Op-Ed: Why There Are Independently Franchised Dealers For All But Tesla Motors

MAR 27 2014 BY MARC LEE 62

Hating on car dealers is something of a sport in the US, been a player there myself.   Its not hard to see why, for most buyers purchasing a car is a highly stressful situation with imperfect information available, and there is this sense that the dealer is trying to squeeze every last dollar out of you, which they are.    From the dealer perspective they are trying to provide every option or service you might not have considered, and they are not above needling you into getting those they believe essential.

Independent Franchised Dealerships Are How Automakers Sell in the U.S.

Independent Franchised Dealerships Are How Automakers Sell in the U.S.

And there is this perception that the dealer is nothing more than a fat cat middle man, who acts as an unnecessary step between car maker and car buyer.

But it is probably fair to say that at least for the Big Three, the car dealer has “earned” its place.  We didn’t start out with car dealers.  Cars have been sold in department stores, bike shops, mail order, factory direct, and by traveling reps.  The car makers even tried there hand at “factory branches.”  It didn’t work.  Customers were consistently happier with independent dealers than the factory ones.

Initially the car makers had trouble getting funds to make the cars, let alone set up a successful distribution system.  The dealers often had to buy the cars up front and it was these funds which largely allowed the automakers to even build the cars.

Reading the history of it makes it clear the independent dealer franchise system wasn’t foisted upon by the automakers by dealers or the State, but rather it proved itself superior to the alternatives.  Every automaker willingly and voluntarily went there.  Later the states codified the system not really to protect consumers but their dealer citizens and their new car sales tax largesse.   Indeed in Virginia we recently lowered gasoline taxes, which was paid for by higher general sales tax, higher new car sales tax and of course  special EV only car taxes.

Now here comes Tesla, and they want to sell direct to the customer, just as traditional car makers did when they first started out.  Despite their advantage in size, expertise and a 100 year head start the automakers and their dealers are screaming foul.  Why should Tesla be allowed to do this and not them? For starters, Tesla wasn’t founded on the backs of dealer funding, as the early auto makers were.  Tesla has never franchised its distribution system, that basis alone should exempt it from being forced into the traditional model.

Tesla has suggested that many if not most traditional dealers who sell gas burning cars are inherently biased against electric vehicles.  This isn’t grasping at straws, buyers who make it very clear that they want an EV and only an EV are routinely directed to gassers by the traditional dealer.

Automakers have also questioned Tesla’s ability to service their vehicles, but this only points to one of Tesla’s advantages.  In the absence of an engine, service requirements are greatly reduced.  For many dealers servicing the vehicle is where they actually profit.  EVs represent a direct threat to that model and this lends credence to Tesla’s suggestion that many dealers have a serious conflict of interest in selling EVs.  Indeed, we have seen one dealer/congressman threaten to fire any employee who dared to order one.

On the Other Hand, Tesla Sells Through Automaker-Owned Stores

On the Other Hand, Tesla Sells Through Automaker-Owned Stores

The very dealer system that the established players want Tesla “saddled with” is in fact a  competitive advantage to them because it allows the buyer to walk into a showroom right now and drive away the same day with the car of their choice.

Tesla buyers face the prospect of months on a waiting list.  This is not something that large numbers of buyers have been willing to do in modern history, but is ironically how it was for everyone in the early days of car making.

Whether Tesla is forced to establish an “independent franchise system” will not change the success of their vehicle.  But if Tesla is forced to focus time and energy on doing that, it will likely slow down their efforts to introduce new models and grow their production and efficiency.  And this is really what the old school automakers want.  Time. Time to catch up with Tesla’s arguably superior technology.

I believe Tesla should be allowed to continue with their factory direct distribution system.  Dealer claims that this would open the door to traditional makers doing the same are patently false.  State Laws and specific contractual agreements between the dealers and car makers make it clear this could never happen, without mutual agreement between both parties.  Automaker claims that it is one set of rules for them and another set for Tesla fail to acknowledge that the automakers adopted that system voluntarily and only later was it codified.

Tesla’s work spurred the rest of the world into even considering EVs.  Innovation like that should be allowed to run and not constrained.

