Tesla’s Troubles Mount: Shuttered Showrooms and Sinking Shares

“The demand for Model 3 is insanely high. The inhibitor is affordability. It’s just that people literally don’t have the money to buy the car.”<p>Saying your product is in high demand when people can&#x27;t afford it is pretty ridiculous. By that logic, demand for Ferraris is through the roof even though they only sell a few thousand a year.

The new lack of a retail strategy just seems insane to me.<p>I should be squarely in the target audience for them, I&#x27;ve purchased a couple BMW 3-series cars in a row, but there&#x27;s literally 0.0% chance I would ever consider buying a car without a test drive.<p>I guess people have done that with Tesla, but once that group of superfans is exhausted (perhaps it already is) and the pseudo-exclusivity aspect has worn off then who in their right mind wants to make a purchase of that magnitude without even being able to try the product?

When Tesla launched, it came across as a car company being run like a startup. They hired laptop people to work on battery tech, they disrupted legal impediments to direct sales (much as Uber and Lyft have disrupted taxi cartels), and they had the de rigueur charismatic but eccentric founder.<p>Now it seems that like other startups, much of their early success comes from using investor monies to undercut the competition and operate at a loss.<p>But when investor patience with losses runs out, like all startups, hard choices must be made about the business model, and the company&#x27;s honeymoon is over.<p>It may yet succeed, but this challenge feels like the challenges a lot of B2C startups have faced when it came time to turn a profit. Many had to change their business model in a way that alienates some of their market.

The problem for Tesla is that they needed to sort these problems out years ago. Now we are approaching the mass-consumer part of the adoption curve where every car company will start offering electric cars:<p>Audi, BMW, Hyundai, Jaguar, Kia, Mercedes, Mini, Nissan, Polestar, Porsche, Renault, Smart, Volvo, VW<p>And I just don&#x27;t think Tesla are going to be stable enough to compete against the big players.

&gt;&gt;The “flip-flop” on retail strategy, he added, “makes it seem like Musk is winging it and the board is letting him wing it.”<p>That sounds like a founder who is not afraid to experiment and course correct when necessary to me.

For context,<p>&quot;An Electric Carmaker Struggles as Its Production Lags&quot; (<a href="https:&#x2F;&#x2F;dealbook.nytimes.com&#x2F;2012&#x2F;09&#x2F;25&#x2F;questions-about-electric-cars-as-a-manufacturer-struggles&#x2F;" rel="nofollow">https:&#x2F;&#x2F;dealbook.nytimes.com&#x2F;2012&#x2F;09&#x2F;25&#x2F;questions-about-elec...</a>) - September 25, 2012<p>&quot;Stalled Out on Tesla’s Electric Highway&quot; (<a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2013&#x2F;02&#x2F;10&#x2F;automobiles&#x2F;stalled-on-the-ev-highway.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2013&#x2F;02&#x2F;10&#x2F;automobiles&#x2F;stalled-on-th...</a>) - Feb. 8, 2013<p>&quot;Lurching Start for Tesla in China&quot; (<a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;02&#x2F;11&#x2F;business&#x2F;international&#x2F;tesla-seeks-a-stronger-foothold-in-china.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2015&#x2F;02&#x2F;11&#x2F;business&#x2F;international&#x2F;te...</a>) - Feb. 10, 2015<p>&quot;For Tesla Owner, Losing a Wheel Was Just the First Surprise&quot; (<a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2016&#x2F;06&#x2F;11&#x2F;business&#x2F;tesla-motors-model-s-suspension.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2016&#x2F;06&#x2F;11&#x2F;business&#x2F;tesla-motors-mod...</a>) - June 10, 2016<p>&quot;Tesla Model 3, Elon Musk’s Grail, Remains a Costly Pursuit&quot; (<a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2018&#x2F;02&#x2F;07&#x2F;business&#x2F;tesla-musk.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2018&#x2F;02&#x2F;07&#x2F;business&#x2F;tesla-musk.html</a>) - Feb. 7, 2018<p>&quot;Tesla Looked Like the Future. Now Some Ask if It Has One.&quot; (<a href="https:&#x2F;&#x2F;www.nytimes.com&#x2F;2018&#x2F;03&#x2F;29&#x2F;business&#x2F;tesla-elon-musk.html" rel="nofollow">https:&#x2F;&#x2F;www.nytimes.com&#x2F;2018&#x2F;03&#x2F;29&#x2F;business&#x2F;tesla-elon-musk....</a>) - March 29, 2018

Worth noting:<p>&gt;As Mr. Musk lays it out, the change is not so radical. In an email to employees, he said that 78 percent of Model 3 orders were already placed online, and that 82 percent of the model’s buyers made their purchase without a test drive.<p>They&#x27;re losing at most ~22% of possible sales. And some of those people might still buy online.<p>A lot of this piece is economic crystal ball gazing and comparing the magic of a super safe, fast, fun, and wildly popular (self driving?!) car to existing car manufacturers.<p>Maybe someone at NYT wants to drive their stock price down so they can buy.

I have always seen car advertising as the most wasteful of all commercials. Tesla doesn’t do this and I, as someone who couldn’t care less about cars, know more about Tesla cars than all competitor cars combined. I don’t think they need the stores. Were I to get a car, I would probably get a model 3 if I confirmed the charging situation was reasonable and risk of repairs was reasonable (at this point I think not).<p>Test driving is an issue. Renting to test drive isn’t a practical thing to expect people to do. But really I just think the value prop of Tesla is the image. If you drive one, it’s because you’re smart or trendy or whatever you think it shows off. It’s a distinct offering from all other car manufacturers. When someone thinks “I want a Tesla” and googles how to buy one, I’m pretty sure they will just go for it, because it’s easier to do than go to a dealership, and it’s the one they already wanted to buy.

Tesla just reminds me so much of what I&#x27;ve read about the story of Enron.<p>Selling the dream of a bright, new energy &amp; technology future. Finding creative ways to take money now while (maybe) delivering the tangible product later. Not delivering on the promises made by the marketing several years later.

Straight from <a href="https:&#x2F;&#x2F;www.tesla.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.tesla.com&#x2F;</a>:<p>&gt;If you haven&#x27;t test driven the car, you can return it within 7 days or 1,000 miles, whichever comes first.<p>That&#x27;s the test drive right there.

Seems like I&#x27;ve seen one variation of this headline or another every few months for as long as Tesla has existed, but they just keep on selling cars. The negativity seems disproportional.

Very surprised to not see Ed N and his writing&#x2F;commenting&#x2F;voting ring on this one. Or Bertel.