Tesla Motors Inc (NASDAQ:TSLA) might adopt a franchise dealership model together with its direct sales model. According to recent reports, Elon Musk is considering a franchise Tesla dealership model.
Musk suggests a ‘hybrid’ system
Musk recently hinted his intentions to Autoline Detroit last week in an interview with John McElroy, when he said that in course of expansion the company may need to utilize franchised dealerships, in addition to its Tesla stores.
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McElroy asked Musk that if the company can achieve a retail model in all 50 states of the United States and how are they planning to handle maintenance and repairs.
Musk acknowledged that the sales would not be smooth if the company relies only on a direct sales model, and said, “We may need a hybrid system, with a combination of our own stores and some dealer franchises.”
New Tesla models need more exposure
This sudden change of mind is both surprising and humorous after seeing the fight that the company has put up to defend its direct dealership model. However, when the new models of Tesla Motors Inc (NASDAQ:TSLA) such as Model X and Model III come to market, the company will have a huge potential for growth that could be best achieved by a mix of direct sales and franchising.
The comments made by Musk also seem to line up with the words of Tesla Motors Inc (NASDAQ:TSLA) Legislative Director Jim Chen last year at an industry meeting. Chen said during a regulatory meeting in fall 2013 to industry stakeholders that the company plans to sell “factory direct” until it achieves an undefined minimum volume threshold.
At that time Hybrid Cars noted that it was not clear if Chen was pointing to, but it does confirm what the auto dealer association has said,suggesting that the company will not be able to expand to support Model 3 sales beyond a limit.
Model X will be launched soon, and then we will likely learn more about Tesla plans. Just recently, the company urged consumers to fight a bill passed by the Michigan legislature to ban the direct sales of Tesla vehicles. The bill will become law with a signature from Michigan Gov. Rick Snyder, who has until Tuesday it.