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62 Comments on "Op-Ed: Why There Are Independently Franchised Dealers For All But Tesla Motors"

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Dr. Kenneth Noisewater

If the relatively anemic offerings by legacy automakers are what passes for their attempts to catch up to Tesla, I wouldn’t worry a whole lot about it. Especially with a sclerotic dealer constituency that is as enthusiastic about EVs as cockroaches are about the exterminator.

+1 Automakers and traditional dealers “playing catch up” wasn’t the right ending for this piece. Tesla may have a trove of proprietary secrets, but really, it is the resistance to pull somewhat more expensive things off the shelf, that is slowing the majors down. This is a market-share and production management game, not so much R&D.

Yeah, right, dealers bought cheap in stock a hundred years ago and now they have the right to cash in forever.

Why should a car manufacturer be treated worse than pretty much any other product?

Very well written article!

I agree that dealerships do have an advantage over direct sales – most people aren’t willing to wait weeks or months from the time the car is ordered and then delivered. And they want to see it in person before they buy it, they want to take that test drive. In the long run, people will want to be able to look at a variety of cars in various sizes and colors to find the one that suits them. Eventually the stream of early adopters will run out.

Ultimately, Tesla will need to innovate on their Go-To-Market strategy to allow customers buy cars the way they do now (vs. buying a build-to-order computer from Dell and waiting for delivery), but not carry all that inventory of every dealership in the US. This might mean franchising, it might mean Tesla-owned stores having a small set of cars available for test drives at each store location, and a set of revolving loaner cars (similar to the P85s in the service program now) to allow people to drive home with a car, even if its not their car. And much shorter times between order and delivery.

Today, for folks not willing to wait, Tesla will sell you one of the demo models or service loaners. Expanding that concept would not be a huge leap. If I remember correctly, it was actually Datsun that introduced the buy-off-the-lot concept when it entered the US market.

Well articulated as always Marc. I am really interested in what the dealers will do next. I am sure they were in cahoots with GM on the Ohio letter. They are not going away nor does it seem they will be able to stop Tesla by traditional tactics tried so far. There has to be an evolution if nothing else an EVolution around EVs.

Marc, the only slack I’ll grant you in this article is that you evidently have never worked in the auto sales industry. But as an Op-Ed piece, this is greatly flawed. When I used to sell cars, European expats would ask me – “Why can’t I just buy a car for an agreed posted price – like I can in Europe?”. I seriously had to make up answers as I went along. That would definately be a better plan for consumers. You did a good job with your history lesson, but now we have this Internet, and the entire story is changed. Consumers should not be forced into any one way of buying any product. The way the current franchising system has evolved puts extreme pressure upon those dealers to sell stock. The pressure gets greater upon the commissioned sales force making them desperate to sell you that car, no matter what. This leads to fraud beyond compare. Buying a new car compares right up there to paying taxes with causing stress to the American citizen. Forcing Tesla to enter into franchising arraingents would kill them, plain and simple. Why do you think no new American car company has risen… Read more »

I cannot tell you how many times my sales manager told me to sell a car at a loss because, “we make all our money in the service and parts depertments, anyway – Sell up our service department!”…

The Fremont factory has about five times the production capacity they use today. If Tesla indeed is allowed access to direct-sell cars in all 50 states, and if Model X and E come to fruition – you will see all wait lines diminish to nothing, as hundreds of new hires begin working on those new lines.

Those POOR, POOOR Big Auto Companies! They don’t have to simultaneously build AN ENTIRE REFUELING INFRASTRUCTURE WORLDWIDE whilst they tool up to produce more product that intrinsically is far superior in every way to
what it’s wealthy, established competitors put out.

It is truly DAVID vs. GOLIATH here, nothing less. Tesla against Big Auto and Big Oil = big political clout.

What’s sad – is Big Auto crying foul! That, through Tesla, they can see the future, and as tiny as Tesla is compared to them – THEY FEAR THEM SO MUCH!

Hey – perhaps they should just change. They can sell EVs through their established system and see who wins…

But truly – they are free by all laws to start new EV Divisions that sell on seperate sites than their ICE divisions and let evolution take place.

