Tesla Could Change How Cars Are Sold

August 23rd, 2013

Tesla Model S

The dealer franchise system has worked for selling cars in the United States for nearly as long as there have been cars in the United States.

By requiring new vehicles to be sold through private dealers not associated with the automakers, the market has been able to determine fair prices based on the MSRP. That’s been mostly good for consumers, at least the ones educated enough to research and negotiate a fair price.

It’s also allowed dealers to make gobs of money by acting as the middlemen between automakers and consumers.

Tesla thinks that model should change.

Electric carmaker Tesla has gained all kinds of media attention over the last few months, most recently for touting its Model S as the safest car ever built. The Model S is certainly a game-changing car, having proven that an electric sedan can be reliable, safe, sexy and achieve a range of up to 300 miles.

One thing for sure: Tesla doesn’t like to play by the rules or succumb to what others think is impossible.

A press release this week proudly proclaimed that the Model S was the safest car ever tested by the National Highway Traffic Safety Association (NHTSA), a remarkable feat considering the automaker has delivered only about 15,000 vehicles to customers around the world.

I use that fact to preface this:

Tesla knows it can build quality cars outside the mainstream. It wants to sell them that way, too, and not use a traditional dealer network.

Skipping a third-party dealer network allows the company to set its prices and sell from private retail stores, just as Apple does with electronics. Some states already have Tesla showrooms, while others are in the midst of legal battles to stop the company from opening a store within their borders.

I respect the dealer franchise laws and their reason for existence, but I also believe this country is ready for a change, or at least ready for the possibility of change. Why should the law dictate how a company sells its wares? If willing citizens want to purchase directly from a company willing to sell, what’s the problem?

I’m curious to hear from car dealers, former dealers, and consumers:

Should Tesla be allowed to sell cars directly to the public?

-tgriffith

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  1. Randy
    August 26th, 2013 at 15:05 | #1

    Given that Elon Musk is the Edison of our time, he’s out there with his different teams showing just how out of date so many of our instititions are these days. Look at the size of SpaceX, and look at how the company has already caught up to NASA in such a short time– and compare how much Musk has spent compared to a single NASA project. NASA literally burns through money like the Saturn V burns through fuel. On the automotive front, he’s outdone the combined efforts of GM, Ford, Fiat, VW, Chrysler and in some ways, even exotics like Ferrari and Aston Martin in developing a very safe, electric vehicle with reasonable range, good looks and quality. Most car companies are truly mediocre and stuck in the past when compared to Tesla. I predict that in the next 20 years Tesla will become a major player in the car industry and will take out at least one if not more of the “big three”, for sure Chrysler and probably parts of GM too.

  2. August 26th, 2013 at 11:19 | #2

    Great article! I agree that Tesla is revolutionizing an auto industry that has been stagnant for too long. Cutting the middle man would surely reduce prices for consumers and streamline the process. One the other hand, I am curious about how it would affect the price elasticity for new car sales. Would love to talk more about this. Regards.

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