Tesla Business Model vs. Car Dealerships

Disruption

Tesla is known far and wide for offering luxury electric cars, just as well as it is known for making waves in forward-thinking in terms of marketing, intellectual property, and most recently, its business model.

Business Models: Old and New

Unlike traditional car dealerships in the US, Tesla disrupts the usual market place by offering company stores for consumers to walk into and learn about their cars. The educated customer could then return home, and configure the car to their specifications online. Although this method may appear to break new grounds, traditional car dealers are not impressed. Third-party dealerships slapped Tesla with a series of lawsuits, and have won in many states that have outlawed the operation of Tesla stores.

Tesla CEO, Elon Musk, criticized the upselling practices of traditional car dealers for higher commissions. He claimed that Tesla should not be subject to the standard automobile sales procedures as non-electric cars, and that potential customers need to be educated on the benefits of going electric. Long before independently owned car dealerships and the direct-to-public method of selling cars, consumers were able to buy cars right at the factory, at department stores, and from catalogs. Car dealerships ended up standing the test of time.

Woes

Although Tesla never had existing dealers, the dealerships lobbied against them out of fear that other car manufacturers might get ideas to operate in a similar fashion, which would negatively impact their businesses. They also argue that only dealerships can guarantee exceptional service and perks such as warranty coverage and the ability to lower prices at different times of the year.

My Take

I personally prefer the Tesla approach to selling cars. The modern consumer is of the Information Age, and likes to do their own homework and come to their own conclusions based on self-discovery. Pushy salespeople are increasingly becoming a laughing matter worldwide, and I am certain that prices would only go up when dealing with a middleman that is thirsty for commission. When it comes to consumer protection and fair trade, I’m certain that car companies would be able to offer this by selling direct-to-public, just as Apple notoriously does with their products.

I understand that my preference leads to the shutting down of many businesses, which will lead to severe job cuts. However, if this change is not made anytime soon, the automobile industry will be shamefully backdated in comparison to all others that have caught up with technology and the needs/wants/desires of the modern customer.