How Tesla is Circumventing Dealerships

As an auto enthusiasts I absolutely love this idea. I recently purchased a new speciality car last year (2012 Jeep SRT8) and I must of said at least 10 times during the process that I wish there was a way to circumvent the dealer. Dealing with car dealers is one of the most fundamentally broken experiences I have ever witnessed.<p>Ready to drop $65k on a new vehicle I walk into a dealer and the first thing that happens is the sales man walks me to a desk, pulls out a piece of paper and starts asking questions and writing "whats your name?, how much do you want to spend per month?, what is credit like?, we can offer you really great financing." I had to interrupt him to explain that I just wanted to have a normal conversation first to even see if he could get the car. Turns out they couldn't.<p>After many other slimy conversations with car dealers (and being hassled in the parking lot before I even walked in the door) I finally found a dealer that was willing to special order the car I wanted at the price I wanted. I waited 4 months for the car and 2 weeks before it was ready to arrive a the dealer they called to tell me they didn't want to sell it to me for that price anymore and they were going to sell it for $10,000 over MSRP. Long story short, I had to threaten legal action just to be able to buy the car that I had put a deposit on and waited for 4 months for.<p>This is not the first terrible experience I have had with buying cars. The "car sales man" attitude is fundamentally wrong. About 80% of the sales people that I talked to at dealerships did not even know about the car I wanted to buy, mentioned the wrong engine or did not even know it existed.<p>I'm waiting for the day that I can just click "buy now" online and purchase a car with Zappos-like customer support at one fair, up front, low price without all the bullshit in between.

Getting a car dealership franchise in the US is like winning the lottery. There are so many barriers to entry that the dealer is pretty much guaranteed to earn $500K to $1M per year if he/she has halfway decent management skills.<p>Further, the credit crunch a few years ago would have wiped out enough of the US Auto industry to put a lot more dealers out of business. The rebate bill that was passed was a <i>massive</i> handout to US auto dealers. All those people making $500K to $1m per year owning dealerships are essentially on welfare.<p>If more of the industry has been allowed to restructure after the credit crunch, Tesla would not have to worry as much about a legal battle. The public would rightly view Tesla as offering an innovative approach that will benefit consumers.<p>The worst part of it is that the reason the automotive OEMs tried to sell directly a few years ago was to put an end to predatory practices (dishonesty, etc.) by auto dealers. There is no reason car dealerships should quote a price and engage in haggling, etc. Many customers (particularly the elderly and the poor) are the direct victims of these practices, and they are supported by the Federal laws that prop up auto dealers.

That's interesting. I've had the fantastic experience of buying directly from an automaker as part of their European Delivery program.<p>Basically, you fly over there, show up at the factory, you get treated like a dignitary, they show you "baby pictures" of your car being built, and then you drive off with it and get to cruise around Europe for 30 days. When you're done, you drop the car off at one of a half dozen ports and fly home. Your car arrives a few weeks later.<p>You get about 10-15% discount and it's a very cool experience. A friend did this for Porsche and while the car was great he said the experience was a little lacking. That they do such lower volume they didn't have the program as perfected and it was more about just showing up and taking possession of the car.<p>Anyway, that's obviously not what Tesla is doing -- but they should. They should definitely have a California Delivery program. They probably already do.

The money line is the statement where they believe there are no laws preventing them from selling cars in all fifty states.<p>There are no laws "currently" is a better phrase. Should Tesla become a serious maker of cars; having one model and a goal of only 35k a year keeps them at the size of Porsche; then they are going to attract attention. That they have received Federal money and their cars are subject to incentives by the federal government and states will put pressure on legislatures to extract "something" from them.<p>To put their sales goals into perspective, a luxury brand like Lexus can sell over 20k a month. The top five sell a hundred thousand plus cars per month. Chart of August sales is at <a href="http://www.autoblog.com/2012/09/04/august-2012-big-jumps-edition/" rel="nofollow">http://www.autoblog.com/2012/09/04/august-2012-big-jumps-edi...</a>

This is excellent, i helped a friend go shopping for a car 2 weeks ago and it was terrible. All the stereotypes of what car salesmen are like were out on parade.<p>I also know a guy that sells cars and he managed to get a customer to pay $2.5K over the price for a NEW car for the USED car... Same model and accessories.<p>I'm glad that theyre pioneering this as I think it's going to be a viable business model

I love everything Tesla is doing except the price of the vehicles, which will come down in time with better battery tech and higher production volumes. I've never gotten any value from a car dealer, and being able to do on-site support for vehicles might actually be more efficient on the service front, too (with Tesla locations in major markets like the Bay Area). They could just pay for a rental car (like anyone buying a $100k Model S doesn't have another car...) during the wait to send a team to Wyoming.<p>I wish Elon Musk would go into some kind of medicine/healthcare startup next, after fixing cars and space.

