Tesla Motors is doing things differently from other automakers, and the company's sales and service model don't always agree with local laws.
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Tesla Motors is a disruptor, a company that is disrupting the "normal" pattern of automobile manufacturers and car dealerships. Tesla does pretty much everything differently from all the other manufacturers, it sells cars directly, it's showrooms are really education centers, and service is handled through regional service centers rather than the back half of the dealership building. In a blog post yesterday, Tesla's Joost de Vries explained how Tesla is "transforming automobile service" but the Tesla Way is not being met with open arms in all quarters.
De Vries started by explaining that the Tesla Model S was designed from the ground up, re-imagining what a car should be. One aspect of this was to redesign the process of servicing an automobile. He wrote: "Now that Model S is on the road, we are bringing 21st century service to our customers as well. First, forget everything you know about service at a traditional dealership. This is different. We specifically designed Tesla Service around the advantages and opportunities made possible by Model S."
First, because Tesla knows where the Model S registrations are located the company can locate regional service centers based on the density of Model S deliveries. By March 1, 2013, over 90% of Tesla Model S owners will be within 100 miles of a regional service center.
The normal pattern is that each car dealership has a service shop in the rear of the building, and there are an extensive array of 3rd party service businesses. Tesla does away with this in two ways. First, are the regional service centers, and second are mobile technicians called "Tesla Rangers" who can come directly to the home or office and perform many kinds of services on the spot.
Second, the Tesla Model S is designed as a low-maintenance vehicle. Some of this is inherent to electric vehicles, as these cars simply have fewer moving parts and less opportunity for failures. No spark plugs, timing belts or oil filters to replace, no smog checks, and the only oil to change is in the transmission and should last for 12 years. There is an annual inspection during which the technician will do a complete inspection and adjustment of anything which needs adjusting, or replacing consumable parts like brake pads.
Third, the Tesla Model S is constantly running diagnostics, sending information to Tesla's central computers. From there the service department can send notifications about issues.
Fourth, the Tesla Model S software is designed to update itself remotely via the car's built-in Internet connection. This can be used to fix bugs in the software, or even to add new features to the Model S.
This business model is different from business-as-usual as it is practiced in the car business. In business-as-usual parts and service are a big part of the profit structure of the whole automobile industry.
In some places Tesla's different model is meeting some legal resistance from towns in which Tesla wishes to set up show-rooms. An example is Tesla's planned location at the Natick Mall, in Natick MA. Tesla sets up show-rooms in normal shopping malls, so that you might have a Tesla Store next to the Jamba Juice in the Mall. That fact alone flies in the face of business-as-usual, because the typical pattern for a car dealership is that the dealership is an independent business, with a large stock of cars on the lot, a side lot with a large stock of used cars, facilities for conducting test drives, and a dealership in the back. A store front in a shopping mall has no room for any of these things.
According to a report in the July 20 MetroWestDailyNews, Natick's Selectmen had issued a business license for Tesla in May, but then the Massachusetts State Automobile Dealers Association and several Natick dealerships stepped in saying "it was not clear if Tesla meets several license requirements, including having a service center near the Natick Mall." Tesla has a lease on property in Watertown for a regional service center, but the MSADA attorney questions whether that is too far away noting that 90-95% of car dealerships have on-site service shops.
A recent Massachusetts law also places an interesting twist on Tesla's story about Transformaing Automotive Service. The "Right to Repair Law," signed into law in August by Gov. Patrick requires auto manufacturers to sell diagnostic and safety information required to service automobiles. This way car owners can repair their own cars, or can otherwise bring their car to the repair shop of their choosing. Clearly Tesla's "we'll take care of you" stance is going to run afoul of the Right to Repair law.
They say you can tell who the pioneers are from the arrows sticking out of their backs. Indeed.
Source: http://www.teslamotors.com/blog/transforming-automotive-service
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Thanks for the post, David.
Thanks for the post, David. While I appreciate the steps Tesla is taking to make a viable entry into the automotive industry, they should plan for occasional variances from their assumptions about competition, profitability and marketability. The vast majority of publicly-held companies don't begin production with $465M in loan guarantees from the DoE, so they should count themselves fortunate. In addition, a $7500 tax credit per vehicle clearly shows this company is taxpayer-subsidized and should not be offered special consideration in the marketplace. As a taxpayer, I already own automotive companies, so I really don't desire another. But, there it is.