I don’t think he is disagreeing James.
First the well articulated history, then a short paragraph stating his opinion that Tesla should be able to continue their path and that it is not the same as allowing the dealer to do the same. And as you stated there are enough forces, internet, Tesla that will ultimately force a change in the current system.

We can hope.

The giant dragon that is the status quo is bigger than you may think.

Tesla is going against such HUGE ODDS here. Consumers drive change, and the path to getting the superior, AFFORDABLE ( Model E?, Model F? ) BEV to the market is a huge hurdle – HUUUUUGE. Then, building up a charging infrastructure to boot!

The fact that EV fans have this discussion alone is disturbing. On other websites like GM-Volt.com, I see guys actually writing pieces giving Big Auto’s attorneys paragraph after paragraph to spew their spew re: Tesla!

You couldn’t buy a Saturn direct, you had to go through a dealer. If GM would have tried to sell them direct they would have had to fight in each state to do so.

Semi true. The part about not being able to buy direct is true – you miss the part that Saturn was a “no haggle” system – you pay the price listed on the car, the listed price for upgrades and options. This follows the direct-sale model – only through a store where taxes need to be paid, and real estate acquired. If the franchise system is flawed, it should be phased out. This natural selection happens when more people prefer one mode of purchasing over another. We’ve seen in innumerable cases where businesses have gone away because another popped up that consumers preferred. This is an example of a dinosaur beginning to realize it’s days are numbered. They fight back – essentially trying to tie the American consumer to an inferior form of merchandising. Both can successfully exist together. I can buy a burger from an established franshise and know what controlled product or quality I can expect. This quality is controlled by the corporation that handed out the franchise. I also can buy a burger from a Mom and Pop diner, usually of better quality, as the store does not rely on billion dollar ad campaigns to gain exposure… Read more »

People’s memories of Saturn dealerships may be a little rosy. I helped my sister buy a Saturn back in the early 90s. The Saturn dealer still wheeled and dealed on the trade-in and dealer installed options. I’d say they were slightly better than the others back then.

The main reason for Saturn’s downfall was the lack of new product; GM starved the budgets for new vehicles and removed all of the unique features that made a Saturn a Saturn. Saturn basically stagnated for a good ten years.

Yes. You still had negotiation on a trade in. You still had backend services (ext warranty, fabric protection). The employees needed to get you to buy today, regardless of if it was a new Saturn or a used car on their lot.

The fundamental difference here is you were being helped by employees obligated to their independent owners, not the manufacturer. That is HUGE.

Well written article. I bought my Leaf using the Nissan VPP program. Pricing is written upfront clearly in the VPP flyer my company got. Every single dealer I contacted claimed to participate in VPP, yet all but one gave me price quotes above VPP. Terrible experience. I complained to Nissan USA VPP Sales Manager and she couldn’t do anything. She said she educated the dealers and it’s now between the dealers and me. Claimed dealer benefits: 1) Competition. Yeah, right. How many times have you seen “Dealer Markup” added to the sticker price of hot cars. Tesla dealers will surely do that. 2) Community Support. What is this? They sponsor a local kid’s sports team and thus make this claim? The local Tesla service center can do that. They create jobs locally too. 3) Taxes. This is BS. Tesla buyers pay taxes. If the city where the buyer lived in doesn’t get those taxes, that’s between the state and the city. Bottomline, taxes are paid. On the opposite side, the dealer’s sales and service people constantly scam their customers. I bought a tire&wheel protection package when I bought my GM car. Then I had a flat and the same dealer’s… Read more »

Yeah, you pay sales tax, if there is any for an EV, in the state where you buy it. And, if you have to then register it in another state, then you pay taxes again – well, at least here in Virginia, where they have a personal property tax on vehicles. Whenever you register, or move to another locality, you pay either a flat rate or a pro rata amount for the remaining amount of time in that locality’s fiscal year.

I know it’s just an expression, but I couldn’t help but laugh at a mental picture of someone literally dragging the finance manager by the ankle across the dealership floor to the service counter…

All I know is the totally lame, crappy salesman who sold us our Volt was lame, and after he made the sale, we never got any answers or help from him. Added to that, their service dept is HORRIBLE, so much so after our last experience that we’re writing a letter about it.

