Why Tesla's Direct approach to sales will fail

dbsb3233

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BIG difference in easily bought, delivered and returned items in the 4 digits, and an item in the 5 digits that takes special delivery and not easily returned.

People put 4 digit purchases on debit/credit cards all the time. Very few people are doing 5 digits out of a bank account/credit card. They require a loan that needs collateral and special processing.
Of course. Again, I'm not expecting dealers to get wiped out. I just expect there will be some shift. Arguably there already has been. Most dealerships have set up internet sales option now too, and likely sell some cars that way. It's not that much of a stretch for there to be internet sales from places other than a dealership.

Obviously delivery of a car requires more expense and special arrangements than a book or a sweater. Amazon had to set up a special delivery when I bought my treadmill through them, for instance.

But that doesn't mean it can't be done. It just doesn't have to be done via a traditional dealership all the time.
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Whatstreet

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Tesla has proven it can be done. They sell all the can make and are building more factories.
 

eastern refugee

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You are actually incorrect in this analysis. Tesla, from day 1, has not made a fiscal year profit. In addition to that, last year their Total units moved was 400,000 vehicles. 320,000 Model 3's and 78,000 Model S/X. They lost money using GAAP. Why do you think they are having to issue common stock to raise a measly 2B dollars? They don't have the cash... and 400,000 is not high sales. It is peanuts in the global car market. Their sales of the Model S/X are actually declining, down 30-40%. It's not because the car has gotten worse, it's because their are many more options now in the marketplace that are more attractive to buyers than there were 3-4 years ago.

Ford sold 5.5 million vehicles last year.

If you look at ford, for example they have 34B cash in the bank. That is the sum of Tesla's Assets, and for some reason the news likes to make the perception out like Tesla has all these gargantuan factories. Ford has over 250b in assets. Tesla is just no where close to the size or scope or profitability of Ford.

Ford is investing 11b (1/3 the size of Tesla $ wise) into their EV architecture and future while still paying a 7% dividend to shareholders. Tesla can't pay a dividend because they're spending all their money trying to grow. It isn't possible to grow to the level of ford, because EV demand worldwide is currently 2 million vehicles and in the united states it makes up only 1.8% of the total vehicles sold. EV's are way too expensive. Ford is coming out with the Mach E at the perfect time and will get their chunk of the EV pie just like Tesla. Worldwide Tesla accounts for only 20% of the EV market. Where is the other 80% going? How are they not dominate in other parts of the world when their car is suppose to have the best technology, specs, etc?

However, Tesla in the USA has a dominating presence - they make up 60% EV sales in the USA or triple worldwide. Why is that? Because the charging infrastructure and government regulations isn't anywhere near the level like it is in Europe where regulations are getting ridiculous and they have excellent 3rd party charging coverage. Tesla has a Monopoly when it comes to charging and that is their only advantage, which is quickly dwindling with EA chargers at about 50% coverage of Tesla and growing rapidly.

By going direct to consumer, it hurts their service and after sales support of their business. Sure, people may buy a Tesla from marketing - after they realize the service sucks they're gonna go to their local Ford dealership and say why the hell didn't I just get a Mach E to begin with? It's similar in every way.

I own a Model 3 and will not be buying another Tesla. Their service and after sales support and even the delivery of the vehicle was the worst buying experience I've ever had. No wonder they try to make the car sale itself as much as possible.

Hope this helps.
Thank you!!! 99% of my Tesla clients have buyers remorse. They justify their purchase now as it is great on road trips as I no longer worry about the price of gas. In short they look for something positive after about 2 months.
 

TheSteelRider

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Coke is the most popular brand in the world. Those value's are justified. Tesla has no where near the dominance like those two brands nor can it grow to that level making EV's. Too many limitation on raw materials.
I agree with this, but that is only true if you consider Tesla to be a car company like most of Wall Street does. However, think of the valuation that Tesla is instead a software and artificial intelligence company FIRST and in order to get their AI to market, they had to build a car.

What Tesla has that no other car company has, is several hundred thousand mobile data-gathering devices that call home every single thing that the owners of the devices do. Nobody in the world has as much data on "real world" driving that Tesla has ... not even for example Automobile Insurance companies for whom such data surely would be a boon.

