Tesla’s online sales model may soon become the norm
Oh, the irony! Auto dealers have fought Tesla’s direct sales model tooth and nail for a decade, arguing that only in-person sales through independent dealerships could provide consumers with the service they deserved. Now, after a few weeks of economic lockdown, an increasing number of dealers are embracing the Tesla model themselves.
Above: Tesla has always specifically designed a user interface and site architecture for easy online sales (Image: Tesla)
As Mark Phelan writes in the Detroit Free Press, auto dealers are quickly adjusting to working under COVID-19 restrictions, and “customers [are discovering that] they prefer the new approach, which leans heavily on internet sales and vehicle demos and could include valet-style pickup and delivery service for everything from test drives to oil changes.”
“This is going to fundamentally change how people view buying a car,” Rhett Ricart, an Ohio auto dealer and Chairman of the National Auto Dealers Association, told the Free Press. “By the end of this year, you’re going to see 80-90% of US new car dealers with full e-commerce capability in their shops.” Online deals at Ricart’s dealerships have doubled during the last six weeks.
In Michigan, dealers were crying the blues for a month, as most vehicle sales were prohibited. Governor Gretchen Whitmer’s recent “stay home” order has cleared the way for them to get back to work: “Workers at motor vehicle dealerships who are necessary to facilitate remote and electronic sales or leases, or to deliver motor vehicles to customers” are now classified as essential workers. However, showrooms must “remain closed to in-person traffic.”
When the coronavirus crisis ends, will it be back to business as usual for dealerships? Maybe not. “We’re seeing a fundamental change in the way cars will be sold,” said Doug North, owner of a Ford dealership and Chairman of the North American International Auto Show. “This pandemic is going to create some permanent changes.”
Above: Traditional car dealers often sneer at Tesla’s online sales strategy but with COVID-19, many are now playing copycat (YouTube: Autoline Network)
There are still a few wrinkles to be ironed out of the process, such as arranging test drives and obtaining physical signatures for documents, but forward-looking dealers are working on these. Ryan LaFontaine, COO of LaFontaine Automotive Group, told the Freep that his customers can reserve specific vehicles online for test drives. “There’s a new norm. All dealers are being forced to adapt. We’re refining the process now to sign and finalize the deal off-site. People are changing their buying habits. Online platforms are as important as brick and mortar.”
The popular web site Autotrader has launched a set of online tools called Dealer Home Services, which helps dealerships set up “no contact interactions” and schedule test drives, pickups and deliveries.
If auto dealerships end up following banks and travel agents online, it’s a safe bet that few buyers will miss the in-person sales experience. A survey by Cox Automotive found that customers resent spending the three hours on average that it takes to buy a car at a dealership. Autotrader Senior Analyst Michelle Krebs agreed that consumers are increasingly frustrated with the wasted time and inconvenience that was, until recently, considered an unavoidable part of buying a car.
“This is where we’re headed,” said Ohio dealer Rhett Ricart. “Customers have always wanted quicker interactions, and now, the change is accelerating exponentially.”