Why Tesla Motors Inc Is Facing Opposition From Auto Dealers

Tesla stockBlomst / Pixabay

It’s no secret that Tesla Motors Inc (NASDAQ:TSLA) is facing stiff opposition from dealerships, but why are they facing it, is less understood. It is an interesting fact that dealerships are spending a chunk of their earnings to try to stop Tesla from selling cars directly to customers. It is for the simple reason that the electronic car manufacturer has an innovative business model that will eliminate the monopolies of the dealer system and will eat into the profits they earn as middlemen, says a report from TheGuardian by Travis McKnight.

Tesla sales model is smooth and easy

Buying a Model S or any other Tesla Motors Inc (NASDAQ:TSLA) car is so smooth and simple that the new generation of customers could easily avoid the long procedure, costs and frustration, which they suffer while buying a car from a dealer. A major part of profits for dealers comes from regular maintenance services, but an electric car does not require frequent maintenance compared to the gasoline ones.

The current generation of consumers is under the pressure of $1.2 trillion in student loan debt amidst poor wages and high rate of unemployment, which was one of the reason for the decline in car sales for consumers ages 18 to 34, between 2007 and 2011, says the author. Such problems shift the focus of the generation towards technology in search of a cheaper alternative and independence. Dealers realize that if Tesla Motors Inc (NASDAQ:TSLA)’s direct-to-consumer model gains popularity, they would lose a lot of money especially from the millennials, who prefer to research online.

Dealers should adapt to the changing business scenario

New Jersey is the latest entrant in the list of such states that banned Tesla’s model of dealership. Other states are Arizona and Texas. Customers can inquire about the models, take a look at the cars in Tesla showrooms, but cannot buy one.

Dealers are wasting their time in getting political favors from republicans and democrats instead of changing their own business model and adapting to new innovation and technology. Tesla Motors Inc (NASDAQ:TSLA) Model S got a green light in California, Colorado, Massachusetts and Virginia, but it is still to overcome all sorts of issues created by the lobbyists in 14 other states from North Carolina to Nevada and Ohio to Oregon.

It’s high time for people to realize that dealership monopolies in the United States are already on the verge of extinction. Republicans and Democrats should give Tesla Motors Inc (NASDAQ:TSLA) a fair chance by letting it continue this new model of dealership.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

2 Comments on "Why Tesla Motors Inc Is Facing Opposition From Auto Dealers"

  1. Umm, telsas are all electric. No costly consumables like belts, spark plugs and fluid maintenance. The things you’ll swap out the most are the tires and the wipers.

    Building service centers for them is a waste. There’s nothing to service.

  2. What can dealerships do that Tesla can’t do themselves?

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