Well someone rang the obvious bell on this one<p>""" "People don't necessarily enjoy that whole transaction," Blankenship says. "If we can be in front of people on a day-to-day basis when they're not thinking about buying a car…after a while, they'll drop back in again, in an environment where there's no pressure. """

This article lacks one important piece of context:<p><i>The Roadster has a base price of US$109,000 in the United States, GB£86,950 in the United Kingdom, A$191,888 in Australia, and €84,000 in continental Europe.[5]</i><p>Yes, the showroom in Chelsea is "Cool". But its like any other Art gallery, with <i>hot</i> underpaid 23 year olds staring blankly at iMacs. Ie, its just another <i>White Cube</i>. With a car parked inside.

Sounds great.<p>FYI - Never, ever simply walk into a dealership for anything but a test drive. You can avoid a lot of the car buying bullshit by getting your own financing and dealing strictly with an "Internet Sales" department.

Here in Austria, we already have some special "online only" deals by major car manufacturers. I'd assume that it's becoming popular elsewhere as well (example: <a href="http://www.hyundai-shop.at/" rel="nofollow">http://www.hyundai-shop.at/</a>) and that car dealers aren't particularly happy about it. Perhaps the huge discount (around 25%) is the usual dealer's cut ...

About a year ago the new GM (post bail out) had talked about a partnership via ebay. The basic premise being dealers can bid for your business. Not much has been spoken since and I have never seen GM market the this concept actively.<p>I found a bunch of links that talk about that: <a href="http://www.theatlantic.com/business/archive/2009/08/why-selling-gm-cars-on-ebay-is-good-for-the-auto-industry/23004/" rel="nofollow">http://www.theatlantic.com/business/archive/2009/08/why-sell...</a><p>I have a hunch a large part of retail sales in the post amazon economy( or after best buy) will transition to this model. Large brands set up stores in malls where you can touch and feel your product. You can then go online and deal with the paper work/ordering.<p>it also surprises me the legality of forcing you to sell via dealerships has not been challenged.

&#62; It's a key part of Tesla's overall business: Instead of building cars and selling them to dealers who hawk them to shoppers, Tesla wants to build only cars customers order — eliminating part of the auto industry's massive overhead costs in inventory.<p>This is a <i>key</i> idea on the modern manufacturing floor. It is pretty much a straight Toyota Way play. I'm guessing they are using a different name than 'kanban' though. :-)

Is there any process for bring American-made cars into Europe tax-free?<p>Also, I've heard that you can get quite a deal on Japanese imported cars into Europe if you know what you're doing. They've some strict regulations which adds to the cost of owning a secondhand car, meaning that they look to sell off cars quicker than other countries.<p><i>But there is another factor here that determines what you’re buying in the secondhand car market: the notorious “shaken.” This consists of all the bits of bureaucracy you need to keep your car on the road — weight tax, vehicle inspection and compulsory insurance (car tax and more comprehensive insurance coverage are separate). If you buy a new car, you have three years until you need to jump through the hoops and start forking over cash. After that, you have to do it every two years, and it can easily cost you over 100,000 yen each time.<p>The end result of this is that people tend to sell their cars when the “shaken” runs out. Dealers will usually arrange “shaken” so that potential buyers have two years to go — a big selling point in the secondhand market. The upshot of all this is that used cars will usually be available when they are 3, 5, 7, 9, or 11 years old. So the first thing you want to check is the length of “shaken” left.</i><p><a href="http://www.japantoday.com/category/lifestyle/view/buying-a-used-car-in-japan-what-to-keep-in-mind" rel="nofollow">http://www.japantoday.com/category/lifestyle/view/buying-a-u...</a><p>Anyone have experience of importing Japanese cars to Europe?

This is probably the only way that longer term the company can afford to sell electric cars at a reasonable price. The tech is obviously expensive, but if you layer on the 10% sales commission and dealer fees, etc. it will jack up the price on these already expensive vehicles by 25%.<p>Imagine how much better the Chevy Volt would sell if it were 25% cheaper...

