OT: Tesla direct sales strategy?

[eddief]

Why are states fighting the strategy? Why is the Tesla approach to selling direct to customers controversial?

[Fixed]

I see lots on the road around here
Nice looking cars
Cheers

[christian]

Car dealerships are typically licensed by the states. It's a revenue and oversight argument.

[MattTuck]

Because dealership owners contribute to political campaigns.

[torquer]

Car dealers (and their associations) are powerful players at the state level.
Legislators are just doing the bidding of their paymasters, although they surely have some "consumer protection" talking points filed away, if needed.
http://www.digitaltrends.com/cars/north-carolina-may-ban-teslas-direct-to-customer-sales-scheme/#!zqJEy
If Egon would just spread some love around, no doubt things would change.

[sparky33]

Car dealerships are typically licensed by the states. It's a revenue and oversight argument.

Today's auto sales model is ridiculous and medieval. If markets were allowed to operate naturally we'd be buying cars with a few mouse clicks. Tesla is closer to getting it right than anyone else, and they are still making $.

fwiw I bought my last car using an independent broker (http://www.thecarconsultancy.com/). Flat fee and he negotiated a ridiculously good deal for me on a car built to spec. I only visited the dealer to sign papers and drive away. Highly recommended.

[roguedog]

Tesla= the new Tucker? Well.. except hopefully the next rev. making money and innovating the industry..

[Ralph]

Franchise law, and the protection of franchises (assets, jobs, tax revenue, etc), is deeply embedded in most states laws. With powerful political forces behind it.

What seems so obvious to us, and a better way to do business, at least for a small car company, is seen as a threat to a huge industry, and "how they have always done things".

It would make sense to me, for a car company getting started, to be able to order one just like you do a Dell Computer....check off the boxes for extra's etc. Then have service centers scattered around as needed. I bet some of you see this eventually.....but not in my lifetime

[PQJ]

Because dealership owners contribute to political campaigns.

This.

[sixgears]

New Jersey became one of 3 states (TX, AZ) to ban the practice of selling Tesla cars direct to consumers. I guess the dealer association (read lobby) got their way. What a shame.

[eddief]

big government intrusion :). i guess only in the places where each of us wants it.

New Jersey became one of 3 states (TX, AZ) to ban the practice of selling Tesla cars direct to consumers. I guess the dealer association (read lobby) got their way. What a shame.

[Climb01742]

everyone, except car dealers and the state/local pols they pay off, hate the dealership model. the car makers hate it because they have no quality or pricing control over dealership experience. car buyers hate it because most car dealers are skeeves and the pricing is intentionally opaque. as others said, it's a model that has outlived its usefulness.

[oldpotatoe]

New Jersey became one of 3 states (TX, AZ) to ban the practice of selling Tesla cars direct to consumers. I guess the dealer association (read lobby) got their way. What a shame.

So much for 'don't tread on me' TEA party, philosophy.

[enr1co]

everyone, except car dealers and the state/local pols they pay off, hate the dealership model. the car makers hate it because they have no quality or pricing control over dealership experience. car buyers hate it because most car dealers are skeeves and the pricing is intentionally opaque. as others said, it's a model that has outlived its usefulness.

+1. The car dealership model is nonsense and non value add.

Nice to be only 30 mins from the Tesla factory. Will be convenient to pick up my Model S or X from the source... one day :cool:

[saab2000]

everyone, except car dealers and the state/local pols they pay off, hate the dealership model. the car makers hate it because they have no quality or pricing control over dealership experience. car buyers hate it because most car dealers are skeeves and the pricing is intentionally opaque. as others said, it's a model that has outlived its usefulness.

This. One of the first things GM and Chrysler did in bankruptcy was force the closure of a bunch of dealerships. And they have killed off brands (Pontiac, Plymouth, Saturn, etc.) in part I think to kill dealers.

It's no secret that car dealerships and the whole experience stinks. It would be nice if you could go to a manufacturer's showroom to see what cars they offer and just order one after deciding what you wanted.