All that said, I support the intelligent development and delivery of electric vehicles, but they must stand not on subsidies, but in the free marketplace. If, as CEO Elon Musk contends, Tesla can be profitable on its own by 2013, they are to be commended. But, one should understand what will transpire: the moment we produce a truly viable electric vehicle that people want to own (I'd suggest without a $7500 tax credit, but I digress), gasoline prices will drop to the floor. With the current market penetration of the combustion engine, if fuel drops below, say, $1 per gallon, alternative fuels will suffer dramatically... no matter how streamlined their sales and service channels are.
Jon; You sound like a bitter
Jon;
You sound like a bitter ICE car dealer. Tesla is a disruptive company. Doing what they are doing (building a car company from scratch that makes cars radically different than status quo) takes money, skill, and huge huevos. We should collectively applaud innovative American companies that can pull this off, instead of criticizing.
To clarify, the $465M from DoE is a LOAN... not a subsidy. While I'm not a fan of the gov't blindly throwing our money around to Cronies (i.e. to Solyndra), the Tesla loan had solid validation from a VC standpoint.
You also imply that Model S is not viable because it hasn't caused gas prices to drop to $1. That's simply ludicrous. You need to understand the global oil market better.
It would be nice if people would put aside their pre-conceived fears & biases long enough to applaud a truly innovative American company that has been executing very well. But honestly, I think Tesla feeds off of this kind of criticism, and takes pride in exceeding expectations and proving critics wrong.
Austin - Just a couple of
Austin -
Just a couple of points of retort, if I may. If you'll read my original comment, you'll see I referred to the LOAN as follows: "...with $465M in loan guarantees from the DoE..." And, the moment you assume all loans are paid back, I will indeed remind you of Solyndra and GM. BTW, even if it IS paid back (and I hope it is), the $7500 tax credit is a SUBSIDY.
You also misread my comment on gas prices. What I actually said was what I believe will occur anytime oil production is threatened by ANY alternative fuel vehicle: consumer gas prices will drop to levels that will make said vehicle less viable in the marketplace. I would love it if Tesla would be successful, and I would frankly be proud to drive one. I'm just a little tired of rosy expectations borne of dissatisfaction with the status quo. Just because you don't like the way "Bitter Dealership People" operate doesn't mean you can waltz in and change the industry with production of 20,000 vehicles a year. Even if you sell cars from pictures in a shopping mall.
Not to gang-up on you Jon,
Not to gang-up on you Jon, but I must point out that your entire argument; "I support the intelligent development and delivery of electric vehicles, but they must stand not on subsidies, but in the free marketplace," is based on a false premise. Your premise is that there are no subsidies provided to the petroleum industry.
The "free marketplace," which the petroleum industry is in, is current loaded with direct subsidies like free military protection (U.S. military is also their largest customer), avoid taxes so well that they get refund checks from the U.S. Treasury and it's customer's pay the expense of the pollution which is caused by their product. Which industry is REALLY being subsidized?
Electric vehicles are viable now, we humans just don't like change, even if it's good for us. Try going vegan.
Brian - LOL on the vegan
Brian -
LOL on the vegan diet. You're probably right. :-)
My premise is simply an opinion. I did not say, "I want everyone to play on a level playing field." I do, but I didn't say that before. I DO NOT want oil companies to receive any subsidies, either, because it opens the door to corrupt practices. Substantially more of our fuel dollars go to the government in taxes than to the oil companies in profit - so why do they need a 'rebate' in the form of a subsidy?
My dad worked for a monopolistic power company in my home state, and I remember to this day when he brought home an electric vehicle... in the early 1970s! I recall the 'trunk' being literally filled with car batteries, and the thing worked. It's a crying shame that between then and now we haven't been able to produce a viable electric vehicle. The reasons are multitudinous, but I am NOT against an electric vehicle, as long as I'm not FORCED to buy one. I want it to drive and perform well, and hold its value. That's all I'm asking.
There is an old saying, "The
There is an old saying, "The only bad publicity, is NO publicity!" I am optimistic that this "Whining" by older Dealerships will be seen as their being frightened by change. The common reaction is not to change themselves but to FIGHT to maintain the "Status Quo" and the more they scream, beg, and cry the more publicity "TESLA MOTORS" will receive... Marvelous! Further remember there is a "Variance" procedure which "Tesla" will certainly pursue which will permit their business to continue even if that means assigning a "Service Writer" and a "Tesla Ranger" team to each showroom in Massachusetts. That may comply with their rules. I have seen many "Agencies" (Including the AAA) which sell cars with only brochures and still are in business. Or one Sales office at a regional service center could do the Delivery for the entire state and the Mall locations merely take contracts, (As they do now anyway.) Then their "Dealer" at the service center arranges for the auto to be delivered directly to the buyer's home... That works in many states...