Why Doesn’t Tesla Just Use Dealerships To Sell Its Cars?

(frankieleon)

Earlier this week, auto dealers in Michigan successfully manipulated the state’s lawmakers to clarify that the only way any car company can sell any vehicles in Michigan is through franchised auto dealers. A handful of other states have similar laws banning Tesla or any other car company from selling their products straight to consumers. So why doesn’t Tesla just give in and work with dealers?

The Washington Post’s Brian Fung investigated this very question and concluded that there are several reasons why Tesla wants to avoid the traditional middle man format.

Primarily, it’s about retaining control of the brand. This is particularly important to Tesla since the electric vehicle market is still relatively new. Why take the risk of handing your product over to a franchised dealership whose primary goal is making his/her own profit?

Tesla does operate a small number of storefront businesses where consumers can see and learn about the cars and their features, but the company’s VP of business development says these “stores are as much education venues as retail venues — in fact, probably more so… We don’t think that we would succeed using an intermediary model where we sell a product that someone else sells to the public.”

Then there is just the thrill of being an upstart company founded by a tech billionaire Elon Musk who seems to revel in the prospect of disrupting an established sales model.

After all, if Musk can succeed in reaching consumers through direct sales, he will have done what other, much bigger players have previously failed to do.

For example, Ford dipped its toes into the direct sales waters in the 1990s, only to be chased off the idea when Texas threatened the carmaker with fines of $10,000/day for allegedly violating the same state law that currently prevents Tesla from selling directly to Texas residents.

Car dealers and legislators who back these laws banning direct sales often claim that they benefit consumers by allowing for pricing competition. If you don’t like the price being offered by one Chevy dealer, you can go to another and see if you’ll do better there. Same goes for all the other major carmakers.

And it’s a valid point; reloading the Tesla website is probably not going to result in a lower price than when you put in your desired specs a few minutes earlier.

But Tesla is not trying to change the law to outlaw car dealerships. It is just trying to see if it can be successful without them. Additionally, if Ford, GM, Chrysler or others decided to give direct sales another try, that doesn’t mean they would eradicate all their existing franchise relationships.

Instead of asking why Tesla wants to avoid going the dealership route, a better question might be: If the dealerships truly love the spirit of competition, why are so many of them actively trying to use the law to minimize it?

by Chris Morran via Consumerist