Tesla Motors Inc (TSLA): The Great Dealership Question

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Tesla Motors Inc (NASDAQ:TSLA) has been in the news a lot lately, especially as it fights to protect its direct-to-consumer sales model. Most recently, the EV automaker lost its battle in Texas, although it has won other battles in other states like New York and Minnesota. So why is Tesla so fixated on selling directly to consumers rather than using dealerships?

Tesla Motors Inc (TSLA): The Great Dealership Question

Quora contributed an answer written by EchoSign CEO Jason M. Lemkin to Forbes.

The Advantages Of Tesla’s Model

Lemkin said he has been through the buying process for the Tesla Model S, and he felt that it was better than any of the other buying experiences he has had with other dealers. Buyers can essentially visit Tesla Motors Inc (NASDAQ:TSLA)’s website, design their Model S and then click to buy it. When the vehicle is ready, it gets delivered to the buyer’s home.

There’s no haggling over the price of the vehicle, and no salesperson tries to sell extras that the buyer doesn’t feel are needed. Also every buyer pays the same standard price for the Model S, based on which options they select when building their car.

The Disadvantages Of Tesla’s Model

While Lemkin clearly was appreciative of the buying process through Tesla Motors Inc (NASDAQ:TSLA), he also said that there is a lot to be desired. He called the delivery process a “logistical nightmare,” and it’s easy to imagine why. The company is delivering thousands of cars directly to buyers’ homes. He said he didn’t get a notice that his Model S was going to be delivered until the night before. He felt like dealers could do a better job in this area because they can handle the logistics.

And then there’s the issue that buyers can’t just walk into a dealership and buy a Model S. They have to order one and usually wait months to receive it. In addition, it’s nearly impossible to actually talk to anyone at Tesla about the vehicles. Lemkin said he couldn’t get any of his pre-purchase questions answered via email and that there weren’t enough account representatives. He said at least with the dealership model, it’s easy to find someone to talk to.

He also noted that Tesla Motors Inc (NASDAQ:TSLA) still has to build showrooms for its vehicles, and with its current sales model, it has to pay for the showrooms itself. If it did use a dealership model instead, that burden would be shifted away from the company.

In addition, he said Tesla Motors Inc (NASDAQ:TSLA) still has to service its vehicles, although there is less maintenance that has to be done with electric vehicles. Nonetheless, dealerships are more ideally positioned to handle service problems. And finally, he said financing and trading in vehicles are both easier with dealerships because they can handle all of it, especially when it comes to trade-ins.

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