How Tesla is Circumventing Dealerships

http://autos.yahoo.com/blogs/motoramic/tesla-plans-short-circuit-car-dealers-194619627.html

by bmahmood • 14 years ago

295 143 14 years ago

autos.yahoo.com

lazyjones• 14 years ago

Here in Austria, we already have some special "online only" deals by major car manufacturers. I'd assume that it's becoming popular elsewhere as well (example: http://www.hyundai-shop.at/) and that car dealers aren't particularly happy about it. Perhaps the huge discount (around 25%) is the usual dealer's cut ...

justincormack• 14 years ago

I think that is less than the dealers cut, which has usually been 50%.

tocomment• 14 years ago

How do test drives work in this model?

djt2• 14 years ago

you go into one of their showrooms or you drive a friends car.

brown9-2• 14 years ago

I think this is a fair question - it's hard to see how you could take a Tesla for a test drive if the showroom is located in the middle of an indoor shopping mall. Would they keep a small fleet on-hand in the mall's parking lot?

WiseWeasel2• 14 years ago

With a considerable amount of imagination. At least they allow us to get our grubby hands on them, if briefly.

URSpider943• 14 years ago

Given that the waiting list for a car is somewhat over a year at this point, Tesla have mounted a nationwide tour of test-drive cars. However, I'm pretty sure that you either have to own a Roadster already, or have put down a deposit on a Model S, in order to get a test drive slot.

brc7• 14 years ago

Any high-demand cars are usually not available for test drives, unless you know the dealer or someone with one.

It's not unheard of for people to have to purchase a car sight unseen, never driven. Dealers may give you an 'out' - as in final delivery is subject to a satisfactory test drive - but few people are going to knock back a car they've been waiting months for.

cincinnatus5• 14 years ago

Indeed I purchased a Mercedes ML in 1997 having not even seen one on the road yet, it was not out yet and 1998 was the first model year. Got one of the first thousand off the assembly line with mixed results (used to call it the 'beta'). I will likely be buying a Tesla X without ever seeing one.

Shivetya• 14 years ago

The money line is the statement where they believe there are no laws preventing them from selling cars in all fifty states.

There are no laws "currently" is a better phrase. Should Tesla become a serious maker of cars; having one model and a goal of only 35k a year keeps them at the size of Porsche; then they are going to attract attention. That they have received Federal money and their cars are subject to incentives by the federal government and states will put pressure on legislatures to extract "something" from them.

To put their sales goals into perspective, a luxury brand like Lexus can sell over 20k a month. The top five sell a hundred thousand plus cars per month. Chart of August sales is at http://www.autoblog.com/2012/09/04/august-2012-big-jumps-edi...

btilly• 14 years ago

As long as it is interstate commerce and Tesla maintains no business presence in a state, that state government can't regulate.

hexis• 14 years ago

"maintains no business presence in a state"

Amazon's recently experiences with sales tax collection shows that a motivated government will keep its eye out for "business presence" and then regulate when it becomes politically useful. Freedom's just another word for something too small to bother regulating.

stephengillie2• 14 years ago

Later, the article mentions how Tesla must put up service centers in some states to be allowed to sell there. Doesn't that count as a business presence?

damoncali• 14 years ago

You want to bet on that?

encoderer2• 14 years ago

That's interesting. I've had the fantastic experience of buying directly from an automaker as part of their European Delivery program.

Basically, you fly over there, show up at the factory, you get treated like a dignitary, they show you "baby pictures" of your car being built, and then you drive off with it and get to cruise around Europe for 30 days. When you're done, you drop the car off at one of a half dozen ports and fly home. Your car arrives a few weeks later.

You get about 10-15% discount and it's a very cool experience. A friend did this for Porsche and while the car was great he said the experience was a little lacking. That they do such lower volume they didn't have the program as perfected and it was more about just showing up and taking possession of the car.

Anyway, that's obviously not what Tesla is doing -- but they should. They should definitely have a California Delivery program. They probably already do.

TylerE• 14 years ago

They wouldn't get the same tax dodge though.

