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Thursday, April 11, 2013

Does Telsa Need Texas?

Inside EVs has a nice write-up of Elon Musk's appearance in Texas to lobby for an exception to that state's dealer franchise laws.

Musk said that selling direct is "life or death" for Tesla.

But is it really "life or death" that Tesla sell in Texas?  With all of the other states he could be in?

Perhaps he meant that that selling his cars direct to customers is "life or death", but I wonder about that too.

If Teslas are profitable cars with solid demand, then dealerships should be able to sell them and make money, and Tesla should be able to make money.  After all, that's how everyone else does it, from tiny Mitsubishi (surprisingly) to the big boys.

Smaller volume players, like Lamborghini, Fiat, or Smart, either use multi-brand dealers, or small boutique shops to market their product.  How is Tesla fundamentally different from a small volume sports car brand?

If Tesla can't survive without eating the margin that would normally go to a dealer, what does that tell us about the strength of their market?



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4 comments:

Joe Lucas said...

I just don't understand why I can't buy a car direct from the factory. If I know what I want and have the money why do I have to dance with a car dealership sales person?

Matthew Simmons said...

What Joe said x 1000. Give me a fixed price, direct from the factory, and I'll be a happy man. Dealing with dealership salespeople is by far the worst part of the process.

Jason Lancaster said...

Many consumers and commentators seem to like to complain about dealers, but the fact is that building cars and selling cars are two completely different businesses. There are very few industries in the world where manufacturers sell directly to consumers, and even in those industries (like computers and electronics) there are 3rd party retailers.

The fact is, dealerships are a necessary part of the vehicle supply chain. Consumers might not like that fact, but as you say it's the status quo...and there are a lot of great reasons for the status quo that I won't detail here.

wes616 said...

I lived in TX for a few years, and my wife is from the Dallas area, so we go there a lot. I think that the car culture in TX today IS what people perceive the CA car culture to be. So I think that TX is fundamentally important to the Telsa strategy.