Car Dealers Are Becoming Scared of Tesla

Tesla's rapid rise is putting many

dealers

hip owners on edge as they witness the possible and likely beginning of the end of its hold on the auto industry. Dealers control the price of a car, the cost of maintaining that car, and the cost of replacement parts. Dealers can also increase your qualified interest rates when financing, sell you overpriced warranties, and will use whatever tricks necessary to make you pay more for a car than you should. Elon Musk wasn't exactly a fan of how this

dealers

hip model works, which is why Tesla doesn't have any dealerships as seen in the US, all major automakers and consumers are forced to transact at Through a third-party owned franchise, a middleman, specifically a car dealership, each customer leaves with their own bonsai tree, unlike, say, McDonald's, where some stores are franchises and other stores are owned and operated by McDonald's 100 of car dealerships are owned and operated as third party franchises, it is the law and trying to change the rules even for the benefit of the consumer is very difficult, not even a retail giant like Costco had the power to alter this model of sales, since their version of car sales is based on obtaining special prices through dealer associations and not directly through the manufacturer, ultimately this makes them an additional intermediary between you and the manufacturer, since A new car company in the modern era, Tesla got lucky. enough to have a chance to bypass the traditional dealership model and today they are the only major automaker in the US that can sell cars directly to consumers.

True, yes, and this is

becoming

a growing problem for traditional automaker dealerships, as well as a huge industry of companies that support dealers like cox Automotive and truecar, unlike 10 years ago, Tesla already It's not just a small company selling a few luxury sedans with a niche powertrain, every automaker, willingly or not, is shifting toward electric vehicles and Tesla is miles ahead of the rest. Especially on cost, Tesla not only has a cost advantage with manufacturing electric vehicles, but also has the opportunity to create a huge cost advantage through its direct sales model that avoids many additional costs from dealers. , such as storing hundreds of cars at each store in large lots that often sit still for months before selling, the more cars Tesla sells, the bigger the problem becomes for dealers.

Just look at the last 12 months. Tesla has sold more than 700,000 vehicles and sales have grown extremely fast. Furthermore, with two new factories under construction, this figure is expected to increase. exploding soon when it comes to sales, Tesla is slowly

becoming

a major player in the auto industry and as the only automaker in the US that can sell cars directly to consumers, this is something of a unfair advantage that ultimately puts the spotlight on laws that are forcing other automakers to follow different rules than those forcing them to use dealerships. These are outdated laws that appeared long before Tesla was founded and there were some good intentions as dealership owners invested millions of dollars of their own money to start a dealership.

It made some sense to protect them, plus manufacturers depended on these dealerships to sell cars to every corner of the country nowadays, although Tess, on the other hand, can sell cars online and deliver them directly to the customer's home, so the The need to have franchises in every corner did not exist. It doesn't exist so technically since Tesla didn't have any franchised Tesla dealerships that they could close by operating their own stores. They never violated these laws designed to protect dealers. This meant that Tesla could build its own service centers and stores. even accept online orders from their own website, while third-party websites must direct you to dealers just to get a price or perhaps redirect you to a local dealer's website, while a direct sales model is an incredibly expensive and often overwhelming task.

For Tesla's sales and service teams, this is an advantage that gives Tesla the opportunity to reduce the cost of having a middleman, naturally, manufacturers who cannot enjoy such benefits and dealers who cannot capitalize on sales Tesla's are adamantly against this and have lobbied regulators to limit or outright ban Tesla from selling their own cars, unfortunately to the point where they have been successful to this day. There are still many states that banned Tesla for not using a middleman and said they want to create a level playing field for automakers. Instead of giving Tesla an advantage over others and they are absolutely right, we know that having a direct sales model can be advantageous, especially if you know what you are doing, ask Apple, it allows for greater efficiency and gives the manufacturer of automobiles complete control. about how they operate, such as their own personal standards for sales trainers and managers, rather than relying on the standards of a small mom-and-pop dealership, but that's not the problem, although the transition to electric vehicles has created a whole new generation from automakers like Rivian.

