Tesla Motors Inc (TSLA): What If It Adopts Dealership Model?


Tesla Motors Inc (NASDAQ:TSLA) faced yet another setback last week when New Jersey Governor Chris Christie blocked the company’s direct sales model in the state. So far, the electric vehicle maker has been banned in five states, and restricted in two others. Auto dealers in New York are also pushing for a ban on Tesla. So, why doesn’t Tesla simply adopt the dealership model and sell its cars happily everywhere? Or the company could turn to dealers in states where direct sales are banned. A terrific idea? No. A terrible one? Yes.

An independent dealer’s tactics are different than Tesla’s

If you’ve ever had the opportunity to visit a Tesla Motors Inc (NASDAQ:TSLA) store, you must have noticed a pleasant and quiet environment. The staff members are polite and helpful. You can browse the store, check out various wheel and battery options. The staff would explain the options for installing a home charger. In short, it’s an entirely different experience, and pleasant one, compared to entering a traditional dealer.

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Tesla Motors Inc (NASDAQ:TSLA) says it needs to educate buyers because electric vehicles are different from gasoline-powered cars. And that’s the reason the Palo Alto-based company maintains its direct sales model. But there is more to it. As Wayne Cunningham of CNET says, Tesla uses its stores to set the tone. A high pressure sales tactic is not in Tesla’s interest. We know that the sales experience is the first contact we have with the product. If that experience is bad, it will affect Tesla’s reputation.

Dealers can’t take care of customers the way Tesla does

Car dealers may not necessary sell Tesla Motors Inc (NASDAQ:TSLA) vehicles in the manner Elon Musk would want. Some of them may incorporate the changes Tesla wants to see, such as elimination of haggling, pressure and hard pitches. But there will definitely be some who would want to do things their own way. They will use traditional tactics that are not suitable for the sales experience Tesla wants to provide.

Tesla Motors Inc (NASDAQ:TSLA) spends little on advertising, but a lot of money taking caring of its customers. For example, the company has set up a network of Supercharger stations where Model S owners can charge their vehicles for free. And Elon Musk himself has sometimes arranged, through Twitter, for customers to get their Model S fixed. An independent dealer is unlikely to maintain the same level of care, and may not set the same tone for sales experience. That will do no good to a relatively newer automaker like Tesla.

Tesla Motors Inc (NASDAQ:TSLA) shares were down 2.02% to $230.03 at 10:36 AM EDT.