European delivery works out because you don't pay new car tax if you buy the car in Europe, drive it enough so it's no longer new (~100 miles or so) and ship it home. This exemption was originally put in place because a bunch of GIs wanted to bring home the sporty little cars they drove in England during WWII.

cantankerous• 14 years ago

That's a really astute observation. I've heard of people doing this before, but didn't realize that the whole auto-vacation was about a tax dodge. Really interesting.

_delirium• 14 years ago

In particular, the reverse doesn't work as easily, so a program where Europeans fly to California to buy a car and ship it back wouldn't be a great idea financially. It varies by country, but in many European countries you need to have resided abroad for at least one year in order for a car purchased abroad to count as a personal effect that you can bring back with you tax-free.

grandalf4• 14 years ago

Wouldn't you still have to pay sales tax on it in California? When I moved here I had to pay retroactive sales tax on a vehicle leased 2 years earlier in a different state.

daeken• 14 years ago

Wow, that sounds amazing. Which manufacturer did you do this with? If you're in the US, were the import tariffs and the odd environmental regulations a problem? I assume they can just make you a "US model".

res0nat0r• 14 years ago

I did this with my BMW ~5 years ago. There are no import tarrifs or environmental problems. The car I bought there is 100% to USA spec and when I'm done with it I can sell it back to the dealer down the street and it is just the same as a car bought on US soil.

There is a huge forum just dedicated to BMW European delivery if you are interested and it helped me out a lot when I was researching this back then. Also someone there every year I believe posts the internal pricing for BMW US/Euro wholesale and with dealer markup so I just went to my local US dealer told him I would give him $1k above German wholesale and he filled out all the paperwork for me. I flew to Munich a few months later showed them my passport and off I went. It was great.

Link here: http://www.bimmerfest.com/forums/forumdisplay.php?s=68aa7500...

joezydeco3• 14 years ago

BMW is most known for their European Delivery program. The car you're purchasing is a model made for the US market, you're just picking up your order at the factory instead of the dealership.

In fact, once BMW ships it to the states you normally pick it up at the dealership anyway. I believe some eager beavers pick it up at the New Jersey dock but I think most wait until the car is delivered and titled in your home state (and any shipping damage is discovered/rectified).

samstave• 14 years ago

This was also available for my Volvo XC90 when I bought it, though I didn't do it.

encoderer2• 14 years ago

I did Mercedes, and like others have said, I've heard great things about BMW's program as well. They took care of all the paperwork to get me licensed and insured in Europe. I'd definitely do it again.

veyron• 14 years ago

"Anyway, that's obviously not what Tesla is doing -- but they should. They should definitely have a California Delivery program. They probably already do."

They can't give the same discount (the discount stems from avoiding new car taxes).

But as an American example, Corvette has a program where you get to participate in the car building process and you take delivery in KY. What makes that program cool is that you get to see the heritage (the Corvette museum)

pedoh• 14 years ago

My understanding is that it costs @$3000 USD in order to have the "privilege" of taking European Delivery of a Porsche. BMW is currently claiming up to 7% cost savings[1], as is Mercedes[2]. Volvo advertises up to 8% savings, but they also pay for the plane ticket[3]. Audi offers a program , too, and according to this blog you save up to 5%[4].

[1] http://www.bmwusa.com/Standard/Content/Experience/Events/Eur...

[2] http://www.mbusa.com/mercedes/european_delivery_program/excl...

[3] http://www.volvocars.com/us/sales-services/sales/volvo_overs...

[4] http://audieurodelivery.com/ed-faq

Arjuna• 14 years ago

"My understanding is that it costs @$3000 USD in order to have the "privilege" of taking European Delivery of a Porsche."