I’m sure there are wonderful dealers out there who sincerely care about their customers. I have just never met them.

Nice writeup Mark, thanks. I think the main problem to address in our country (or at least that we would like to address here at InsideEVs) is “How can we market and sell the most electrified vehicles?”

Tesla, as an electric-only automaker, is in a unique situation, and as such, they bring the problem to the forefront.

Their being able to sell electric vehicles directly makes a lot of sense. I hope the scope can broaden to allow all manufacturers to sell electrified vehicles without dealer push back.

I don’t know if the solution is to eliminate dealers per se, but clearly the present arrangement doesn’t work well (as many who have tried to buy a Volt or Ford Focus Electric can typically attest to).

To date, the biggest argument dealer association attorneys have put forth against Tesla’s direct-sales model is that the established system:…..Wait – for – it….

“PROTECTS THE CONSUMER!!!”

BWAAA HA HA HA HAAAAAAAA —- not funny!

I worked in the industry. It’s a jungle out there!

Sales dept. tries to reem you any and every which way they can. PLEASE DO NOT BE A WOMAN – OH EM GEEEE! – They see women and newbies miles away and plot and scheme as how to rid you of your money as cleverly as possible.

My point here is Marc’s homogenized piece here makes dealers and carmakers seem so….well….just and pure in their approach to fleecing you. Believe me – you know it’s not so, Joe!

The internet is the bane of all auto dealers. Suddenly,more consumers could do their due-diligence and compare makes, models and prices!

It’s the internet and the internet alone that has enabled more of an even footing to the consumer if they put some work into it and find the facts. DEALERS HATE THE INTERNET! The most they can do is post ads that are buried amongst the thousands of other ads – it’s brutal for them.

Dealers want your butt in their dealership. They’ll pay you, bribe you with hot dogs and coffee — they just want you there because if you’re on the net, they only give you facts – but in person, they can ply all sorts of proven techniques to upselling you into stuff you really don’t need or want.

Along comes TESLA…and THEY DON’T EVEN PAY ZILLIONS to ADVERTISE THE CAR!!! Of course, they’re scared…they piss their pants at the thought of Tesla actually growing big and taking them down. Best defense is a good offense – so fight them in court – cause fire scandal stories and all sorts of rumors…Buy politicians…you name it.

Dr. Kenneth Noisewater

It protects the consumer the same way the Mafia protects local businesses.

+10

The UPI story linked below states the real reason that dealer groups oppose Tesla’s direct-sales approach is not because they fear Tesla, but because they “fear that Asian carmakers will follow Tesla’s lead and open factory-owned stores.” Apparently, they are referring to Chinese automakers, which have yet to enter the US market and thus like Tesla have no established dealership network. These Chinese automakers, like BYD, would sell ICE vehicles, hybrids, & EV’s.

Tesla is providing a blueprint to Chinese automakers on how to enter the U.S. market and sell cars in the 21st Century. If you ran a Chinese automaker, which business model would you copy, Tesla’s direct sales through company-owned stores model or the traditional sales through independent dealership model?

http://www.upi.com/Business_News/2014/03/14/New-York-car-dealers-press-for-ban-on-Teslas-direct-sales/UPI-59731394823358/#ixzz2w3YDRY00

Who cares. Saturn pissed off the UAW by going away from Detroit, and finding an eager, educated, unemployed workforce in America’s farmlands. They pissed off GM beancounters because Saturn’s plastic body panels needed far less bodywork than steel ones. They pissed off GM’s other divisions because GM’s engineering resources were cut thinner by Saturn’s need to have innovative product. Then, they pissed off the dealer associations because of the fear that the “no haggle” sales approach would take off. Yet GM still perservered – sadly, the product did not live up to expectations due mostly to the pressures and conflicts above within the SAME CORPORATION. Chinese entering our market is good for the consumer. Is it different because they are a Communist country? Perhaps to you or I ideologically, but a new player driving down prices is good for Americans. After all, over half the things inside your current home are ( unfortunately ) made in China. Hyundai wasn’t shunned. Of course, like all other transplants, the UAW tried to force them to comply or die with the union model, but they did not, and now thrive. Hyundai first hit our shores with the undersell plan. They gained ground in… Read more »

I care. We’re sawing the branch on which we are sitting when dealing with China. The siren song of cheap products will kill us in the end.