I bought my current 8-year old VW by walking into the showroom and making my best and final offer after a bit of research on invoice pricing. Based on the fact that they accepted it pretty quickly meant I probably offered too much but it was, at most, a couple hundred dollars too much. There was really no way I was getting it for thousands less than I paid. And the transaction was so much smoother. No BS. No calls from sales managers at odd hours.

Walk in, make an offer, sign the papers. Leave.

That's how it should be. I hope Tesla isn't forced into the dealership model. They are making cool cars that get rave reviews and it would suck to see this diluted by a money grab middle dealer. "How 'bout rustproofing? Which one are you driving home in today? What color do you want?"


BTW - On what is the legal argument based that someone can't sell an automobile directly to the consumer? Or that I as the consumer can't buy directly from the manufacturer?

[jlwdm]

.... And they have killed off brands (Pontiac, Plymouth, Saturn, etc.) in part I think to kill dealers......



I think Pontiac, Plymouth and Saturn were dead long before they killed those brands.

The Pontiac Aztek might be able to make a comeback though.

Jeff

[zetroc]

Car dealerships and car salesmen are an antiquated business model, much like real estate, that built their entrenched monopolies based on the control of information to the customer. It worked fantastically well before the internet era, but is now grossly in need of pruning. Dealers can see the writing on the wall - that much is made clear by the frantic nature of their lobbying against the direct sales model - but whether they will sink into their tar pits quickly or slowly remains to be seen.

[54ny77]

car dealers and many bike shops share what will eventually be a similar fate.

[oldpotatoe]

This. One of the first things GM and Chrysler did in bankruptcy was force the closure of a bunch of dealerships. And they have killed off brands (Pontiac, Plymouth, Saturn, etc.) in part I think to kill dealers.

It's no secret that car dealerships and the whole experience stinks. It would be nice if you could go to a manufacturer's showroom to see what cars they offer and just order one after deciding what you wanted.

I bought my current 8-year old VW by walking into the showroom and making my best and final offer after a bit of research on invoice pricing. Based on the fact that they accepted it pretty quickly meant I probably offered too much but it was, at most, a couple hundred dollars too much. There was really no way I was getting it for thousands less than I paid. And the transaction was so much smoother. No BS. No calls from sales managers at odd hours.

Walk in, make an offer, sign the papers. Leave.

That's how it should be. I hope Tesla isn't forced into the dealership model. They are making cool cars that get rave reviews and it would suck to see this diluted by a money grab middle dealer. "How 'bout rustproofing? Which one are you driving home in today? What color do you want?"


BTW - On what is the legal argument based that someone can't sell an automobile directly to the consumer? Or that I as the consumer can't buy directly from the manufacturer?

I looked at Kelly Blue Book on invoice pricing..I went in, asked for that price, the gent took it..done, 2013 VW Jetta SportWagen TDI.

I think they 'expect' to add a bunch of $, window tint, car bra, paint protection..blah, blah..took none of those..I think that's where they make a lot of their margin..

'Could' be almost like buy at home, pickup at warehouse, type gig...like HomeDepot or sumthin'...

[Lewis Moon]

Because dealership owners contribute to political campaigns.

Ding ding ding. We have a winner. This is a reason we have to buy what's on the lot rather than what we want.

[Lewis Moon]

big government intrusion :). i guess only in the places where each of us wants it.

...at the dealership, in the bedroom and in the womb. Everyone is a Libertarian...until they're not.

[sparky33]

I think they 'expect' to add a bunch of $, window tint, car bra, paint protection..blah, blah..took none of those..I think that's where they make a lot of their margin..

IMO this is one of the worst parts of the process. You negotiate the price, you are ready to sign, pay and go. Then the finance guy tries to sell you extended protection plan A, B and C - tells you that you are crazy for passing. scam.

[moose8]

Here is a link to an npr story about someone who tried to sell cars direct: http://www.npr.org/blogs/money/2013/02/19/172402376/why-buying-a-car-never-changes

[saab2000]

I think they 'expect' to add a bunch of $, window tint, car bra, paint protection..blah, blah..took none of those..I think that's where they make a lot of their margin..



