#1 cleantech news, reviews, & analysis site in the world. Subscribe today. The future is now.


Cars

Published on October 19th, 2014 | by James Ayre

20

Tesla Going The Way Of Franchise Dealerships? Elon Musk Hints Yes

October 19th, 2014 by  


Elon Musk touting the idea of franchise Tesla dealerships? Sounds about right, doesn’t it? Wait, what?

In a rather surprising comment — but I guess he makes those a lot, doesn’t he? — Musk recently noted that as Tesla continues to expand it may need to utilize franchised dealerships, in addition to its Tesla Stores.

tesla-test-drive-21

That’s a bit of a turnaround for Musk — and a bit humorous considering how hard the dealerships have been fighting against Tesla — but I guess that there’s some logic there. Once Tesla begins selling the Model X, and more importantly the Model 3, the potential is there for huge growth — perhaps a mixture of franchising and direct sales would be the right choice?

The comment was made in a recent face-to-face interview with Musk conducted by Autoline Daily’s John McElroy.

Here’s McElroy’s summation of the question: “When I asked him if he could really scale up his retail model in all 50 states of the US and asked how they would handle maintenance and repairs. Musk admitted that relying exclusively on company stores probably was not enough.”

Here’s Musk’s exact words: “We may need a hybrid system, with a combination of our own stores and some dealer franchises.”


 

Some ambiguity there, but the comments do square up with those made by Tesla’s Legislative Director Jim Chen last year at an industry meeting.

“In a closed door regulatory meeting in fall 2013, two witnesses cited Tesla’s Legislative Director Jim Chen who told a room full of industry stakeholders Tesla only means to sell factory direct until it reaches an undefined minimum volume threshold,” Hybrid Cars notes.

“At the time it was unclear whether Chen/Tesla meant such a thing, but this otherwise confirms what dealer associations have said, namely, that Tesla cannot likely grow the whole business to support Model 3 and beyond to the scale it wants with all that on its shoulders.”

With the release of the Model X fast approaching, I guess that we’ll probably find out sooner rather than later if there’s anything to these comments.

Image Credit: Tesla Motors


Tags: , ,


About the Author

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.



  • valakos

    it makes little sense that dealers are so against tesla right now when tesla sales are so small and no other manufacturers are considering selling directly – i suspect the hand of oil companies is at play in there behind the scenes helping either fund actions against telsa or backing/encouraging car dealers to pursue tesla

  • TedKidd

    You really think the salespeople care about how much business the service department gets? Really?

  • DWilson

    I think Tesla should sell all kinds of EVs at least on an experimental basis as not EV drivers can afford a Tesla but it would serve all EV drivers to compare to Telsa before they buy. They would show the other dealers how it is really done. To me it’s just as much about communicating the message that ICE will fade away.

  • NRG4All

    It seems to me that this would hurt Tesla’s direct sales method. This is what the anti-direct sales from manufacturers laws are all about, i.e. a direct from manufacturer show room would have an unfair advantage in that they could undercut the pricing that the franchisee’s would have to have.

    With as little maintenance that EVs need I would hope that Tesla continues its fight to eliminate the middle man.

  • TedKidd

    Wow, master strategists. Thinking in 4 dimensions. 500 steps ahead.

    Musk only sold direct because he knew the current sales force was incapable of selling electric. 4-5 years from now that will no longer be the case, his prime reason for direct sales will no longer exist.

    • Bob_Wallace

      Why sell your cars to a middleman company when you can sell them yourself and keep all the profits?

      Tesla can run showrooms, do test drives and operate maintenance shops on their own.

      • TedKidd

        Bob, my guess is Elon doesn’t believe he can scale dealerships at the rate he plans to produce cars. And I believe he indicated a primary impediment to selling cars is the sales force.

        I was at the Mercedes dealership last week and a salesman scoffed at the eB – “only goes 100 miles”. That attitude doesn’t sell electric cars, and I’ve seen it at every brand! I bet I’ll see it at VW and Kia when those cars come.

        If he has enough volume to justify a dedicated showroom to a franchise dealer, that problem goes away. Just my WAG.

        • Bob_Wallace

          Were I Elon I’d hire some very skilled people to set up and manage showrooms and service centers.

          Pay them good salaries in order to get top notch people.

          That would likely be much cheaper than giving away a significant percentage of the selling price to a dealer.

          Do that and you don’t end up with sales people running down your product.

  • Joseph Dubeau

    I don’t buy my shoes or clothes online.

    • Republic

      If a car doesn’t fit, Tesla will tailor it to your measurements.

    • Bob_Wallace

      I buy most of my clothes and shoes online.

      I can purchase what I want rather than what the local dealers want to sell me and I can shop for the best prices.

      I’d gladly buy a car online rather than dealing with car sales people and their obnoxious games.

    • frog mann

      I do

      • Joseph Dubeau

        I have seen a frog in clothes and shoes.

        • frog mann

          well its harder for frogs.. we get refused service often in Brick&Mortars and sometimes other customers scream or even step on us!

          so I always buy my clothes online.

      • Joseph Dubeau

        When I go out to eat, I don’t mean food cook on a camp fire.

  • Why would one choose to interact with a car dealer if one could use an online configuration system instead? The online system scales and evolves faster than bricks and mortar, and its interests are always 100% aligned with Tesla, as opposed to car dealers who resist change and suck value out of the car-buying process at every turn.

  • Albertico

    How did you even come to remote conclusion that Tesla will go with dealers by anything Elon Musk has said?

    He mentioned time and time again, eventually, when Tesla becomes large enough, that Tesla may need to use franchise dealerships. This is years away

  • Others

    Ensure that the dealer who sells Tesla does not sell any other Make, otherwise they will send every prospective Tesla customer to their other Make.

  • WeaponZero

    Tesla is not going to franchise. The statement exists so the dealers would be more open to letting Tesla at least open limited amount of stores. Once that is done, it will create a precedence for completely bypassing the franchising model and eliminate it.

    But if he said that, then the dealerships instead of negotiating a few stores would fight to the tooth.

  • Jim Smith

    tesla can easily scale up. i would not read too much into this.

Back to Top ↑