Tesla shitcanning showrooms and service centers...

[rumatt]

Originally Posted by robg

Seems like a lot of their troubles could've been avoided by just having regular franchise dealers.

Add a middle man who sucks profit and increases vehicle prices? Hell to the no.

[robg]

Originally Posted by rumatt

Add a middle man who sucks profit and increases vehicle prices? Hell to the no.

I think new car sales average some ridiculously low profit margin of around 1%. Either way you to pay for buildings, people, etc. From what I understand, dealers make their money on service and used car sales - which are both areas tesla seems to struggle with while charging high prices and offering low quality. I guess their solution is just to eliminate showrooms almost entirely - which is a loss from a customer perspective.

[ZBB]

Tesla Service does a great job. I've never had anything but fantastic interactions with their service teams, both in AZ and in OH.

Tesla's new car sales model is mostly good. I love the no-haggle aspect -- the price is the price. Online orders make sense. They struggled with the Model 3 ramp-up -- but I'll give them credit for trying new things (like the "inside delivery specialist" that would coordinate delivery). Actual delivery was fantastic.

I haven't bought used from Tesla, but perhaps need to work on that from what you hear on the forums. But JST had a good experience -- and its entirely possible that we are only hearing the bad experiences from the online stories...

I don't think Tesla moving to a franchised dealer model will make the experience better overall.

[JST]

Originally Posted by ZBB

Tesla Service does a great job. I've never had anything but fantastic interactions with their service teams, both in AZ and in OH.

Tesla's new car sales model is mostly good. I love the no-haggle aspect -- the price is the price. Online orders make sense. They struggled with the Model 3 ramp-up -- but I'll give them credit for trying new things (like the "inside delivery specialist" that would coordinate delivery). Actual delivery was fantastic.

I haven't bought used from Tesla, but perhaps need to work on that from what you hear on the forums. But JST had a good experience -- and its entirely possible that we are only hearing the bad experiences from the online stories...

I don't think Tesla moving to a franchised dealer model will make the experience better overall.

I had a great experience, but it was also more than a couple of years ago. There have been a lot of changes since then.

I think Tesla will struggle without test drives, particularly since the test drives are what sell the car so quickly, but perhaps they are going to do something else with test drives?

The real issue for a lot of people is going to be what they do with used cars and trade ins.

[clyde]

Originally Posted by robg

I think new car sales average some ridiculously low profit margin of around 1%. Either way you to pay for buildings, people, etc. From what I understand, dealers make their money on service and used car sales - which are both areas tesla seems to struggle with while charging high prices and offering low quality. I guess their solution is just to eliminate showrooms almost entirely - which is a loss from a customer perspective.

I like what you did there, "[o]ffering low quality."

I think you're spot on with much of that. Regular dealerships don't make much directly on new cars, but they're what bring in the trade-ins which generate the shit ton of profit when sold as used cars. Without the new cars, the model starts to crumble a bit. The only thing stopping Tesla from making this work is themselves.

I don't know what Tesla does about trade-ins. Do they take them? If so, do they just wholesale them out and kiss all the money they could make goodbye? If they're not making the most of that, it would be another of their stupid choices, like eliminating standing stores and test drives. But whatevs

The franchise dealership model also makes a good bit of money on service, a fair amount coming from warranty work. Warranty work is profitable for dealers, but the manufacturer is the one paying. When the service center is owned by the manufacturer and the employees are paid by the manufacturer, it's not going to make any money from warranty work. The only revenue Tesla service centers will generate will come from non-warranty work.

That's got to be a driving force in their resistance to making it possible for independents to work on their cars. If only Tesla can perform Tesla service, they can charge higher rates, charge more for parts, and essentially, throw a bunch more $f$u$c$k$y$o$u$s at their customers.

Originally Posted by ZBB

Tesla Service does a great job. I've never had anything but fantastic interactions with their service teams, both in AZ and in OH.

I'll take your word for it given the large number of service encounters you've had with them

I don't think Tesla moving to a franchised dealer model will make the experience better overall.