So, yes the valuation is nonsense based on them being a car company. But, how would you valuate it in comparison to say, Facebook or Google, both of which heavily track user data and sell that data? They say "big data" is the next economy, so perhaps that justifies such a valuation?
 


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mark360

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I agree with this, but that is only true if you consider Tesla to be a car company like most of Wall Street does. However, think of the valuation that Tesla is instead a software and artificial intelligence company FIRST and in order to get their AI to market, they had to build a car.

What Tesla has that no other car company has, is several hundred thousand mobile data-gathering devices that call home every single thing that the owners of the devices do. Nobody in the world has as much data on "real world" driving that Tesla has ... not even for example Automobile Insurance companies for whom such data surely would be a boon.

So, yes the valuation is nonsense based on them being a car company. But, how would you valuate it in comparison to say, Facebook or Google, both of which heavily track user data and sell that data? They say "big data" is the next economy, so perhaps that justifies such a valuation?
If they don't sell the cars, the data is worthless. The data must push them to offer substantially cheaper insurance rates, full self driving, etc. You can't look at them as just a software company because they don't sell software. They use it in house.

At the end of the day the data adds no value to the company unless it generates Tesla revenue. At some point, that data must generate revenue aka car sales.

If you look at ARK's valuation of Tesla, they depend HEAVILY on Tesla reaching 3.2 million vehicle sales per year to get to $1,500 / share. That isn't happening in the next 5-10 years. The best selling car and SUV combined sold only 1.7 million units last year. And they start $15,000-$20,000 cheaper than the cheapest Tesla.

Also, if they achieve FSD with robotaxi's (not possible in the near future) they put their stock up to like $20,000. If you know or understand anything about FSD robotaxi's, it is impossible with today's tech and may never be a reality without some constraints (according to Waymo CEO)

So I know what I'm talking abou.t
 

eastern refugee

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I view Tesla as a tech company that happens to sell cars. I look at Tesla like I look at apple. As a car manufacturer they are a boutique company and say a major manufacturer like Ford. Unlike Tesla Ford will eventually be stocking Mach E in approved dealerships. Why??? Customers want to see and sit and test drive a car before buying it. Tesla tried this approach but due to the massive cost of doing business this way they are going to be closing many of their locations. Tesla essentially had no one to compete with until the Mach E and the Volkswagen ID cars. Simple because no one could compete with their range. Now that these 2 manufacturers can Tesla will have to do something to move their paradigm. All in all it is going to be great for the electric car market.
 

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Not unlike legacy dealers, our experience may vary. Mine has been excellent. Of course, the problem for legacy dealers is... they have to feed that legacy, even if -- with EVs -- that makes no sense. (Which is what's behind places like Texas and Connecticut outlawing Tesla sales). Current estimates are that 44% of a dealer's profits come from legacy-style service. So, IMHO, it's crucial for Tesla to maintain tight control over service.
 

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Tesla has problems and standard dealerships have problems. Tesla's problem is that they need more showrooms around the USA and, more imporantly, Tesla needs more service centers around the entire country. Dealerships almost universally suck; most people hate them and hate going there. Going to a Tesla showroom was a pleasant experience for me: no pressures, no sales pitch, eagerly letting us test-drive a Model S and Model 3. The Tesla employees that I spoke with seemed much more knowledgeable about the cars they "show-but-don't-sell" than do most ICEV-dealership salesmen about the cars that they sell. I don't like Tesla cars and will never buy one, but I love what Tesla has done to the automobile world, and I hope that they put a lot of arrogant ICEV manufacturers out of business who refuse to jump all-in on electric vehicles.

But I know that Tesla owners complain a lot about servicing issues (time to get parts, time to get serviced), and Tesla doesn't have showrooms all around the USA. And a huge part of the problem is those many states that are corrupt in having those absurd dealership laws, which dealerships (and their ultra-rich owners) have lots of clout to keep those laws in place, keeping Tesla out. What will Polestar and Rivian and Fisker and other new EV companies do? Maybe state legislatures can be pressured to change their dinosaur dealership laws.

