Tesla is reinventing the way cars are sold - and competitors don’t like it. Cars are traditionally sold by dealerships that operate independently from the automakers. Tesla, however, challenges law and tradition by selling their cars directly to the consumer, with ordering done solely and exclusively online. Though these moves fly in the face of such an established and regulated business, the practice of removing the middleman to reach customers directly is well established in the technology sector. Apple opened its first store in 2001, and in 2009 Microsoft followed suit. While many of their products are purchased online, these single-brand stores provide continuity to the customer experience and give the product producers a venue to interact with their consumers.
Similarly, Tesla has started to invest in brick and mortar stores, locating them in high traffic malls. These stores do not function as dealerships, as all sales are made online through the company website, but rather as a means of exposing potential customers to the Tesla brand. Tesla CEO, Elon Musk, believes traditional dealerships have a conflict of interest when it comes to selling electric cars - fully advertising the benefits of EVs would undermine the gas-powered cars that constitute the vast majority of the dealer’s revenue. Furthermore, Tesla’s system ensures that the sales process is driven by customer needs rather than a dealer’s desire for commission. Tesla’s unconventional strategy seems to be been working. After selling only 2,658 cars in 2012, Tesla sold 35,000 cars only a year later in 2013. Forecasts suggest that Tesla could sell as many as 500,000 vehicles in 2020.
Legal barriers traditionally discourage automobile companies from selling their own cars. While Tesla’s direct sales are not in conflict with the original intent of dealership laws, they are extremely controversial and face lawsuits in several states. Tesla does provide maintenance services at service centers independent from their stores. Consumers are largely in support of Tesla, while dealership associations are their main opponents. At MIDIOR we like to say, “when it comes to innovation, if nobody’s mad then it may not be worth the effort”, and Tesla’s distribution model has certainly sparked controversy. If Tesla can survive the onslaught of lawsuits(as they just recently did in Massachusetts), they could redefine the way cars are sold.