James, did you get a warm and fuzzy feeling inside when Apple’s Chinese contractor put suicide prevention nets around it’s factory dormitory to prevent workers from jumping to their deaths? Not having to scrape their co-workers off the sidewalk should increase the productivity of the Chinese factory workers assembling the latest Apple product, driving down prices for American consumers. That’s a good thing, right?

http://www.dailymail.co.uk/news/article-2092277/Apple-Poor-working-conditions-inside-Chinese-factories-making-iPads.html

http://www.dailymail.co.uk/news/article-2103798/Revealed-Inside-Apples-Chinese-sweatshop-factory-workers-paid-just-1-12-hour.html

http://www.youtube.com/watch?v=z8GQNJ0WJb4

Nice Op-Ed, but there are some important missing parts in it.

The lobbying power of the auto dealership associations is huge now, where it was not in the early days you describe. They’ve been effectively able to change the laws state by state to have the upper hand. In 1970 there were only 2 states with laws restricting entry and distribution channels. By 2001 there were 41 and it may be all 50 today.
http://consumerfed.org/pdfs/fincarpr.pdf

Great point. +1

Also, the laws differ in each state. In some states, there are laws that require all new cars to be sold through the franchise system — regardless of if you already have ever sold through a franchise dealer before or not.

While there should be some laws preventing manufacturers from hurting existing franchises, the laws go WAY beyond this.

I wonder if Mitsubishi would be struggling in the USA if they did not have have to deal with 50 different sets of restrictive state laws.

I’ll be the first to say I HATE car dealers. I hate the way you have to negotiate a price. I hate how they try to add and sneak all kinds of crap into your contract that you don’t want or need. Extended warranties, window etching, maintenance plans, you get the idea.

However, I do think Tesla could benefit from a traditional dealer. For one, just as the article suggested, the Dealer can buy stock from Tesla and have those cars waiting on lots for people to buy. This would take a financial burden away from Tesla. And there are many dealers that would probably jump at the idea of becoming a Tesla dealer.

What would be best is a dealership that sells nothing but electric cars. It would be great if they had Nissan Leafs, BMW i3, and Tesla all on the same lot. Unfortunately, this probably won’t happen unless they are used cars.

But as to the free market, I think there is no modern day excuse to REQUIRE auto makers (any of them) to sell through dealers.

Interesting idea – an EV-only dealership! Given all I’ve heard and read about dealerships, though, the markup they would need to offset the lack of service would probably sabotage the effort. It takes capital to establish, and more capital to operate the facility and pay the sales people. I think that is one reason why Tesla is going with the direct-sales model: the company profits from sales provide the capital necessary to operate a sales office. That, and the lack of pressure since Tesla sales reps are not on commission, as far as I know. However, if each manufacturer sold their cars at a wholesale price to the dealers, below the advertised MSRP, then the manufacturers would be essentially financing the dealerships. The dealerships may contractually agree with the manufacturers to cap the sales prices at MSRP. Regardless, it would be really cool, I think, to be able to go to a dealership with an adjacent open, clean repair shop (like pics of Tesla’s factory) and a nice variety of EVs from a variety of manufacturers to test-drive. A place where a Model S, BMW i3, Chevy Spark EV, Nissan Leaf, etc., would be lined up side-by-side, with at least… Read more »

Automakers are doing it wrong: They should be pushing to sell their electric vehicles direct too, without penalty. That would unshackle them from the dealership model, but only for electric cars. This would be their “foot in the door” to getting rid of the dealership model completely.

I like your idea, but I think they would really have to put up a fight that they may not be able to win.

Unlike what the article suggests Tesla’s success will be affected by being forced into the franchise system. It’s a very expensive system and needs to be funded by the sort of maintenance revenue EVs just don’t generate.

