Tesla is transforming the car dealership model

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Originally published at https://evannex.com on January 23, 2020.

If there’s a single trait that all car buyers seem to share, it’s a distaste for the traditional car-buying experience. Everything from the process to the outcome is (ahem) subpar. It’s kind of like the retail equivalent of spending the day at the ER. But it doesn't have to be so painful. On a lighter note, Tesla is changing things.


Above: Tesla's "dealerships" are more like Apple stores and are often located in high-traffic malls (Above: InsideEVs)

How? Well, let's take a look at how (and why) the traditional dealership experience differs from the car buying experience at Tesla. And there's good news ahead: things might be changing.

THE TRADITIONAL DEALER EXPERIENCE
You step foot on a lot and you're instantly "prowled" by an overly aggressive salesperson looking for his next mortgage payment. Oddly enough, you probably know more about your soon-to-be EV than he does. Your questions go unanswered and misinformation fills the air. It's like the salesperson is just there to make an already grueling process more confusing.

Then what happens? The car with your preferred specs isn’t available. You called prior, checked the dealership's website, and was assured it would be there — but it’s not. Yep, they got you in the door and that’s all that matters (to them). Now you can either continue your search elsewhere, settle on another vehicle, wait a few days for a dealer trade, or wait months for a custom order.

Looking for the final price, you're juggled back-and-forth from one manager to another — you feel like trouble is coming. Facebook, Instagram, Twitter... it’s all been checked and updated. So now what? More waiting. Refusing to make eye contact with the enemy, you watch some scratchy local channel on that sweet 42” screen and grab yourself a watered-down coffee in a shot-glass-sized Styrofoam cup.


Above: Drinking coffee out of that dreaded styrofoam cup as you wait and wait and wait (Flickr: Robert Geiger)

Then the actual numbers come. As it turns out, everything on the dealer's site was a lie. Your new car will cost significantly more than the advertised selling price. They say it was “mislabeled” and add another few thousand bucks in impossible-to-understand dealer fees. I guess this is the price you pay for this luxurious and wonderful experience?

Guess what? This experience is shared by thousands of unsettled customers (every day) across the country. Fun fact: The average time spent at a dealership when buying a car is over 3 hours long.

THE TESLA EXPERIENCE
If you’ve bought a Tesla recently you already know the odds of you going back to a traditional dealership are slim to none. Just like driving electric closed your eyes to outdated fossil fuel powered vehicles, the ultra-simple Tesla buying process opened up a whole new world for you. Buying a car can be easy... even enjoyable?

With a few taps of the screen, your new car is ordered. You submit a credit application alongside a few digital signatures and wait for approval. It’s done. Your pickup date is scheduled. Using your phone, you just take a few photos of some required documentation and send 'em over.


Above: Tesla deliveries sometimes occur at designated "delivery centers" or the company's service centers (Image: EVBite)

On the day of delivery, you show up to the Tesla dealership excited to see your new car on display. You hand over any physical documents required, sign a couple of dotted lines, and drive off into the sunset. You just bought a car from the future. Total time taken from your life: probably 15 minutes. And people wonder why Tesla has the highest customer loyalty rate.

One price, no haggling, and no one is pummeling you for a commission. You get exactly what you wanted at precisely the price quoted online.

THE PROBLEM
Tesla works differently from traditional automakers. With direct sales, they skip franchises altogether. This allows for better control over the customer's buying experience. And, with no middleman, it reduces the price for the end-customer too.

Tesla's staff is paid on salary — making the commission "grind" a thing of the past. Rather than pressuring for a quick sale, knowledgeable specialists are there to educate you about the product and its many benefits. Everything else is done over the web reducing your time at a Tesla dealership to a minimum.

See, legacy automakers don’t sell cars to consumers. Instead, they sell their vehicles in bulk to privately owned franchise dealers. These dealerships will then add some "padding" on top of the advertised price to make their margin.

This outdated practice isn't preferred by car buyers, but it’s required. Tesla’s direct sales method is actually restricted, limited, or banned in certain states. You get a clear view of that in Texas (see below).


Above: A look at Tesla's restrictions in the state of Texas (YouTube: ReasonTV)

Another state that virtually banished Tesla was Michigan. But after a six-year battle, "The state of Michigan... filed to settle a Tesla Inc. lawsuit that will allow the Silicon Valley automaker to sell directly to customers living in the home state of the Detroit Three," reports The Detroit News. And now the automaker can also set up service centers in the state too. This decision could set a precedent for other (similar) cases in the future as well. The FTC also appears to side with Tesla on this issue.

The irony: it turns out that many auto manufacturers actually want to sell cars like Tesla, but they can’t. These regulations are backed by the thousands of franchise dealership owners around the country. NADA (National Automobile Dealer Association) works hard to lobby against any direct sales. Nothing much (outside the recent win in Michigan) seems to be changing in the near future. But that hasn’t stopped Tesla from pushing the car buying experience into the future.

THE FUTURE
Sure, Tesla is a growing company with growing pains. Some argue their sales process extends wait times for vehicle deliveries. Not so. Today, Tesla’s demand still outpaces their production. Hence, wait times for delivery can (admittedly) be a bit longer.

In any case, Tesla's sales process leads to a better overall customer experience. In fact, any dealership (or manufacturer) willing to make some of these changes could follow in Tesla’s footsteps. Tesla's buying process is one of the highest-rated aspects of the company.

The people have spoken and it’s time for the auto industry to make some changes. There's nothing stopping a manufacturer like Ford from implementing tighter rules over their franchise network that would leave customers happier than they currently are — it’s no wonder Ford is implementing new rules with the sale of their new electric SUV, the Mustang Mach E.

Under these new guidelines, dealerships won’t be allowed to mark the Mustang Mach E under MSRP leaving it one-price and haggle-free. Since Ford franchises are privately owned, Ford themselves can’t actually restrict anything. Instead, they will provide monetary incentives to the dealers who adhere to the new guidelines.

Tesla is pushing the auto industry into the future with better tech and cleaner cars. Now, it turns out that Tesla also pushing the industry to create a better overall buying experience too.

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Originally published at https://evannex.com on January 23, 2020.

An earlier version of this article appeared on EVBite. EVBite is an electric vehicle specific news site dedicated to keeping consumers up-to-date on any developments in the ever-expanding EV landscape.
 
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