As of February 2012, the Porsche European Delivery Program is available at no additional charge (italic emphasis is mine):

"Porsche Cars North America today announced several enhancements to its European Delivery Program. The revised experience provides customers the opportunity to purchase their new Porsche vehicle from any participating authorized Porsche dealer in the U.S. and take delivery of their new car at their choice of one of the automaker's two German factories. The program is now offered at no additional charge to customers and includes access to discounted airfare and hotel accommodations." [1]

[1] http://press.porsche.com/news/release.php?id=695

blasdel• 14 years ago

Just one problem: a Tesla left unplugged or even charged by inadequate current for a month will irreversibly destroy its own battery and the replacement cost is most of the car's value.

I wonder if the power hookups for refrigerated containers are beefy enough to keep a Tesla charged…

programminggeek• 14 years ago

This is probably the only way that longer term the company can afford to sell electric cars at a reasonable price. The tech is obviously expensive, but if you layer on the 10% sales commission and dealer fees, etc. it will jack up the price on these already expensive vehicles by 25%.

Imagine how much better the Chevy Volt would sell if it were 25% cheaper...

djt2• 14 years ago

This is excellent, i helped a friend go shopping for a car 2 weeks ago and it was terrible. All the stereotypes of what car salesmen are like were out on parade.

I also know a guy that sells cars and he managed to get a customer to pay $2.5K over the price for a NEW car for the USED car... Same model and accessories.

I'm glad that theyre pioneering this as I think it's going to be a viable business model

chaostheory• 14 years ago

Agreed. My personal experience at a dealer for both buying a car and a servicing it are horrible. Hopefully more manufacturers start shifting to this model.

dkhenry• 14 years ago

Well someone rang the obvious bell on this one

""" "People don't necessarily enjoy that whole transaction," Blankenship says. "If we can be in front of people on a day-to-day basis when they're not thinking about buying a car…after a while, they'll drop back in again, in an environment where there's no pressure. """

vbl• 14 years ago

I know this sounds nuts, but I have a business idea that might be suitable for discussion in this thread.

The idea is to do away with the dealership for anything not related to the actual transaction (they handle financing efficiently, etc.)

Instead, the system relies on individual agents who have parking lots of different cars within a category and across brands. If I were a mid-size specialist, I'd be very family-minded and feature the Accord, Altima, Impreza, etc.

This would allow a customer to make one stop to cross-shop, and they get highly specialized counsel without any (obvious) incentive to sell hard on a certain brand.

The agent then hands off the buyer to the dealer with a fair price negotiated (using various online tools) and the buyer just closes the deal. The agent gets a cut of the sale Cars.com style.

Granted, it's not a highly scalable business, but it could be a worthy self-employment idea (with the upfront capital to do it, or loaner cars from dealerships), and the customer experience is vastly superior.

ChuckMcM• 14 years ago

You've described the salient points of an auto broker.

MartinCron2• 14 years ago

I once used an auto broker to help me purchase a very specific used car and it was probably the best used car buying experience I've ever had. Zero drama. Very civilized. Maybe I could have saved a little bit of money by finding the car myself and being a hardball negotiator, but there's a value in keeping the part of your soul that dies when you interact with a car salesman.

halefx• 14 years ago

https://www.truecar.com/

pnathan• 14 years ago

> It's a key part of Tesla's overall business: Instead of building cars and selling them to dealers who hawk them to shoppers, Tesla wants to build only cars customers order — eliminating part of the auto industry's massive overhead costs in inventory.

This is a key idea on the modern manufacturing floor. It is pretty much a straight Toyota Way play. I'm guessing they are using a different name than 'kanban' though. :-)

brc7• 14 years ago

Every single BMW car that is built, is built to order. You can literally have no two BMWs the same. The ones on dealer lots have been ordered by the dealers, who have an idea on what combinations sell well.

I visited the factory in Munich and you can see a big line of doors, seats, carpets, etc feeding up to the assembly line. Each is computer controlled, and when the intended vehicle gets to the seat install station, the correct seat (style, fabric, RHD/LHD) meets the correct car. When the doors arrive, they've got the right interior bits already in them, and all the wiring loom bits match up with what is already in the car, even if the prior 20 cars have all had different options (color, trim, options, etc).

Meanwhile, at the back of the factory, JIT delivery trucks are delivering the next set of seats/steering wheels/seatbelts etc - all barcoded, all ready to be loaded onto the assembly lines in the correct order.

