• Skip to main content
  • Skip to primary sidebar

Auto Trends Magazine

Car reviews, industry news, & advice.

Archives for July 2010

Cars and iPods Are Different – Tesla’s Retail Strategy Is Flawed…and Arrogant

July 31, 2010 by Jason Lancaster Leave a Comment

Based on an article from the July 26th edition of Automotive News, it seems that start-up automaker Tesla plans is to sell cars the same way that Apple sells iPods. Tesla won’t have dealer showrooms – they’ll have manufacturer-owned “galleries.” Tesla won’t have service departments – they have field technicians called “Tesla Rangers.” Tesla’s stores won’t have a lot full of new cars to choose from – they’ll have a couple of floor models to sit in, a demo unit for test drives, and a website to visit when it’s time to buy.

Unfortunately, all of this means that Tesla won’t have much success with sales, especially once big automakers bring out their own electric cars. Until they recognize the limitations of their strategy, they will be nothing more than a small, niche manufacturer that will probably be swallowed up by a larger automaker down the road. Here’s why:

1. Instant gratification can’t be ignored, and no inventory means no urgency. Ask any auto dealer and they’ll tell you that people don’t like to wait for their car. Because Tesla dealerships won’t have any cars in-stock, there is a real risk that some consumers will opt to buy a competing vehicle rather than wait for their Tesla to arrive.

There’s also the fact that a lack of inventory means there’s no urgency – if a consumer is told “this is the last red one on the lot,” they feel some pressure to consummate a transaction right away. If they’re told “sign here and your car will arrive in 6 months,” they’re much more likely to investigate alternatives. The bottom line is that dealers need inventory to maximize sales, and without ready-to-buy inventory Tesla dealers will be at a disadvantage compared to the local Ford, Toyota, Honda, and Nissan dealers with in-stock inventory.

2. Larger dealers are more effective. Tesla’s plan centers around small little dealers in select markets. However, larger dealers are more capable of selling and marketing vehicles. Specifically, larger dealers can:

  • Justify larger marketing and advertising budgets, including brand-level ads
  • Afford to invest in long-term marketing strategies
  • Expend the resources to be active and visible in the local community (things like baseball team uniforms and sponsoring local events)
  • Offer consumers more on trade-in (more on that below)

3. Apple doesn’t sell used iPods, but Tesla will sell used cars. Trade-ins are an especially important aspect of the retail automotive business, and represent a significant flaw in Tesla’s strategy. Since many consumers aren’t able to buy a new car without getting rid of their old one, the average Tesla dealer is going to have to take trade-ins. These dealers can either try to market these trades to the limited number of visitors they get, or they can auction these trades off to other dealers. Auctioning off trades (which will mostly be gas powered) seems like the most likely option for Tesla dealers specializing in electric cars.

Of course, if Tesla dealers are going to the auction, they’ll be forced to offer customers auction value. Large dealers, with thousands of visitors and a wide variety of cars, rarely auction off trade-ins because they can usually sell anything they get. As a result, large dealers can afford to offer a consumer more than auction value for their trade to facilitate a transaction…and that gives them a financial, transactional advantage over Tesla’s small dealers. What if Tesla dealers, as a result of this fundamental disadvantage, gain a national reputation for under-valuing trade-ins? That’s not going to do much for the brand.

4. Manufacturers probably can’t sell cars. In the late 1990’s Ford conducted a dealership experiment. Beginning in 1997, Ford bought back all of their franchises in five markets – San Diego, Tulsa, Oklahoma City, Rochester, NY, and Salt Lake City. These franchises were formed into “auto collections,” and once these dealers were all under Ford’s control, they began to “fix” all the problems that consumers had with dealers.

A little less than three years later, Ford’s auto collection experiment was deemed a failure. According to an Automotive News article from 2002, one of the stores that Ford “fixed” saw a sales decline somewhere between 75-90% over the three years that Ford ran the show, forcing Ford to give up or lose their presence in these vital markets.

While it could be argued that Ford’s factory-owned dealership failures were a result of poor management or a poor market, consider this: The only remaining independent Ford dealer in Salt Lake – Butterfield Ford – saw tremendous sales increases every month while Ford’s Salt Lake Auto Collection suffered. Ford’s corporate stores sank while a local independent in the exact same market thrived. Is a large corporation like Tesla really going to be better at selling cars than a local franchise with ties to the community and very little overhead?

According to Tesla, one of their advantages over bigger automakers is their small size. If Tesla really does understand the value that a small company with low overhead can bring to the table, why do they reject a franchise strategy?

The other irony here is that Tesla has promised to “revolutionize” the auto industry before. Tesla claimed that they could shorten the development cycle of the automobile and bring technology to the consumer faster than their bigger rivals. When they launched the Tesla Roadster in 2006, it was supposed to be the beginning of a new era. Four years later, Tesla has squandered much of their technological advantage, failed to produce more than about 1,000 vehicles, and lost buckets of money. Yet despite this humbling experience, Tesla remains arrogant, assuming that they can re-invent the auto industry in every respect. Good luck.


Author Information

Jason Lancaster is a nine-year veteran of the car business and the president of Spork Marketing, a dealership Internet marketing firm.