I agree. But the current model seems headed downhill fast and it's picking up speed.

[kognito]

Originally Posted by robg

I think new car sales average some ridiculously low profit margin of around 1%. Either way you to pay for buildings, people, etc. From what I understand, dealers make their money on service and used car sales - which are both areas tesla seems to struggle with while charging high prices and offering low quality. I guess their solution is just to eliminate showrooms almost entirely - which is a loss from a customer perspective.

Front end also benefits some from financing on the folks who have average to less than average credit

[robg]

Originally Posted by ZBB

Tesla's new car sales model is mostly good. I love the no-haggle aspect -- the price is the price. .

In theory it sounds good but I think tesla is starting to run into some of the downsides of this pricing model. They are constantly changing pricing and option packages in order to keep up with the market. In reality, all car manufacturers do this but are able to do it with various targeted incentives. This helps avoid the problem of people buying a car and then getting upset when the MSRP drops the next week. It also allows for the reality of differences in price sensitivity between various markets. Personally, I’ve never found it to be a big deal to do a little research and email a few dealers with an offer. The ever changing Tesla lineup and pricing is more opaque and confusing.

[robg]

Originally Posted by clyde

I don't know what Tesla does about trade-ins. Do they take them? If so, do they just wholesale them out and kiss all the money they could make goodbye? If they're not making the most of that, it would be another of their stupid choices, like eliminating standing stores and test drives. But whatevs



.

They do accept trade ins and many of them get resold by Tesla with a 2 or 4 year warranty. From what I understand they contract with third party services like Mannheim to process and store the cars until someone buys them. This is partly why they don’t allow you to see the car or test drive it before you buy it - it’s often not physically at a Tesla location. They no longer refurbish or even fix minor dings. A basic wash and maybe a vacuum is al you get.

Apparently they used to spend gobs of money refurbishing and detailing their CPO cars to like new condition. That got jettisoned in the name of cost savings. TD and JST benefited from that program.

But just as shutting down showrooms cuts costs but also potentially sales, they seem to have gone too far in the other direction and if they keep it up I imagine they’ll get less money for their used cars and less people will want to buy them.

What’s crazy is that CPO programs for most manufacturers is a cash cow for dealers and the companies themselves. It’s a proven model that works and I’m not sure why tesla can’t figure it out. You don’t need to go from complete restoration to nothing; there’s a happy medium. The one kind of cool thing is that the pricing for the used cars drops each day the car is on the market - it’s kind of a reverse auction.

But their struggles here also serve to highlight that no company can do everything - you have to pick what you’re good at and do that in house. Software is likely one of those things although, frankly, i think focusing so much development effort on self driving is a fools errand for a small compamy like tesla. Save some money by cutting that program instead of showrooms!

[SARAFIL]

I wonder how much of this is Elon thinking he “knows more than the generals” to use Trump language. I think the company is still a mess operationally and lacking strong oversight and accountability. They have lost several senior execs (chief counsel lasted 2 months, lost their CFO and chief accounting officer, ...) and also read a recent article that their new assembly line under a tent wasn’t permitted and has safety violations. Elon is also in trouble with SEC again because he can’t stop tweeting things that are inaccurate/misleading/inappropriately timed stock movers. He agreed to some board changes last time to appease SEC but I don’t think the board has any actual oversight function in reality to this day.


I get that people hate dealers. But the traditional distribution model has benefits that we’ve been talking about here.

1) A lot of buyers want to sit in the car and drive it. There are definitely the enthusiasts that will buy online just like everyone that has to have the new iPhone, but if they want to scale and sustain 500k+ sales per year then they need to win over mass market buyers who probably won’t be comfortable with the online only model. I’m really interested in seeing if this hurts sales growth over the next few years.

2) Logistics with trade ins. The entire process from appraising to taking them in to reselling them. But arguably they could partner with someone to help here.

