is “supply limited.” In other words, it can’t produce as many cars as consumers are asking for. (Not the worst problem for a company to have, but a problem nonetheless.) Tesla has been scaling up production about as fast as possible, but it still expects to be supply limited through the end of this year. It doesn’t advertise fir this reason. That said, it is trying to gain a foothold in a lot of markets (within the US and globally), and is effectively doing so via Superchargers, amazing vehicles, launch events, a ton of new sales centers, etc. Its biggest supply bottleneck is the battery cells, which it is addressing via the construction of a battery “Gigafactory.” Once that is up and running, Tesla’s production can really jump, so it needs to make sure it is ready to ramp up demand if needed as well. One of the biggest obstacles to demand are outdated laws in various US states that prevent Tesla from selling directly to customers. On Tesla’s recent quarterly conference call, Elon spoke of a “secret weapon” to increase demand and essentially fight dealers that he may unveil/implement later this year. The speculation begins… Below is an EV Obsession repost focused on some of that speculation.
On the quarterly Tesla conference call held this week, CEO & Chairman Elon Musk stated, “I think we have a secret weapon on the demand side that will probably start to deploy later this year. We’ll see how that goes, it isn’t totally necessary and it’s a good weapon against the dealers.”
That was surely one of the more fascinating lines of the call, and it has had Tesla followers wondering and speculating about what the heck this “secret weapon” could be.
As always, a good place to go for some Tesla speculation and ideas is the Tesla Motors Club forum. At 14 pages as of this writing, I’m not going to go through all of the ideas and responses (that’s what the forum is for), but I think these are some of the most interesting, fun, and/or likely:
- “Do a deal with a national rental company to make Teslas available for rent at reasonable cost, and voila, test drives available, no need for special event permits.”
- “Or, an alternative: Tesla Test-drive Taxis. Tesla makes Model Ss available as taxis. But when you hire the cab, you can opt to drive it yourself.”
- “Tesla Motors Pre-Owned LLC. They only sell used cars. Plenty of used cars around. Come and take one for a test drive…. By the way, says the salesperson, there’s a company called Tesla Motors LLC in California. Their cars are all new. A bit better than this one. If you want a new one, you can buy one from them. Let me bring up the website on the center console…”
- “It could easily be an advertising campaign. It would directly attack pervasive dishonest dealer practices and tout their online buying experience. I mean this is very similar to how Saturn sold their cars.”
- “Instead of a test drive they bring the car to you and let you drive it for a day. Or a weekend rental program — $100 for the weekend supercharging include.”
- “Set up ‘rental’ stores and ‘rent’ the car for 2 or 3 year terms that are suspiciously similar to leasing terms.”
- “I’m thinking some kind of lifetime warranty or an extremely long warranty period. Elon has always said he wants to run service center at a zero profit. What better then buying a car that you will never have to pay to have serviced? With the simplicity of the electric drivetrain this is something other car companies could not match.” Another commenter: “Reducing the cost of service and/or enhancing the warranty would both boost demand by assuaging fears people have about the new technology, and counter many of the arguments made by dealers…. When I say enhancing the warranty, that could mean extending the length, or it could also be some sort new (secret) warranty component, such as a battery degradation guarantee. With some 60,000 or so Model S on the roads now, and probably several thousand of those at or above 50k miles (including mine), they are probably getting some very good real-world data on expected battery degradation rates…. Also, as they roll out more service centers, and existing service technicians gain experience, they are probably seeing existing warranty costs go down. Not to mention as JB said in response to the motor replacement question on the call, they’re continuing to refine design & production in order to further reduce the number of warranty repairs/replacements going forward.”
- “I think in the states that don’t allow manufacturers to operate dealerships, they need to set up a coop structure where the dealership is owned by the customers, along with a service center, that is set up so that it is economically neutral to tesla, yet meets the letter of the law. Think REI. How that profit gets transferred could be based on several factors…. They need to get creative here.”
- “It’s going to be battery leasing. Brings down the initial outlay for the car and all you do is pay a monthly leasing cost on the battery. Makes it viable for many and removes battery degradation worries.”
- “I think the Tesla will get sold through a dealer network called the Apple Retail Store – it will be called the iCar P85D and you will be able to buy apple care with it.
” Another commenter: “Given the statement was ‘for demand side generation’ AND related to battling the dealer situation. I’ll go with a massive worldwide dealership distribution agreement with Apple. Overnight, every Apple Store will become an authorized dealer, CarPlay included. Concurrently delivering massive distributed demand at the lowest automotive customer acquisition cost in history, and immediately establishing ‘dealerships’ in every state (and every country).” - “I’ve had similar thoughts before, though not with partnering with Apple. I was thinking about Amazon or AutoNation. In any case, the basic idea is to partner with strong online marketer, who is content to sell at fixed prices and will acquire dealership licenses in every state. Apple could certainly fit the bill.”
- “Personally, I think a deal with Google is more likely. It doesn’t even have to be global either, just something to bypass the dealership franchise laws. Google becomes the ‘dealership’ in order to meet legal requirements, but for all practical purposes Tesla controls the either sales experience.”
- “SolarCity to become exclusive TSLA dealership. Elon Crowd funds idea by having the internet guess his secret weapon against dealerships.”
- “Sell them at Costco or some other retail chain.”
- “Free kittens with every Model S!”
- “If Elon had said only that it was a “weapon against dealerships” I might have thought that they had finally put together an iron-clad lawsuit to file in federal courts to sweep away all anti-manufacturer restrictions in state dealership laws. But he also said it was a weapon that would boost demand…. Conversely, there are a lot of ways that Tesla could boost demand, but which of those are a “weapon against dealerships”?… I’m wondering if we can line Elon’s remark next to Deepak’s: ‘Our expectation is that we will establish shop via warehouse line for leasing cars and that will continue to grow and fund the big portion for leasing funding required.’ … Not that I have any clear idea of what “shop via warehouse line” might mean; does this mean a deal with Sam’s Club?”
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