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Published on May 31st, 2019 | by Maarten Vinkhuyzen

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Elon Does Not Listen To Me Regarding Europe — But Should He?

May 31st, 2019 by  


This title is of course pure click bait. Elon should not have to listen to me. This should be the competence of some executives at Tesla Europe HQ in Amsterdam. But Tesla California HQ could indeed ask why this writer is consistently yammering about the European sales infrastructure (or lack thereof).

I don’t know much about the car-buying habits in the USA. I can’t comment much on the Tesla marketing policies for the USA.

For Europe, that is different. Europe is historically a build-to-order market. How much negotiation is expected and accepted differs per area and epoch, but some wheeling and dealing is often expected, especially when a previous car is offered as a trade-in. Another aspect of the European buying experience is the test drive. I am not referring to the 25 minute drive demonstration offered by Tesla, but a real test drive for a few hours or, in this class of car, a whole weekend. What is not expected, is the dealer having unsold new cars in stock. Or even the exact model that is considered for a test drive.

In short, the European car-buying habits are close to those that Tesla is trying to teach to the American public. Tesla should be a huge success in all of Europe, as it is in Norway, the Netherlands, and Switzerland. The main differences between the areas where Tesla is successful and those where sales disappoint is the sales infrastructure.

When Tesla was unknown, it was a good idea to have shops/galleries in luxurious high-foot-traffic areas in city centers. Tesla is now the yardstick by which the competition is measured, but Tesla needs to be present at the same locations the competition is selling its cars. A showroom with service center in the commercial zone where other high-end dealers are situated is what is expected.

The European map with Tesla shops looks nice for northwestern Europe … until you start clicking on those icons. Many are just a telephone number for a sales representative, others are shops, far too few are shop–service center combinations. Interestingly, the map for Germany was cleared last week of most icons for sales reps. Did someone listen to my previous rants?

Above is the map for Germany store + service center locations. There are 2 or 3 stores without service centers, but that is not what a buyer is looking for. In the area between Dortmund and Bonn, the Rhine-Ruhr region, over 12 million people live with a single service center.

The map of France is worse. 12 million Parisians have only a single service center and there are 4 in the rest of this country, covering 67 million people. The nearly 50 million people of Spain make do with 2 dealerships, in Madrid and Barcelona. Italy is barren beneath the river Po (river on the south side of the Alps).

I made a list of the bigger cities/metropolitan area without any Tesla service center.

Ruhr area  Germany

5,376,000

Rome  Italy

5,190,000

Athens  Greece

3,773,559

Naples  Italy

3,714,000

Warsaw  Poland

3,369,567

Rhein–Süd (Cologne–Bonn)  Germany

3,070,000

Katowice  Poland

3,029,000

Budapest  Hungary

3,000,076

Lille–Kortrijk–Tournai  France/Belgium

2,612,189

Valencia  Spain

2,522,383

Bucharest  Romania

2,287,347

Turin  Italy

2,277,857

Liverpool–Birkenhead  United Kingdom

2,241,000

Seville  Spain

1,943,191

South Yorkshire (Sheffield)  United Kingdom

1,869,000

Porto  Portugal

1,719,021

Sofia  Bulgaria

1,681,592

Belgrade  Serbia

1,659,440

Portsmouth–Southampton  United Kingdom

1,547,000

Nottingham–Derby  United Kingdom

1,534,000

Kraków  Poland

1,472,784

Gdańsk  Poland

1,309,027

Bremen  Germany

1,269,755

Zagreb  Croatia

1,243,779

Riga  Latvia

1,195,000

Poznań  Poland

1,178,442

Łódź  Poland

1,165,000

Bilbao  Spain

1,134,514

Cardiff  United Kingdom

1,129,971

Thessaloniki  Greece

1,108,085

Saarbrücken–Forbach  Germany/France

1,102,000

Nice  France

1,082,000

Putting a store/service center (aka dealership) in these cities is really a no-brainer. Outside these cities there is room for a few dozen more. Europe has many cities that are not big cities but are the centers of regions with enough inhabitants and potential customers to justify a Tesla establishment.

The recent actions of Tesla to close some stores, and direct all sales to the website, are not in conflict with the need for dealerships in Europe. Tesla is not as well known in Europe as it is in the USA. Even with effective word-of-mouth marketing, the potential customers often like a visit to a dealership to get a better “feel” or understanding of the brand. With the shaky reputation of Tesla quality in the press (whether deserved or not), the reassurance of a service center in the vicinity is important when considering buying an expensive car.


In Europe there is a certain bias against American cars. They are considered big, heavy, inefficient, difficult to handle, and as having a tendency to fall apart when you look at them — the opposite of Japanese and German cars in quality. There are not many cars imported from the USA. That leads often to the comparison of a nearly antique American car with a state-of-the-art European one. Not fair, but many reputations are not necessarily earned, and you simply have to overcome them.

While we are elated the fully electric vehicle market share has passed 1%, and in some places even 3–5%, the dark side of those numbers is that 95–99% of consumers did buy a vehicle without a plug, often not even considering a plug-in for their new car. This is another reason why, besides worth of mouth, real dealerships are needed.

There is no demand problem for Tesla in Europe. It is not even a problem that Teslas are expensive. There are enough rich Europeans to buy these cars. The main problem is there is no offering of Teslas to sell. The sales infrastructure is severely lacking.

That was logical when Tesla only had models S & X and was supply constrained. A token presence in these markets to get some name recognition without getting waiting lists unacceptably long was the right policy. With the Model 3 and some would-be competitors for the Model S & X, a bigger market penetration is required.

At the end of this year, Gigafactory 3 in Shanghai will start production. When that happens, a part of the production capacity of the factory in Fremont, California, will not be needed for China anymore. It would be great if the European market was expanded enough to absorb that production capacity.

To reach that expansion of the market, Tesla needs to open 30 dealerships in the cities listed above in the next six months, and another 30–50 in the areas between those cities in the following year.

There is no reason why Tesla should sell fewer cars in the EU+EFTA than in USA+Canada. Both markets should grow to 300,000–500,000 in 2020.

This is not a plea to open as many dealerships as the European competition has. That number is a relic from days past, when every smith in every village started to sell cars and became a dealer. They have been closing locations and reorganizing their dealer network in an ongoing process for years. Some distance to a dealer/service center is acceptable, depending on the population density. 
 
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About the Author

Grumpy old man. The best thing I did with my life was raising two kids. Only finished primary education, but when you don’t go to school, you have lots of time to read. I switched from accounting to software development and ended my career as system integrator and architect. My 2007 boss got two electric Lotus Elise cars to show policymakers the future direction of energy and transportation. And I have been looking to replace my diesel cars with electric vehicles ever since. And putting my money where my mouth is, I have bought Tesla shares. Intend to keep them until I can trade them for a Tesla car.



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