People often think it is strange that I support Tesla's sales model. As a car-buying consultant, I am getting paid so people can avoid the typical dealership experience. If the Tesla direct sales strategy were to catch on there would be no need for my services. However, despite my own business I firmly believe that consumers should be able to choose how they purchase a product and businesses should be able to choose how they sell their goods. As a New Jersey resident I was incredibly disappointed about the Tesla ban. I wanted so much for Elon to win because I despise a lobby that pressures politicians to bypass the democratic process in order to enact laws counter to the free-market economy. All of this because the dealerships are afraid their days of ripping buyers off are numbered. I started thinking about all the dealership experiences I have had and I came to a realization….by reinventing the franchise model, Tesla can still change the way cars are sold.
The Model S is expensive and has limited numbers, but the Model X and upcoming Model E look to be in striking distance of more consumers. Elon will eventually need to make a choice between reaching more car-buyers or continue fighting an uphill battle and risk losing market share. If he chooses to franchise, here is how it could be done:
Institute fixed pricing-
Despite Saturn's failure in the US market, the brand was successful in its revolutionary use of a "no haggle" sales model. GM simply did not allow the franchises to get in discount wars with each other to get customers. Saturn consistently ranked higher than any other non-luxury car brand in J.D. Power and Company's annual surveys of dealership satisfaction. Currently, Scion offers a "pure price" policy where a customer can configure their model online and know the fixed price before arriving at the dealership. I would imagine Tesla can come up with something similar.
Make Tesla stores exclusive and different-
Limit the number of franchises, at first, to only one or two per major metro area. Install supercharger stations so that current customers are stopping by in their travels. Nothing sells cars better than testimony from enthusiastic owners. Maybe partner up with a trendy restaurant and make the dealership a destination, a place where people learn about and experience the brand. Hold events and product demonstrations with home solar companies, have people geek-out on vehicle cutaways to show battery charging and other cool functions. One of Musk's concerns about Teslas at "traditional dealerships" is that dealers have less incentives to sell new technology from a new company and would rather "sell what they know." The solution to this is simple, only allow Tesla dealers to be stand alone locations not connected to any other brand. Which then brings me to...
Make sales staff training top priority-
Tesla already has employees who are passionate and knowledgeable about their products. The Model S is a very desirable car, finding willing investors and staff that are dedicated to promoting the brand shouldn't be a a challenge. One of the reasons the Model S has become so popular is you are not just purchasing a car...you are purchasing a unique piece of technology. The dealers to be able to foster that "Tesla community" mentality. People like being different, utilize this psychological need to have something "better" than the next guy. If you think Prius owners are smug...you are going to hate Model E drivers. Lastly, hire an independent contractor to "secret shop" Telsa stores and make sure they are not acting like "typical salespeople." (shameless plug: Mr. Musk you know where to find me)
How many of you have rolled into Best Buy or an Apple store just to "play around" with the latest gadget? Of course you don't want everyone and their mother just stopping by to joy-ride a 80k Model S, but they could set up a small test track and have sales staff take folks out for a quick spin. People that connect with a product today are more likely to purchase later. The idea is to get people excited and get them talking. For many the iPhone is a "must have" device...make the Tesla the "must have" car.
Don't forget about pre-owned and leases-
Once the Model S, X and E are on the road for some time, there are going to be people trading their Teslas in for other newer models. There are also going to be buyers who want a Tesla but can't afford to buy new. There needs to be a showroom and lot space for all the pre-owned models. Also, as of now Tesla is missing out on the incredibly lucrative luxury lease market. Over half of all luxury cars are leased and the most competitive lease segment is your 3-series/A4/C-class arena. A Model E that leases for the same as a 3-series will be a total game changer for the brand.
Musk often brings up Fisker and Coda as examples of failed electric cars through dealerships. I don't think these comparisons are fair. Fisker's failure was the product of poor management, questionable quality, and the fact that it wasn't a true all electric car. As for Coda, that vehicle was doomed from the start. It was a 40k car that looked and drove like a 15k car. The Model S delivers the same performance and luxury, even more so, than its competitors in the same class. I'm going to go out on a limb and predict Tesla's future cars will be the same way.
Of course instituting franchise dealerships is an expensive and complex proposition for Tesla. Facilities and staff training cost money but one of the main advantages of a Tesla dealer is they do not have the need for expensive service departments, therefore they can focus on other things.
Imagine a car dealership you want to visit, part auto display, part interactive science museum, and what the hell throw in a restaurant (everyone's gotta eat right?). Then you go down the road to the dealership with the inflatable gorilla on the roof trying to hock 60k luxury car next to a 15k compact, you ask a question and the response is "I gotta talk to my manager." Eventually more and more buyers are going to want that "Tesla experience," dealers will have to adapt or perish.
It will take a new brand with no prior dealership baggage to truly revolutionize the car-buying experience. There are already luxury car dealerships that operate with no pressure, no games sales environment. I've worked with several of them, they have seen the writing on the wall and know if they don't adjust to the modern car buyer sales will go elsewhere. This is by no means a perfect theory, and I would really like to see what you have to say in the comments. I think the majority of us want Tesla to succeed; it has been a long time since an American automotive start-up took on the established players successfully. I for one would hate to see Tesla in the same page as Tucker in the history books.