Lucid Air and Polestar, all promising companies that have no intention of using the distributor model, although many people do not like dealerships, the problem again is not that they exist, most consumer goods are sold through distributors outsiders, such as Best Buy, and there are many benefits to franchising for both consumers and brands in Hawaii, for example, Tesla's operation is limited to two small stores and one service center, all in Oahu, most of the state's population, on the other hand, Ford has seven dealerships on the four main islands, although it may make financial sense for a manufacturer to open a store on a small island with 70,000 residents, but it might make sense for a local willing to make that investment and take that risk.

This also means that when someone has a problem with their car they can usually find a dealership nearby to help them as quickly as possible, believe it or not, dealerships can also help with quality control, which is something Tesla is known to suffer from. It's not that Tesla can't produce quality cars, it's just that there really isn't much to do. incentive for them to do so, even after years of producing cars in Fremont, we still see examples of customers driving home new cars with paint problems or larger than normal panel gaps, as dealers buy their inventory from the manufacturers to resell, they carefully inspect their cars and make sure the manufacturer pays for any defects before selling it, this means manufacturers have a quality they must maintain or else they will be panelized by dealers.

These are great benefits for consumers, but unfortunately that is the end of the smooth road when a marketplace is run exclusively by independent intermediaries. Manufacturers lose control over their sales process. Automakers can't even control the price of their own cars. All they can do is set a manufacturer's suggested retail price that no one pays even though the FTC states that manufacturers can create prices. deals with distributors or cutting them off if they break the rules, that's how Sony can control the price of its highly sought-after and limited-supply PS5 in retail stores, even when it resells for double or triple that on third-party marketplaces.

However, when it comes to cars and when an exciting new car like a Civic Type R is in short supply, dealers can charge an extra 10,000 or more than 25 percent above the MSRP, there's not much a manufacturer can do about it. respect when a dealer is your only sales channel, especially when dealers have united to become a powerful force. The National Automobile Dealers Association represents the interest of virtually every dealer in the US. If you mess with one of them, you're messing with them all. However, my prediction is that dealership owners will soon realize that all good things must come to an end.

Consumers are getting tired of the way cars are sold and the only thing that makes haggling for a car tolerable in the first place is because it's the industry standard, however with Tesla and new manufacturers Of automobiles. like Rivian Polstar Lucid and many others, coming to haggle for a car will not be normal and most of the time it will be a negative experience for the customer. Traditional automakers are already considering how their cars are sold. Take for example this Lincoln store which is a store in a shopping center much like Tesla stores but instead of being run by a dealer it is run by Ford, they still can't sell their own cars because that would be illegal, but the experience is probably more in line with what ford wants general motors is investing tens of billions of dollars in electric vehicles and doesn't want dealers standing in the way of its cadillac brand, they gave an ultimatum to the dealers, dealers would need to invest about two hundred thousand dollars to adjust their stores to electric vehicles or accepted a purchase offer and about twenty percent of them accepted the purchase offer, perhaps given that dealers choose to be bought rather than be forced to face manufacturer competition, this could be an opportunity for GM to bend the strict dealership laws a little. and create their own stores, sell their own cars and have a website that can actually be used to buy a car, maybe this will give GM and other manufacturers the opportunity to fight the dealers and tell them that if they are not going to respect their prices, We are going to restrict them from ordering new cars to sell, who knows what will happen and how long it will take, but ultimately and thanks to the rise of Tesla, we could be seeing the beginning of the end of the unwanted sales model only in dealerships cars and someday.

Hopefully, traditional automakers and regulators will soon work together to improve the way we buy a car, but more importantly, consumers will have the option to choose between a dealership or a manufacturer's store, just the same. so we can choose between buying an iPhone at apple or costco with that thank you very much for looking