3) the CPO sales process - the fact that they “do nothing” to the car before resale these days scare me if that’s actually true. I get that everyone always says a CPO inspection is nothing special, but the dealer is accountable for making sure a car is safe to be on the road. I don’t care about whether or not they pop out door dings but are they actually making sure the cars are roadworthy? (Brakes, tires, suspension components, etc)

4) I love the idea of them coming to me for minor service work in theory, but wonder how often it will work in reality. They still need a traditional service facility for circumstances where they can’t work on the car at customer’s location or if the car needs more substantial repairs. And if they are going to have local service shops scattered around the country, couldn’t they have a few models on display and someone there to answer some basic questions? Oh, wait...

Parts and service pay the bills at a traditional dealership. A good dealer will cover all of their operating costs each month from parts & service, with sales operation being gravy and really just generating future service customers. Tesla has the advantage of retaining the entire service operation. I really wonder what the true additional cost of a local sales operation is if they already have to run the service operations. Which gets me back to my first point - I wonder if Elon really gets it. Time will tell.

[robg]

Originally Posted by SARAFIL

I wonder how much of this is Elon thinking he “knows more than the generals” to use Trump language. I think the company is still a mess operationally and lacking strong oversight and accountability. They have lost several senior execs (chief counsel lasted 2 months, lost their CFO and chief accounting officer, ...) and also read a recent article that their new assembly line under a tent wasn’t permitted and has safety violations. Elon is also in trouble with SEC again because he can’t stop tweeting things that are inaccurate/misleading/inappropriately timed stock movers. He agreed to some board changes last time to appease SEC but I don’t think the board has any actual oversight function in reality to this day.


I get that people hate dealers. But the traditional distribution model has benefits that we’ve been talking about here.

1) A lot of buyers want to sit in the car and drive it. There are definitely the enthusiasts that will buy online just like everyone that has to have the new iPhone, but if they want to scale and sustain 500k+ sales per year then they need to win over mass market buyers who probably won’t be comfortable with the online only model. I’m really interested in seeing if this hurts sales growth over the next few years.

2) Logistics with trade ins. The entire process from appraising to taking them in to reselling them. But arguably they could partner with someone to help here.

3) the CPO sales process - the fact that they “do nothing” to the car before resale these days scare me if that’s actually true. I get that everyone always says a CPO inspection is nothing special, but the dealer is accountable for making sure a car is safe to be on the road. I don’t care about whether or not they pop out door dings but are they actually making sure the cars are roadworthy? (Brakes, tires, suspension components, etc)

4) I love the idea of them coming to me for minor service work in theory, but wonder how often it will work in reality. They still need a traditional service facility for circumstances where they can’t work on the car at customer’s location or if the car needs more substantial repairs. And if they are going to have local service shops scattered around the country, couldn’t they have a few models on display and someone there to answer some basic questions? Oh, wait...

Parts and service pay the bills at a traditional dealership. A good dealer will cover all of their operating costs each month from parts & service, with sales operation being gravy and really just generating future service customers. Tesla has the advantage of retaining the entire service operation. I really wonder what the true additional cost of a local sales operation is if they already have to run the service operations. Which gets me back to my first point - I wonder if Elon really gets it. Time will tell.

Regarding their used car resale process, apparently they do conduct a "70 point" inspection, but unlike everyone else they don't publish the inspection list and they won't share the results of said inspection. The whole genius behind CPO programs was realizing used car prices are lower than they otherwise would be due to a lack of trust and transparency. Tesla doesn't seem to get that they are shooting themselves in the foot with their opaque approach. They really should just outsource the whole operation to CarMax or something rather than needlessly damage their brand.

I suspect that their showroom costs are more than other dealers incur because they have put them in high cost retail locations instead of in typical car dealer on the outskirts of town. But, as you say, there's a happy medium here - why not use some floor space at your service centers to have a few cars on display, and maybe offer test drives in spare loaners. Maybe they will do that- it seems too obvious not to.

They have such a great brand and products that it's really a shame that they don't have someone who knows what he's doing in charge. They keep making unforced errors. Hopefully Musk will get tired of trying to run a car company and start something else or cede control to a "Tim Cook" type.