Ideally, all companies should have test-drive showrooms with salaried (not commissioned) employees help potential customers without pressures. All sales MSRP, no discounts -- takes a lot of the crap away from the hell of visiting traditional dealerships. Have service departments attached to the showrooms, 100% of the time. Let companies own the showrooms and service centers, instead of rich local dealer/owners. Pay the employees lots more via salary and good benefits, so that they don't have to beg customers to buy to put food on their plates. It can be done. It should be done. Apple stores do it, selling items up to thousands of dollars, and their showrooms are also service centers, and their employees don't get paid on commission.

Tesla has the business model basically right; what is lacks are enough showrooms and enough service centers. Musk was wrong to close showrooms a year or so ago to cut costs. But then we all know he is a brilliant engineer, but not so good a business man.
 
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eastern refugee

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Tesla has problems and standard dealerships have problems. Tesla's problem is that they need more showrooms around the USA and, more imporantly, Tesla needs more service centers around the entire country. Dealerships almost universally suck; most people hate them and hate going there. Going to a Tesla showroom was a pleasant experience for me: no pressures, no sales pitch, eagerly letting us test-drive a Model S and Model 3. The Tesla employees that I spoke with seemed much more knowledgeable about the cars they "show-but-don't-sell" than do most ICEV-dealership salesmen about the cars that they sell. I don't like Tesla cars and will never buy one, but I love what Tesla has done to the automobile world, and I hope that they put a lot of arrogant ICEV manufacturers out of business who refuse to jump all-in on electric vehicles.

But I know that Tesla owners complain a lot about servicing issues (time to get parts, time to get serviced), and Tesla doesn't have showrooms all around the USA. And a huge part of the problem is those many states that are corrupt in having those absurd dealership laws, which dealerships (and their ultra-rich owners) have lots of clout to keep those laws in place, keeping Tesla out. What will Polestar and Rivian and Fisker and other new EV companies do? Maybe state legislatures can be pressured to change their dinosaur dealership laws.

Ideally, all companies should have test-drive showrooms with salaried (not commissioned) employees help potential customers without pressures. All sales MSRP, no discounts -- takes a lot of the crap away from the hell of visiting traditional dealerships. Have service departments attached to the showrooms, 100% of the time. Let companies own the showrooms and service centers, instead of rich local dealer/owners. Pay the employees lots more via salary and good benefits, so that they don't have to beg customers to buy to put food on their plates. It can be done. It should be done. Apple stores do it, selling items up to thousands of dollars, and their showrooms are also service centers, and their employees don't get paid on commission.

Tesla has the business model basically right; what is lacks are enough showrooms and enough service centers. Musk was wrong to close showrooms a year or so ago to cut costs. But then we all know he is a brilliant engineer, but not so good a business man.
you have said it the best and explained it right. Thank you.
 

Scrannel

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Buying my Tesla 3 Performance was easy and simple. Showroom was extremely helpful (never even went in after first visit) but they were able to juggle times best for my delivery -- and I always received an email from delivery after I got off the phone with showroom. My one service center event, went just as smoothly. Legacy car dealers make 44% of their profit from "service". So, they will fight to keep that $. Texas outlawing the sales and trying to outlaw even the service of Tesla is a perfect (and oddly "socialist") example of how desperate the legacy lobby is. But... remember the Alamo?
 

Scrannel

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Just to add... years ago my dad (who was in his late sixties) bought a VW, ordered and paid for anti-lock brakes, back in the day when it was an option. This was Vermont, with their tough winters. I found that his car didn't actually have ABS and the dealer basically told him, too bad. I called VW North America and they explained they have zero legal control over their dealers, as this was regulated by each state. Their dealers could do whatever they wanted. An hour later I got a call from someone further up the VW food chain who was outraged. VW by-passed the dealership, took my dad's car back and gave him a new one with ABS.

When the manufacturer is their own "dealer", theoretically they will find themselves needing to be just as responsive as that great guy at VW North America.
 

Billyk24

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When the manufacturer is their own "dealer", theoretically they will find themselves needing to be just as responsive as that great guy at VW North America.-----------except there are multiple owners on the TMC site that state otherwise.
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