That very fact means a fundamentally different retail approach is needed for Tesla or, combined with the fact that existing dealers are unlikely to be big promoters of the sort of product Tesla is making Tesla has no chance of success in the US at all.

I’m sure that’s what occurred to the cardealers and their supporters like GM too when they started their legal war on Tesla.

I do believe EVs are going to change the model, to what I don’t know. I too like Aaron’s suggestion of an EV direct model but it will take some kind of head scratching to get there. The machine tool industry has done this before. They have had some manufacturers direct and some with dealers and some that had the main products with a dealer and more complicated products sold direct from the manufacturer. I think Cadillac dealers have opened the door to such thinking by opting out of the ELR. We will see. Interesting times for sure.

“Indeed, we have seen one dealer/congressman threaten to fire any employee who dared to order one.”

Wait . . . what? Who was that?

Pennsylvania Republican Mike Kelly who inherited a Chevy dealership from his father.

Thanks!

Stupid facts, they leak from my fingertips… *grin*

I leased a Leaf last year and I’m very satisfied with it, but not the sales experience. But it was part of a huge “auto-mile” setup where the same family owned numerous dealerships off the same I-5 offramp. Because they were similarly named, I ended up walking into the wrong lobby. There was an iMieve setup inside, which if I recall was the first EV I’d ever seen in person and I thought it looked really cool. I asked the sales leech that approached me if I could sit in it and check it out and he immidiately steered me towards a gas car, telling me I didn’t want that because it is so range limited. If I hadn’t made it over to the right lot I might have been pressured into buying a hybrid of some sort. I know first hand how some dealers treat EV’s. The Leaf sales person couldn’t figure out how to open the charge port, then tried to stick the L2 connector into the Chademo port. Even as I was satisfied with the negotiation for my Leaf I only found out about the “disposition fee” of $400 at the end of lease that wasn’t previously… Read more »

+1 Well said.

Very typical stories of auto dealers.

Great article. 🙂

Whenever the American auto industry feels threatened, their first course of action is to lobby Washington D.C., and/or state governments to pass lows protecting them. Look to the Chicken Tax of the ’60s which to this day prevents Americans from buying decent vans, or the heavy tariffs of the ’90s which forced foreign competitors to find advantage by transplanting their design and manufacturing facilities to our soil.

In the end, ask yourself if all their protections really were good for you. Or did they just succeed in pushing back better quality competitors a decade or two – and force you into their system of conveyence of inferior product?

And like I said before, their motto is always “to protect the American consumer” which is a whole, huge truckload of B.S..

Apple allows some of their products to be sold in non-Apple retail stores like Best Buy…but I think they have to agree to not undercut the Apple stores…if what I heard is remotely accurate, Best Buy and others have agreed to sell Apple products at Apple prices.

Due to the conflicts of interest noted elsewhere, this would not work for Tesla with respect to dealerships that sell ICE-based products, but it’s an idea that the company may need to consider as they grow…

Question: “Why are there independently-franchised dealers for all but Tesla Motors?”

Answer: “George Blankenship”.

Can we just do FREE MARKET. If Tesla fails so be it if the fat cats are right so be it.

No, at least because it’s not free. The people who line the coffers of politicians who scream “Free Market!” are the same people who run these companies and pay lobbyists to continually convince these same politicians to rig the system in the favor of those who already have the advantages.

Liberalism in the US is the ongoing struggle against the tyranny of the powerful.

I agree Tom. The message that business can’t get in the way of the free-market is silly. That’s the whole game, in stories like this.

Questions. Is it against the law for one customer to explain to another customer how to purchase a Model S on the Tesla website in a mall Tesla store? Is it against the law for a non-Tesla employee to use their smart phone at a Tesla store and help another person order a Model S?

NPNS! SBF!
Volt#671

I love the idea of an EV dealer/gallery!

I would help me a lot, especially 3 years from now when there is more selection on the table. It would take a very selfless business and a very unique business model to work with competitor EVs to spawn a revolution.

Tesla is very high minded, but I’m not sure it has the stomach to help facilitate something like this. i8s next to model Ss. model Es next to i3s. FFEs next to Leaves (Leafs?).

