A little over a week ago, Tesla announced the arrival of its long – awaited Model 3 sedan, worth $ 35,000. He also revealed that she would close almost all of her retail establishments and would go on to sell online only.
The second part was greeted with shock and jeers, but Tesla is serious. And the move could be brilliant.
I'll admit I did not think so at first. Tesla does not use franchised dealers, unlike all other major US manufacturers. Instead, Tesla is supportive of direct sales and has encountered strong resistance from auto dealers in a number of states (laws governing car sales are respected because Tesla was allowed to perform direct sales in some of them).
After the announcement, I interviewed Elon Musk, CEO, about a controversial conference call with the media. He said he expects reputable dealers to be repressed because they do not want to allow online analysis of franchising laws nationwide. If they stand in the manner of Tesla, they would interfere with interstate commerce – unconstitutional, according to him.
"Good luck with that," he says.
Read more:Tesla closes most of its stores and adopts an online sales model only.
Tesla Direct Sales Challenges
After the announcement, I thought about the implications. In the United States, states are often seen as "labs" for legal changes that could later become national. The federal government monitors the experiments. A good example today is the legalization of marijuana. In the end, if enough large states take this route, weeds could be legalized anywhere in the United States.
My theory was that Tesla was undertaking a direct selling experience and that she might someday ask for a federal exception. Honestly, I thought it would fail, largely because every time a big automaker was trying to scrap dealers, these and their fervent allies of local governments and Washington were defending themselves.
I thought Tesla would accept a hybrid model, with direct sales in some states but ultimately franchised dealers in others.
They too might have thought about the issue and concluded that it would be better to get started and impose their own solution. "People want to buy things online," said Musk. And he's right. In addition, a large number of sales of Tesla are obviously already carried out mainly online, and the wider automotive industry is more and more interested in simpler and simpler methods to provide buying advice, match buyers to cars, organize tests, and modernize the non-centric financing and insurance process.
Tesla is facing the risk for everyone
Tesla has always been a kind of automotive industry leader. General Motors and Ford companies around the world have been happy to let Musk and its company absorb all the challenges of validating an electric vehicle market. Contrary to many auto industry experts, Tesla is widely admired and rooted in Detroit. They know how difficult it is to start a car manufacturer – let alone make only electric cars.
That's why I now think that the only online sales effort makes sense. Tesla is classic: risky, but if Tesla succeeds, the major automakers would have more ammunition to modify the franchise system than in the past.
I've also proposed another theory on why Tesla does this: Tesla has plans to fail.
The company already operated more than 300 stores, and it is possible that a rigorous commercial analysis led to the conclusion that online sales were widespread with just about everything except cars, and that Tesla was faced with Resellers' resistance to direct sales, he was just not smart. Keep fighting and follow a sales model that discourages customers.
Running a retail network is difficult after all. And if you try to do it yourself – and the big builders do not do it – it's also very expensive. So Tesla decided, maybe, to calm down. Give a chance to the online approach only. If it works, so much the better.
And if it does not work? Well, there are huge national distribution companies, operating franchises in many states, that could take over Tesla's business, such as AutoNation and Penske Automotive Group. A partnership would help Tesla a lot to buy vehicles from its customers, although that would obviously jeopardize Musk's desire to vertically integrate Tesla's business and could hurt Tesla's profits (although I think Tesla could be more profitable if it abandoned certain sales and manufacturing). external contractors).
Now, you can say that I think back to that decision, and you may be right. But it's a big problem – even more importantly, that the arrival of Model 3. While Tesla is superb and that automotive design, technological innovation and participatory marketing, it struggles with manufacturing problems, logistics and execution – boring, blocking and blocking tasks. – tackle things that the rest of the automotive industry has perfected.
Tesla could use some excuses to exploit this expertise. But society must find ways to do it without Tesla not being as if it was not Tesla.