Tesla Motors Inc: Why A Direct Sales Model Is The Best

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Tesla and auto dealers have been in a fight for years over the EV firm’s direct sales model. Now the FTC has come forward to find a solution to this issue and recently called on all stakeholders to put forth their cases, says a report from CNET. At the event, Tesla’s general counsel, Todd Maron, gave several arguments in favor of direct sales.

For Tesla, location is the key

Location was one main reason cited by Maron. The executive said dealerships are located at faraway locations, and this is not good for Tesla’s business. Our “stores are small and often in high foot traffic areas such as shopping malls,” and this helps in popularizing its cars and technology.

“When new technology comes out, consumers don’t go to it. You need to bring the new technology to the consumer,” Maron notes.

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Another reason given by Maron is the huge inventory requirement of traditional dealerships. he said dealers choose out-of-the-way locations because they need a big inventory of cars, and often from varying manufacturers. On the other hand, Tesla does not need to keep stock as its cars are “custom built for each individual customer.”

Tesla builds cars only after an order has been placed, so it is not logical for the company to keep stock with dealers as one doesn’t know what the buyer will order.

Dealers have no vested interest

Giving another reason, Maron said the traditional dealership model is based on the volume of sales, and auto salesmen earn money on how quickly they sell a car. But in the case of Tesla, potential buyers have many questions.

Maron also listed a few of the frequently asked questions: “how to charge from home, away from home, what is range anxiety, how am I going to see it, what is the incentives [sic], what is the difference between the price of gas and electricity, how does the car work, what is regenerative breaking, what is dual motors [sic].” Maron added that it takes a good amount of time to educate buyers on Tesla cars, and traditional dealerships do not have any interest in educating buyers because they may not be “a true believer” in the technology.