Car talk

Tesla’s direct-to-consumer model: Do we like it?

By Sarah Sidlow

Tesla Motors is a company that’s used to pushing the envelope. It’s laid the groundwork for an affordable, long-range electric car that Actually. Looks. Cool. According to Business Insider, “The point was to make a car so awesome, so badass, so powerful that it would forever change what everybody thought about electric vehicles.” The name honors Serbian-American electro-genius Nikola Tesla, the inventor of the AC induction motor that powers the company’s car. But recently, Tesla has become synonymous with yet another challenge to the status quo: its direct-to-consumer sales model. Instead of relying on independent dealerships, Tesla’s model aims to take the car directly to the driver—with futuristic lighted displays that rival the Apple store. Is it time for the rest of the car industry to get an update, too? Well, that would take a lot of work. No fewer than 48 states currently ban or limit direct sales of automobiles. Some allow Tesla to sell its cars through company-owned stores. Others allow Tesla to open showrooms, but not sell cars in them (in these instances, store associates are not allowed to talk about the car’s price, or even direct potential buyers to the appropriate website). These laws have been on the books for a long time—their intent is to prevent “unfair competition” that could cut into the sales of locally owned car dealerships. The system was designed so that established carmakers already using franchises, like GM or Ford, couldn’t set up their own stores to compete with independent dealers. Those who favor the laws also argue that a hometown dealer is going to be more invested in its community (they surely pay more in state and local taxes) and the area’s customers. Allowing the manufacturer to go right to the driver, they argue, takes all of the local magic out of the equation, and if Tesla wants to share the market, they can do it right next to everyone else. But Tesla and its supporters are saying it’s time for a change. They say the old laws just illustrate that government is deciding how consumers should act—something that should be left up to the customers themselves. They say there’s no reason to expect direct sellers like Tesla to mistreat their consumers, and consumers have already proven that the direct-to-consumer model is pretty darn popular (hello, Amazon). Tesla argues that selling cars in the traditional dealership manner is actually bad for their business—since most of those places make more money on service than car sales, and Teslas, by design, require very little service. Tesla CEO Elon Musk also said publicly that he thinks it’s “terrible” to make a profit on service, and he doesn’t intend to start now. Tesla also has an ideological bone to pick with the dealership model. The company is opposed to the gas-guzzling philosophies of the older showroom stalwarts, and argues it shouldn’t be forced to share the stage with gassy cars and dealerships that don’t properly explain the advantage of electric vehicles. The most high profile Tesla fight is currently taking place in Utah, where the automaker built a $3 million store in Salt Lake City, only to have it demoted to a gallery/service center two weeks before opening because of pressure from the area dealership association. As one Tesla official once asked, “How do you sell the future if your business depends on the present?”

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Sarah Sidlow
Reach DCP editor Sarah Sidlow at SarahSidlow@DaytonCityPaper.com.

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