Tesla is forcing the automotive industry to rethink the way it sells cars

In 2019, many automotive experts said that Tesla was making a big mistake by deciding to sell cars only online, claiming that no matter how bad feelings people have about dealers, they are essential for the automotive business.

But the strategy, adopted by Elon Musk, Tesla’s chief executive, and combining direct sales with a limited number of stores and service centers, seems to prove skeptics wrong. The company dominates the fast-growing electric car market, although other manufacturers are struggling to sell cars due to a shortage of computer chips.

Tesla’s approach, which was copied by other young electric car manufacturers such as Rivian and Lucid Motors, could ultimately have serious consequences for the automotive industry. Most car manufacturers and car dealers are making big profits right now as the shortage of new cars has raised the prices of both new and used cars. However, car companies and dealers may eventually have to accept some of the changes Tesla introduced to win over buyers who are used to buying cars online.

People who have traded in conventional electric car vehicles made by Tesla and newer companies said they were happy with the experience and would consider buying future cars in the same way.

“The easiest big purchase of my life, insanely easy,” said Rachel Ryan, who lives near Los Angeles, about her purchase of a Tesla Model Y in 2021. “I bought it while my husband was at work,” she added. . When he got home, I told him he wouldn’t drive my minivan again.

Miss. Ryan said the only service problem she had was a flat tire. “Tesla came to my house to fix it,” she said. “All the questions I have, I just send an email and they will be discussed in minutes.”

Buying online is a must for people who want to buy an electric car manufactured by Tesla, Rivian or Lucid, whose customers can only buy online and directly from the manufacturer. But online car shopping is enjoyed by a large proportion of all car buyers, even those who buy cars with internal combustion engines through dealerships, said Michelle Krebs, executive analyst at Cox Automotive.

“Our data shows that consumers want to do more of the process online, but most do not want to completely eliminate the dealer’s visit,” she said. Said Krebs. “They just wanted the dealer’s experience to be something else – focused on the product, product features and test drive.”

She said some dealers began digitizing some or all of the buying process in the early days of the coronavirus pandemic, when showrooms closed like other outlets. In Europe, some carmakers have gone even further. Daimler, Volkswagen and Volvo are selling cars directly to consumers or have announced plans to do so.

US carmakers have also signaled that they would like to make big changes. Ford Motor CEO Jim Farley told an investor’s conference this month that the company’s distribution and advertising costs are around $ 2,000 higher than Tesla. Mr. Farley said Ford wanted to sell electric cars only online at prices without negotiation, without maintaining a large inventory of cars in the offices.

He added that dealers would remain important, but would have to become more specialized. He likened what was happening in the automotive industry to retail, where the rise of Amazon has forced established retailers to sell more online and use physical stores in new ways.

“It’s kind of like what happened between Amazon and Target.” Said Farley. “The goal could have gone away, but they didn’t. They embarked on an e-commerce platform and then used their physical store to add groceries and make returning much easier than Amazon.

Well-established carmakers are unlikely to turn down dealers for another reason: US laws often require them to sell cars through franchise dealers and may make it difficult or impossible for carmakers to work directly with customers.

Tesla lobbied state lawmakers to change the laws governing car sales, and has led lawmakers in many places to allow the company and other carmakers who have never owned car dealerships to sell cars directly to customers.

But in some states, such as Texas, where Tesla is now based and has a factory, the company is struggling to persuade lawmakers to change laws and regulations that benefit dealers. For example, Texas offers a $ 2,500 discount for people who buy electric vehicles, but Teslas buyers do not qualify because these cars are not sold by franchise dealers.

The National Association of Car Dealers, which represents dealers, has long opposed direct car sales and called on lawmakers to require Tesla to use dealers, arguing that dealerships are vital to the automotive industry and local economies. They also said Tesla’s approach is much less convenient for car buyers and owners.

“We are the face of the manufacturer in every small town in America,” said Bill Fox, a former chairman of the association. told AutoGuide.com in 2015

The dealers’ association did not respond to a request for comment.

Not only retailers criticized Tesla. Some Tesla owners complain that repairing or troubleshooting their cars can be a challenge.

The car manufacturer is working about 160 service centers in the United States, which is much less than more established companies – Chevrolet, for example, has more than 3,000 dealerships across the country. Tesla promises to send a technician to customers’ homes for minor repairs, but bigger problems have to be solved by mechanics at service centers.

James Claffen of Ithaca, New York, hosts a YouTube channel that focuses on electric vehicles and related topics. He bought Tesla in 2019 and posted videos documenting how difficult it was to solve various problems because he lived for several hours from a Tesla service center.

In one Video from October 2019, he was plagued by problems with his Model X sports car, which included a hole in the panel and a dent in the door’s protective strip. “I’m not excited to make this video. “I was afraid of that, hoping something positive would happen,” he said. “Unfortunately, after five weeks of owning the Model X, Tesla’s service was very poor.”

Tesla did not respond to a request for comment.

Other owners who live far from Tesla service centers say distance was not an issue. This may be due to the fact that electric cars require less maintenance than vehicles with an internal combustion engine.

Bill McGuire, editor-in-chief of Mac’s Motor City Garage, a website for car enthusiasts, said he drove 99 miles from his Toledo, Ohio, home to Clarkston, Michigan, for a test drive at a Tesla store and later chose his car for service. Tesla Center in Columbus, Ohio.

“It was my first online experience buying a car – it was a bit of a surprise and mostly enjoyable,” he said. Said McGuire. “Some people may want a lot more holding hands.”

The only problem he encountered with his Model 3 was condensation in the taillights. Tesla sent a technician and the taillights were replaced in his garage.

Other young electric car companies, such as Rivian and Lucid, have even fewer showrooms and service centers than Tesla. Rivian has 19 in the United States and Lucid has only 10, with seven more to open this year. This did not dissuade tens of thousands of people from booking cars manufactured by the two companies.

Like Tesla, both carmakers are offering to send technicians to customers’ homes for minor repairs and say major repairs will be carried out at service centers. To allay buyers’ fears that more substantial mechanical work could be a nuisance, Lucid has gone so far as to promise free transportation to its nearest car repair shop.

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