This is exactly where they make a lot of their margin. I talked to someone recently who works in the finance dept. for a local chain of dealerships. She makes a killing. Several hundred grand per year. Financing and extended warranties and all the other stuff to glop up the vehicle is what she said. She was being totally honest it seemed. I wasn't buying a car and she wasn't selling me one and there was no pretense that that might happen so she kind of spilled it all out and I had no reason to doubt her.

[Mark McM]

If cars are sold manufacturer direct, who provides servicing/repairs?

If the retail model where the consumer is required to go through the local dealer is considered to be bad for the buyer in the automobile business, why is it considered to be good for the consumer in the bicycle business?

[sparky33]

car dealers and many bike shops share what will eventually be a similar fate.

Maybe true. Though I'm getting some value from my LBS. Service, fit, advice, etc.

In contrast, car dealers are muddling the sale of simple commodity items with basically no added value.

[saab2000]

If cars are sold manufacturer direct, who provides servicing/repairs?

If the retail model where the consumer is required to go through the local dealer is considered to be bad for the buyer in the automobile business, why is it considered to be good for the consumer in the bicycle business?

Well, I could start a car repair shop tomorrow and have recognized certifications which quantify what I can do with cars. Diagnosis, paint, chassis, body work, etc. This is all certifiable. There is little certification in the bike business so the LBS might have a genius mechanic who 'gets it' or it might have the high school kid who started last week doing fittings on $12,000 bikes or gluing tubulars, etc.

No way to check it out. In the auto industry at least theoretically there is training and certification.

[Mark McM]

Well, I could start a car repair shop tomorrow and have recognized certifications which quantify what I can do with cars. Diagnosis, paint, chassis, body work, etc. This is all certifiable.

By whom? The car manufacturers? What incentive do they have to certify independent repair shops?

Cars are now highly computerized, and car manufacturers have little incentive to make computer diagnostic information/equipment available to independent shops. Although various Right To Repair (http://en.wikipedia.org/wiki/Motor_Vehicle_Owners'_Right_to_Repair_Act) laws (which require the manufacturers to provide this information) have been proposed at both the state and national level, at this time only Massachusetts has passed such a law.

[redir]

I had no idea this is how it works. So if everyone hates it why is it still like this? Stupid. Personally I will never buy a new car so I'll never even walk into a dealership but I have gone with my father to buy some new cars. HE would do his research and basically offer them a little bit more then what they actually pay for it. Works every time.

[Lewis Moon]

If cars are sold manufacturer direct, who provides servicing/repairs?

If the retail model where the consumer is required to go through the local dealer is considered to be bad for the buyer in the automobile business, why is it considered to be good for the consumer in the bicycle business?

The folks who are providing the service/repairs now....your local car mechanic.

[saab2000]

By whom? The car manufacturers? What incentive do they have to certify independent repair shops?

Cars are now highly computerized, and car manufacturers have little incentive to make computer diagnostic information/equipment available to independent shops. Although various Right To Repair (http://en.wikipedia.org/wiki/Motor_Vehicle_Owners'_Right_to_Repair_Act) laws (which require the manufacturers to provide this information) have been proposed at both the state and national level, at this time only Massachusetts has passed such a law.

Well, to start with the SAE - Society of Automotive Engineers. Otherwise I can go to school and become certified in various levels of automobile repair. That basically doesn't exist in the world of bikes.

As to the incentive to the manufacturers? I can't think of much. All I'm saying is that pretty much nobody likes the experience of shopping for cars or for that matter, having their car repaired, by traditional dealers. They all seem super shady and murky and opaque and that's quite intentional.

Most people don't expect stuff for free but they would like to know what they're getting and not get the runaround by slick people paid on commission.

[DreaminJohn]

If cars are sold manufacturer direct, who provides servicing/repairs?

If the retail model where the consumer is required to go through the local dealer is considered to be bad for the buyer in the automobile business, why is it considered to be good for the consumer in the bicycle business?

Excellent points.

My first thought went to test drives and how to compare/contrast different models. Are we to rely on someone else's impressions?

