Posted on August 16, 2016 by Matt Pressman
Selling an electric vehicle while counter-selling gasoline powered vehicles (a franchise dealership's cash cow) is a bit of an oxymoron. Therefore, Fast Company* reports, "Tesla has chosen to eschew the traditional dealership method—in which automakers sell their cars to independent dealers, who are granted exclusive territories—in favor of company-owned showrooms." They interview Ganesh Srivats, Tesla’s vice president of North American sales, who explains: "We knew we couldn’t rely on dealerships to promote our mission, to operate the business the way we wanted to, to provide this great customer experience," he explains. "So we’ve really had to chart our own course."
Above: Tesla Store in Pasadena, CA (Source: Fast Company* / Photo: Daniel J. Johung)
It's no wonder. According to InsideEVs, a new study found that: "[Franchise] dealers in many cases were not interested in offering an EV [electric vehicle], and often were not prepared with any information to share on them, or the federal credit program. Of note: 14% of dealers with an electric vehicle physically present on the lot failed to have any charged [for test drives]." In total, the study had 174 volunteers who visited 308 car dealerships and stores that represented 13 different automakers, and, not surprisingly, "Tesla stores received the highest marks overall – as really their only product is an electric one."
Above: The winner, Tesla, is the only car company that didn't have any negative electric vehicle shopping experiences reported in the study (Source: InsideEVs via Sierra Club)
Tesla takes a different approach than the franchise dealership model. "We like the idea of owning the entire process," says Tesla's Srivats. "It creates an information loop from our customers straight into manufacturing and vehicle design." This differs greatly from the hard-selling franchise dealership model that's fraught with such negative connotations with car buyers. "When you go to a [franchise] dealership, there’s all this sort of doubt about the process," says Srivats, who was senior VP at British fashion house Burberry before joining Tesla last summer. "The haggling, all the nastiness around it. Did I pay the same amount as the next customer? Did I get tricked?" Furthermore, to see just how bad franchise dealerships are at selling electric vehicles, check out these research findings...
Above: Key findings from the Sierra Club's Report on electric vehicle shopping at franchise dealerships (Source: InsideEVs via Sierra Club)
To combat these issues, Tesla has turned its back on the franchise dealership approach. However, even though Tesla has been successful thus far with its innovative stores, it's not resting on its laurels. Srivats says that Tesla will soon drastically redesign its retail concept, but offers few details: "We’re throwing preconceived notions of auto sales out the window and starting from the ground up." Radical change to the stores shouldn't be such a surprise considering that SolarCity is set to combine with Tesla. Once that happens, Tesla stores will soon be promoting a 360° sustainable energy lifestyle — complete with electric cars, solar power, and home battery storage.
Above: The newest 'Tesla Service Plus' location in Austin, Texas (Source: Electrek)
And Tesla has impressive expansion plans according to its most recent Shareholder Letter: "We are also accelerating store openings and plan to add a new retail location every four days... adding stores in new population-dense markets like Taipei, Seoul, and Mexico City... [and] the quality of our new locations is also improving as many shopping malls now consider us the new standard for an anchor tenant based on the amount of foot traffic that we draw and our very high revenue per square foot."
Above: Tesla's new flagship store in Sydney, Australia (Source: Go Auto News)
Fast Company* concludes, "nearly 400,000 people have put down $1,000 to reserve a [Model 3] vehicle... but to realize those sales, Tesla must find a way to boost its physical sales infrastructure. Musk made the electric-vehicle version of the sexy iPhone; now he needs more Apple Stores." As we anticipate this upcoming retail overhaul, we're excited to see how Tesla stores expand and evolve over the next 12-24 months.
*Source: Fast Company