Tesla Is Forcing the Auto Industry to Rethink How It Sells Cars

In 2019, many auto experts said Tesla was making a big mistake by deciding to sell only cars online, arguing that no matter how bad people feel about the dealership, the car business needs it.

But the strategy adopted by Elon Musk, Tesla’s chief executive, and the strategy of combining direct sales with a limited number of stores and service centers, seems to disprove those who say no. The company dominates the fast-growing electric car market, even as other manufacturers struggle to sell cars due to a shortage of computer chips.

Tesla’s approach, which has been replicated by other young electric car makers such as Rivian and Lucid Motors, could ultimately bring big results to the auto industry. Most car manufacturers and auto dealers are now making huge profits as the shortage of new cars has pushed up the prices of both new and used cars. Still, car companies and dealers will eventually have to adopt some of the changes Tesla has introduced to win over buyers who are in the habit of buying cars online.

Traders of traditional cars for electric vehicles made by Tesla and new companies said they were happy with the experience and would consider buying a car of the future.

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

Ms. Rhea said the only service problem she had was flat tires from the nails. “Tesla came to my house to fix it,” she said. “I have any questions, I just email, and it’s over in minutes.”

For those who want to buy an electric car made by Tesla, Revion or Lucid, it is necessary to buy online, whose customers can only buy online and directly from the manufacturer. But online car shopping appeals to a large segment of all car buyers who buy combustion-engine cars through dealerships, said Michelle Krebs, executive analyst at Cox Automotive.

Ms. Said Krebs. “They just wanted the dealer’s experience to be something else – focusing on the product, the product’s features and the test drive.”

She said some dealerships began digitizing some or all of the purchasing process in the early days of the coronavirus epidemic, while showrooms closed like other retailers. In Europe, some car manufacturers have gone even further. Daimler, Volkswagen and Volvo are selling cars directly to customers or have announced plans to do so.

U.S. automakers have also indicated they want to make big changes. Jim Farley, chief executive of Ford Motor, told an investor conference this month that the company’s distribution and advertising costs per car are about $ 2,000 more than Tesla’s. Mr. Farley said Ford only wants to sell electric cars online without having a large inventory of cars at the dealership.

He added that dealership would be important but would have to be more “specialized”. He compared the retail business to what was happening in the auto industry, where the rise of Amazon forced established retailers to sell more on the Internet and use physical stores in new ways.

“It’s like what happened between Amazon and Target,” Mr. Farley said. “The target could have been removed, but they didn’t. They bolt on e-commerce platforms, and then they use their physical store to add groceries and make easier returns than Amazon.

Established automakers are unlikely to remove dealerships for other reasons: state laws often require them to sell cars through franchised dealers and can make it difficult or impossible for automakers to deal directly with customers.

Tesla has lobbied state legislators to change the laws governing auto sales, and has obtained legislators in many places to allow the company and other automakers to never have a dealership to sell cars directly to consumers.

But in some states like Texas, where Tesla is now located and has its factory, the company has struggled to persuade lawmakers to change laws and regulations in favor of dealership. For example, Texas offers electric vehicle rebates to buyers of વાહ 2,500, but Teslas buyers are not eligible because the car is not sold through a franchised dealership.

The National Automobile Dealers Association, which represents dealers, has long opposed the direct sale of cars and urged lawmakers to use Tesla dealers, arguing that dealership is important to the auto industry and local economies. They also say that Tesla’s approach is much less convenient for car buyers and owners.

“Franchised dealers are essential for the widespread adoption of EVs in the U.S.,” Jared L., dealer at NADA, said in an email. And as more legacy automakers enter the EV market, “these mass-market customers need to take advantage of existing franchised dealership networks to sell effectively – not to be outdone,” he added.

“We are the face of manufacturers in every small town in America,” Bill Fox, former president of the association, told AutoGuide.com in 2015.

It’s not just dealers who have criticized Tesla. Some Tesla owners complain that repairing or fixing problems with their car can be a litmus test.

The automaker operates about 160 service centers in the United States, far fewer than the more established companies – for example, Chevrolet has more than 3,000 dealerships nationwide. Tesla promises to send technicians to customers’ homes for minor repairs, but service centers face major problems through mechanics.

James Clafen of Ithaca, NY hosts a YouTube channel that focuses on electric vehicles and related topics. He bought Tesla in 2019 and has released a video showing how difficult it was to solve a variety of problems as he spends many hours at the Tesla service center.

In an October 2019 video, he was denouncing problems with his Model X Sport utility vehicle, including a hole in the panel and indentation in the weatherstrip of the door. “I am not excited to make this video. I was scared in the hope of something positive happening, ”he said. “Unfortunately after five weeks of owning the Model X, the Tesla service experience has been very poor.”

Tesla did not respond to a request for comment.

Other owners who live far away from Tesla service centers say distance is not a problem. This may be because electric cars require less maintenance than combustion-engine vehicles.

Bill McGuire, editor-in-chief of Mack’s Motor City Garage, a website for car enthusiasts, said he had traveled to Tesla stores for his test drive in Toledo, Ohio, Clarkston, Mich. Drove 99 miles away from home and later picked it up. His car at the Tesla Service Center in Columbus, Ohio.

“It was my first experience buying a car online – it was a little bit surprising and mainly fun,” Mr. Said McGuire. “Some people want to hold more hands.”

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

Other young electric car companies, such as Rivian and Lucid, have 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 has not disappointed thousands of people reserving cars made by the two companies.

Like Tesla, both automakers offer to send technicians to customers’ homes for minor repairs and say major repairs will be done at service centers. To allay buyers’ fears that more significant mechanical work could be a hassle, Lucid goes so far as to promise free transportation to a nearby service center for a car in need of major repairs.

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