[ultraman6970]

If tesla can't put dealers in those states, just find a city at the limits of the state to put their dealerships, done with the problem, kind'a "footloose" approach, do you think a texan wanting a tesla won't drive all the way to the state line to get the car? Of course he will :D. But knowing some states probably they will ban the darn cars just because they can. Amazing that now a days crap like this could happen.

Have seen a few and the darn car is just amazing, well finished, no sound, fast, etc. Looks like any ultra fancy european car, never imagine seen a car like that made in the US, not even a cadillac.

Tesla sufficed the guy that have money, now it is time for them to please the regular joes that only need a car just to commute, to to show off.

[rnhood]

Excellent points.

My first thought went to test drives and how to compare/contrast different models. Are we to rely on someone else's impressions?

That's also a good point. I generally don't have a problem with auto dealerships, although I don't believe sales should be restricted to dealerships only. The same with bikes. But I would never buy a bike that I did not test ride, at least for a day or two. I think one reason the classifieds show quite a few late model bikes is because they were purchased blindly, and didn't measure up.

[binxnyrwarrsoul]

Tesla, great band.

[ultraman6970]

https://www.youtube.com/watch?v=l2q_-xN2N54

Tesla, great band.

[ultraman6970]

Tesla, the most underrated inventor aswell :)

[Climb01742]

the real question about car dealers is_not_whether they are needed (because they are crucial to selling, test-driving, touching and feeling the product before purchase and service afterwards) but who owns them. as it stands now, manufacturers can't vertically integrate and own dealerships. vertical integration has both positives and negatives, but if factories were allowed to own their own dealerships at least there would be competition and perhaps a more consistent and long-term approach taken to car owners.

[93legendti]

This. One of the first things GM and Chrysler did in bankruptcy was force the closure of a bunch of dealerships. And they have killed off brands (Pontiac, Plymouth, Saturn, etc.) in part I think to kill dealers..


But the Administration didn't kill ALL GM, Chrysler (or outlaw all) dealerships. Everyone's for big socialism, until they're not (this is not directed saab2000, but those who erroneously brought their misconceptions and biases to the thread).

[Mark McM]

Well, to start with the SAE - Society of Automotive Engineers. Otherwise I can go to school and become certified in various levels of automobile repair. That basically doesn't exist in the world of bikes.

Cars are highly computerized. Special information and equipment is often needed to interface the computer and gather diagnostic information from these proprietary systems, and the manufacturers aren't required to supply these to anyone they don't want to. Sure, you can go to SAE for general automotive training, but if the manufacturer doesn't want to supply the proprietary information for specific vehicles, what do you do? Try to reverse engineer it? That's why independent repair shops have been lobbying for Right to Repair laws - and so far, with little success.

Bikes have less proprietary computer technology (at least so far), so this isn't as large a barrier for independent bicycle repair shops.

[yngpunk]

Cars are highly computerized. Special information and equipment is often needed to interface the computer and gather diagnostic information from these proprietary systems, and the manufacturers aren't required to supply these to anyone they don't want to. Sure, you can go to SAE for general automotive training, but if the manufacturer doesn't want to supply the proprietary information for specific vehicles, what do you do? Try to reverse engineer it? That's why independent repair shops have been lobbying for Right to Repair laws - and so far, with little success.

Bikes have less proprietary computer technology (at least so far), so this isn't as large a barrier for independent bicycle repair shops.

THere a plenty of "third party" outfits that will provide manufacturer specific training outside of the OEM. I know of a repair shop that specializes in BMW and Mercedes cars and on their wall are their training certificates citing so and so took such and such class for this and that BMW/Mercedes system. They also have the necessary proprietary computer technology to read and reset the CPUs in these cars

[EDS]

Cars are highly computerized. Special information and equipment is often needed to interface the computer and gather diagnostic information from these proprietary systems, and the manufacturers aren't required to supply these to anyone they don't want to. Sure, you can go to SAE for general automotive training, but if the manufacturer doesn't want to supply the proprietary information for specific vehicles, what do you do? Try to reverse engineer it? That's why independent repair shops have been lobbying for Right to Repair laws - and so far, with little success.