Filed Under: Commentary Tagged With: APPLE, AUTOMOTIVE MARKETING, Ford, IPOD, Jason Lancaster, NEW CARS, TESLA, TESLA MOTORS, TESLA RANGERS, TESLA ROADSTER

Primary Sidebar

Recent Posts

  • 4 Car Upholstery Cleaning Tips
  • The 14 Brands of Stellantis
  • Peugeot May Not Return to the U.S. Market After All
  • Next-Generation Sedona Minivan Will Be Renamed the Kia Carnival
  • GM Launches BrightDrop, Its Commercial EV Brand

Recent Comments

  • Temporary Repair Steps and Tips for Windshields — Auto Trends Magazine on 4 Car Upholstery Cleaning Tips
  • Pandemic Times: Car Disinfecting Tips — Auto Trends Magazine on 4 Car Upholstery Cleaning Tips
  • How to Detail Your Car Like a Professional — Auto Trends Magazine on 4 Car Upholstery Cleaning Tips
  • 4 Car Upholstery Cleaning Tips — Auto Trends Magazine on How to Detail Your Car Like a Professional
  • 4 Car Upholstery Cleaning Tips — Auto Trends Magazine on Product Review: Dyson DC31

Archives

  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008

Categories

  • Auto Parts
  • Auto Shows
  • Automotive Career
  • Automotive News
  • Book Reviews
  • Car Tips
  • Classics & Discontinued Models
  • Commentary
  • Commercial Vehicles
  • Concept Vehicles
  • Dealers
  • Engineering & Technology
  • Fleet
  • Fun News
  • Maintenance & Repairs
  • Motorsport
  • New Car Reviews
  • New Models
  • Ownership Experience
  • Product Reviews
  • Special
  • Specifications
  • Uncategorized

Meta

  • Log in
  • Entries feed
  • Comments feed
  • WordPress.org

New!
Check out our Jobs Board!

via GIPHY

Subscribe to Auto Trends

Subscribe in a reader

Social Media

Visit our social media pages:
Facebook
Twitter
Google+
Pinterest

Where is Matt Currently Published?

The Carolinian (new car reviews)
NAPA Know How Blog
On the Road Again

Pages

  • About
  • Authors List
  • Automotive Brochures
  • Contact
  • Industry Jobs
  • Write
    • Style Guide

Categories

Recent Posts

  • 4 Car Upholstery Cleaning Tips
  • The 14 Brands of Stellantis
  • Peugeot May Not Return to the U.S. Market After All
  • Next-Generation Sedona Minivan Will Be Renamed the Kia Carnival
  • GM Launches BrightDrop, Its Commercial EV Brand
  • The Refreshed and Handsome
    Lexus IS 350 F Sport
  • What We Know About the All-New 2021 Jeep Grand Cherokee L
  • The All-New and Formidable 2021 Nissan Rogue Crossover
  • Fuel-Efficiency and AWD Champion: 2021 Toyota RAV4 Hybrid
  • Midsize Performance Master: 2021 Hyundai Sonata N-Line
  • Performance Hatchback: The All-New 2021 Mazda Mazda3 Turbo!
  • NACTOY Finalists For 2021 Offer Familiar and Futuristic Choices
  • Super Trooper: Nissan Titan Pickup
  • Behind the Wheel of the Popular 2021 Toyota Corolla Sedan
  • Lucid Motors Completes Arizona Factory
  • A Robust Turbodiesel Comes to the Chevrolet Silverado 1500
  • Mid-Engine Masterpiece: The Eighth-Generation Chevrolet Corvette Stingray
  • Compact Performance:
    2021 Cadillac CT4-V
  • All-Wheel Drive Supplies the Nissan Altima With a Competitive Edge
  • Return of the Toyota Venza!
  • Lexus Brings a Convertible to the Gorgeous LC 500 Line
  • Stellantis Logo Revealed by Peugeot, Fiat Chrysler Ahead of Spring Merger
  • Preview: 2021 Nissan Rogue Crossover
  • How to Fix a Broken Rivian Vehicle
  • Cadillac Gets Most Things Right
    With the XT6 Crossover
  • The High Potency Dodge Challenger SRT Hellcat Redeye Widebody Coupe
  • The All-New Chevrolet Trailblazer Forges Urban Paths
  • The Small Infiniti QX50 is Big on Tech and Engineering Features
  • Toyota Brings the TRD Treatment to the Midsize Camry Sedan
  • The Kia K5 Outclasses Most Competitors, Including the Departing Optima
  • Can the Toyota RAV4 TRD Off-Road Handle Tough Terrain?
  • Subaru WRX Showcases Its Performance Chops
  • Infiniti Overhauls QX80 Trims and Makes This Important Safety Feature Standard
  • Ford F-250 Super Duty and a Trail-Stomping Tremor Package
  • A Cut Above: Mazda’s Mazda3
  • The Highly Efficient Hyundai Ioniq
  • Volkswagen Atlas Revels in its Strengths
  • General Motors Deepens Partnership With Honda, Takes Stake in Nikola
  • Smart Concept: Jeep Grand Wagoneer
  • More Than an Encore: Buick Encore GX
  • Got a Recall? There’s an App for That.
  • Refreshed Nissan Titan Makes Its Case
  • BMW M235i: Not Your Typical Coupe
  • Hot Stuff: Lexus RC F Sport Coupe
  • Will the Electric Vehicle Boom Create New-Found Dependencies for Foreign Minerals?
  • Rumors? We Got Them!
  • About Bollinger Motors, EV Startup
  • Raptor Fighter: Ram 1500 TRX!
  • White Space Wonder: 2020 Nissan Rogue Sport
  • About the 2021 Genesis GV80
July 2010
S M T W T F S
 123
45678910
11121314151617
18192021222324
25262728293031
« Jun   Aug »

Copyright © 2021 · News Pro on Genesis Framework · WordPress · Log in