What the heck is the plural of model S?
Ses? S’s? Ss? That must be the real litmus test for new hybrid/electric cars. Can’t say the plural.

I agree with every word of this op-ed. Kudos to Marc Lee for dissecting the real reason why the other auto makers, lobbyists, and law makers have it out for Tesla. But I would like to add that they don’t want to catch up with Tesla’s technology but rather they would like to kill it so they can make more EVs with more complications than the Roadster and Model S have combined. That way their customers have to service them at the dealership and keep forking over the majority of their monthly income to them when you consider the car payment, services, and repair costs.

So where were all those dealership associations when Tesla was only selling the Roadster?

Where were all those dealership associations when Tesla sold their first 100 model S’s?

What changed?

I think they’re afraid of Tesla now.

So, while looking up the history of auto dealerships dating to the early years, you might have also looked back to the 1950s and 1960s. For the early decades there was no interstate highway network and cars really just weren’t built to reliably get you across the country. Radio didn’t start until 1928 – TV much later – communication from auto manufacturers to customers was very limited, and reverse communication non-existent. Of course independent dealerships were needed to sell nationwide – most dealerships except in the largest cities sold multiple brands. Volume was small. Even as late as the 1970s the Olds dealership I lived next to talked about how there was that magical week when they once sold 8 cars – the average weekly sales were under 2. Those were very, very different times. But with the interstates and interstate driving it became somewhat common for people to fly/train to Detroit to pick up their car directly and save money. This scared the poop out of the dealers, who by this point had gotten large enough to have significant lobbying force. State laws were passed protecting dealers and soon buying at the factory was not an option. As dealers… Read more »
I bought an Infiniti G35 6MT in 2003 from a dealer. They couldn’t find one with the options I wanted so I ordered it and waited 3 months. It was worth the wait. I really enjoyed the car, though I spent a fortune maintaining it. In 50k miles I went through 3 clutches and I don’t know how many brakes. Never put more than 1 clutch in any other car I owned over 40 years. I ordered a Tesla Model S online in 2010 and waited 3 years to take delivery, which happened at my workplace, during lunch. It was more than worth the wait. IMO, it’s the best car ever built. The $2 I spent for washer fluid last month was my only maintenance cost. I drove 7500 miles on about $300 worth of electricity. The car has several features it did not have when it was delivered. They were all free and came via wireless firmware updates at night while the car was charging in the garage. My Model S has never required any service. Tesla has a really nice service center nearby. I saw it when I picked up a tube of touch up paint to cover… Read more »

“Who says people won’t wait? They are. The wait is much shorter now (weeks to months) and Tesla is selling every example they can produce. ”

Clearly some people do wait, especially for a car at this price level. But for the masses most people do not wait weeks and months. The go into a dealership and drive off in a new car the same day. It will be interesting to see what solution Tesla invokes for that.

“Every auto maker has more than enough resources to put a motor with one moving part on a frame, add 4 wheels, a body and a computer to make it all work.”

Agreed, the hardware is not really that much of an issue, but I think the software to make it all work right, might be a challenge.

And of course how is a dealer to make money if the car doesn’t really require service? This has been an issue even for ICE vehicles. All cars are much more reliable than they used to be, and the service requirements are substantially lower.

No question the magic of Tesla is the software development. That’s not simple, but one would think that a sufficiently motivated auto maker could find enough software engineering talent in the world to make a working BEV. It isn’t rocket science, or is it? Elon runs Space X so maybe he used rocket scientist to build the car, but I doubt it’s a lack of ability stopping the auto makers from following Tesla’s example. It’s not wanting to abandon the ICE industry and make electric cars instead because it’s pretty hard to sell both. Can’t offer filet and gruel as entrees on the same menu. Think how cheaply a stripped down, basic electric car could be produced. Once you get past the R&D you could stamp out cheap cars by the millions without all the whistles and bells the Model S has. Currently, the battery is the expensive part but that will change quickly and soon. Leasing the battery might make the most sense. Buy a $12000 basic electric car, spend $100-$200 to lease the battery. As batteries improve, you lease better batteries. Also, let people add whistles and bells later on when they have the money. Just order it… Read more »