Bikes have less proprietary computer technology (at least so far), so this isn't as large a barrier for independent bicycle repair shops.

If there is no dealer network than it would logically follow that the car manufacturers would happily take money from repairmen/shops for certification/training to fix/service their vehicles.

By way of example you can still get a Saab serviced at many repair shops and at least in the case of the place I took my Saab, they have the equipment do do all of the diagnostics, etc.

[fogrider]

technically, the stores are not really stores, since the cars are bought through their website. it is where one would go to 'kick' the tires and where one would go for a test drive.

going to a dealership is a joke, more and more people are buying through brokers.

[binxnyrwarrsoul]

Tesla, the most underrated inventor aswell :)

True dat, T.

[saab2000]

But the Administration didn't kill ALL GM, Chrysler (or outlaw all) dealerships. Everyone's for big socialism, until they're not (this is not directed saab2000, but those who erroneously brought their misconceptions and biases to the thread).

True. And I'm far from an expert on any of this. I just read popular press....

I won't go political here even though that's the crux of the issue ultimately. I'm not qualified to comment too much.

As to GM (Government Motors or General Motors) we can argue 'til the cows come home about the bankruptcy and the bailout and all that but Michigan did well by it. I think. It seems that tens of thousands of jobs were saved by the bailout and GM is likely going to be able to stand on its own two feet. But I'm no economist and I understand that there are many sides to the story. Ford survived the auto crisis without bankruptcy protection.

Anyway, my point in entering this thread is that I would like to see Tesla be able to sell their product to their consumers directly. That's how they choose to do it and I don't see how the government involvement in that process does anyone any good, except for a few lobbyists for the auto dealership association.

The big automakers are apparently actually scared of Tesla. Good.

[zap]

Tesla wants to keep the margin.

Personally, I would never purchase an automobile on line. In the past, I always got better deals in person.

By the way, I think Tesla should be able to sell consumer direct.

[Vientomas]

"The green subsidy program's most successful investment to date is an electric car manufacturer that has yet to profit solely from the sales of its product. Instead, it is a company built on loan guarantees, sustained on subsidies and profitable only through a system of credits designed to benefit electric car manufacturers at the expense of their competitors. Take away all of the recent hype surrounding Tesla's recent loan repayment, and you are left with a company built to cash in on the privilege and favors from politicians."

http://www.usnews.com/opinion/blogs/economic-intelligence/2013/06/03/teslas-success-is-the-result-of-political-favoritism

[MadRocketSci]

I looked at Kelly Blue Book on invoice pricing..I went in, asked for that price, the gent took it..done, 2013 VW Jetta SportWagen TDI.

I think they 'expect' to add a bunch of $, window tint, car bra, paint protection..blah, blah..took none of those..I think that's where they make a lot of their margin..

'Could' be almost like buy at home, pickup at warehouse, type gig...like HomeDepot or sumthin'...

I don't remember the details but even at invoice the dealer will make $$ from a factory kickback or something....like a couple hundred bucks...

[Ralph]

Dealer hold back. 2-3% of the invoice price. They can sell below invoice (if they wish) and still make out. But....it costs a lot more to sell a car than you might think. Lots of overhead in running a fancy dealership.

Personally.....I would like to see cars sold direct, order them kinda like you do a Dell computer, and manufacturers can put their service centers out in cheaper real estate instead of fancy highway frontage. Then hire the same techs that just lost their jobs at the dealership. Cut out dealership sales expenses and markups.

[ultraman6970]

would be cool to see that, prices in cars would go down big time.

By the way anybody knows whats the cost of a car for the car manufacture? lets say how much is the cost for ford including their mark up of manufacturing a ford taurus for example??? anybody knows stuff like that, is info as restricted as ALIENS :P

[eddief]

No oil changes on which to make a profit.

http://www.wired.com/business/2014/03/car-dealers-fear-teslas-plan-end-oil-changes-forever/?mbid=synd_yfinance