Does anyone know what economic conditions cause a market to transition from being car/house-like (no fixed price, annoying sales process) to what is normal for cheaper products in first world countries (more-or-less fixed prices, less aggressive selling)? Is it related to products'scarcity?<p>From my own experience I know that even products that normally have fixed prices in the first world (cell phones, bikes, anything really) are sold more like cars in a lot of developing countries where bartering is the norm. You might find them available for drastically different prices even in the same locale and it is frequently necessary to waste time and energy keeping track of the going price for a particular product that you are considering buying.

This business model allows Tesla to be incredibly agile in a slow moving marketplace.<p>With the current auto market, there is a lull between what consumers want and the production facility. Remember when Ford was cranking out SUV's and then the economy tanked, gas prices went through the roof and nobody wanted SUV's anymore? Ford's plants were still producing SUV's and shipping them to dealers who didn't want them and couldn't sell them. They were taking a huge loss on every one of those Explorer's they produced.<p>Tesla's model allows them to change much faster to the needs of the consumer, without wasting a lot of production costs and overhead. I think the time is right for a huge disruption in this industry.

They've had a showroom like this in DC for some time. I walk past it all the time. I don't think I've ever seen a customer in there.

Heres something that worked for me recently - walked into the dealership 15 minutes before closing time on the last day of the month after confirming on their website that they had the color / accessories combination I was looking at. I had a fairly good idea of what I wanted to pay, and they were eager to close the deal and to go home, the whole deal including the test drive was done in under 30 minutes.

I know this sounds nuts, but I have a business idea that might be suitable for discussion in this thread.<p>The idea is to do away with the dealership for anything not related to the actual transaction (they handle financing efficiently, etc.)<p>Instead, the system relies on individual agents who have parking lots of different cars within a category and across brands. If I were a mid-size specialist, I'd be very family-minded and feature the Accord, Altima, Impreza, etc.<p>This would allow a customer to make one stop to cross-shop, and they get highly specialized counsel without any (obvious) incentive to sell hard on a certain brand.<p>The agent then hands off the buyer to the dealer with a fair price negotiated (using various online tools) and the buyer just closes the deal. The agent gets a cut of the sale Cars.com style.<p>Granted, it's not a highly scalable business, but it could be a worthy self-employment idea (with the upfront capital to do it, or loaner cars from dealerships), and the customer experience is vastly superior.

I had a great experience buying my first car, a new-used car, from Enterprise Car Sales, a branch of the car rental company. We were able to have a good conversation, and I found that they are a "different" kind of car dealer because they have fixed, no haggle prices for all of their cars.<p>They are, however, still a car dealer as customers are not able to buy the car online, but they are able to pay to ship the car to the nearest Enterprise dealer. Like every other dealer however, there is a surprising amount of paperwork.<p>It wasn't entirely painless, but it was the closest to a pleasant experience as I was comfortable with. I was not comfortable negotiating how much I lose with a normal dealer.<p>I wish I could buy a Tesla vehicle now, but I don't have the money to do so, and I don't want to be in debt for a long time.

For those who don't know, Blankenship was a key architect of Apple retail <a href="http://www.teslamotors.com/about/press/releases/tesla-hires-apple-gap-veteran-revolutionize-car-buying-experience" rel="nofollow">http://www.teslamotors.com/about/press/releases/tesla-hires-...</a>

How do test drives work in this model?

It seems like they'd be in a whole lot more stores, and in front of a whole lot more eyes, if they just worked with dealerships. It is a lot like how many phones and other devices have attempted to get sold online without a lot of success compared to something that is actually placed in Verizon and other carriers' stores and sold to millions. Will they "lose" a ton of money if they let these middlemen play? Sure, but they will sell a lot more too.

I wish Tesla luck in this. Laws mandating franchise car dealerships seem to be fairly bad for consumers, and I can't think of any compelling government interest in maintaining them. Maybe seeing a better model at work will help them to go away.

BMW also plans to sell the BMW i3 and i8 online:<p><a href="http://green.autoblog.com/2012/07/30/bmw-will-sell-first-cars-online-and-theyre-electric/" rel="nofollow">http://green.autoblog.com/2012/07/30/bmw-will-sell-first-car...</a>

This is all very well until there's no dealerships that can service your vehicle or stock the parts.