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Tuesday, 28 July 2020 21:28

Tesla, Franchising and the Bottom Line

Written by Chris Scali, Halbert Rasmussen, Monica Baumann, Wards Auto

Index

Wall Street was bullishly anticipating Tesla’s second-quarter earnings report released July 22.

The electric-vehicle maker posted an unexpected profit, but imagine how much better that report would have looked if Tesla stopped resisting the franchise-sales model.

 

Instead, Tesla CEO Elon Musk insists on swimming upstream, clashing with governments and dealer associations around the country via a direct-sales model that deprives consumers of the thrill of driving the car home from the dealership---as well as the great discounts, experiences and incentives derived from competitiveness between franchisees.

 

While it’s a fool’s game to predict how the stock market might react to anything, it’s hard not to imagine how much rosier July 22's report would be if Tesla stopped publicly showcasing its gorgeous cars like department-store mannequins and actually allowed consumers to test-drive a car and drive it home---and how that change would lead to the following:

 

Consumers would spend less money if Teslas were sold at franchise dealerships (more on this in a minute);

  • Tesla might make more money on each car, on average;
  • Consumers would have a better shopping and overall experience if the company shifted to a franchise model---which would also, after a time, drive up Tesla’s profitability. Better shopping and ownership experience = more cars sold = more profit;
  • Tesla could grab more market share if it adopted a franchise model.
  • By focusing on innovation and outsourcing, and less on swimming upstream with its direct-sales model, Tesla ultimately will produce cars that are even better and more affordable.

 

While Tesla’s approach of window shopping-style showrooms helps demonstrate to consumers that Teslas are different from other cars, different isn’t always better and it’s never enough.

 

Imagine how much of a buzzkill your first new-car-buying experience might have been if you never got to do more than sit in the front seat of a kind-of similar model at a dealership at the mall. At least the Gap lets you try on the jeans!


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