It's truly eye-opening to watch a highly automated factory like this in operation. When a dealer in the USA presses the 'order' button - suppliers, factory, workers - everything lines up and out pops a fully finished, completely unique car.

jpswade• 14 years ago

This is all very well until there's no dealerships that can service your vehicle or stock the parts.

manaskarekar2• 14 years ago

Where there is a market, there will be someone to make money out of it.

waterside81• 14 years ago

I've looked into this with regards to Tesla (I'm on the fence about if I want to buy one or not).

I'm in Toronto, they're opening up a dealership in a mall ("Yorkdale" for the locals) and they have one service centre in each major city they operate in (Vancouver, Montreal, Toronto). The sales person told me they plan on opening more.

You pay $600 once a year for maintenance & service. Additionally, your car is constantly phoning home to alert Tesla HQ if something looks awry.

VLM• 14 years ago

"there's no dealerships that can service your vehicle"

Around here the stealerships all claim to service anything you can push pull or drag in regardless of brand. GM service dept loves to service your Ford or Toyota, etc. There's no lifetime employment / company man effect, the greasemonkey at Ford probably worked at the GM or Toyota dealership last year anyway.

Finally, its an electric car, what are they going to do, change the oil and spark plugs?

RandallBrown• 14 years ago

The Tesla dealership near me (Seattle) turned into a service center. There's also a Tesla store in a mall nearby where I imagine you can set up the test drives and such.

_fn• 14 years ago

At where I live car dealership only sells used car. If you want to buy a new car, you go to the manufacturer's dealership. Almost all of them are 3S shop: Sales, Service, Sparepart.

Allowing the manufacturer to sell their own cars works really well here.

cincinnatus5• 14 years ago

In general fully electric vehicles are much simpler mechanically and need vastly less servicing. The bit of scheduled maintenance that they do need to be handled by anybody.

incision• 14 years ago

Sounds great.

FYI - Never, ever simply walk into a dealership for anything but a test drive. You can avoid a lot of the car buying bullshit by getting your own financing and dealing strictly with an "Internet Sales" department.

geogra4• 14 years ago

Mind posting a link to a place with an 'Internet Sales' department?

_ea1k• 14 years ago

Every dealership that I've talked to for the past 5 years or so has had one (albeit, typically the "department" is one person at the dealers around here).

001sky4• 14 years ago

https://bankofamerica.truecar.com/main.html

This. you can price, including out of state, etc. for in-demand models w/ price markups or inventory issues, this can be an eye opener. they e-mail you an invoice. that locks in a price. the prices are pretty decent, and benchmarked to invoice.

roedog• 14 years ago

All the dealers in my county have websites with an email address or web form to contact them. After doing some research on models, pricing, etc. I sent an email to each dealer describing what I was looking for and requested a quote. Some did not reply at all. I took the most decent offer. They dropped it off at my office. I never set foot in the dealership for the whole transaction.

SilasX• 14 years ago

When I lived in Waco, the Hyundai dealership's website's "internet sales" department was a page telling you to call Lisa at [telephone number]. No, I'm not kidding.

Apparently, they've wised up since then, because the link doesn't work:

http://www.wacohyundai.net/internet.htm

nvarsj• 14 years ago

I wish it was so easy. You still have to invest significant time into an "internet sale" and even then they can pull a bait-and-switch on you. It still requires hardball negotiation tactics, like bringing in a cashiers check and being prepared to walk out (even if you had to drive 1.5 hours, take time off work, etc.). The whole thing is a freakin' mess.

mrkurt• 14 years ago

"Being prepared to walk" (or at least looking that way) isn't exactly a hardball negotiation tactic, it's more a prerequisite for being able to negotiate at all.

grandalf4• 14 years ago

Getting a car dealership franchise in the US is like winning the lottery. There are so many barriers to entry that the dealer is pretty much guaranteed to earn $500K to $1M per year if he/she has halfway decent management skills.

Further, the credit crunch a few years ago would have wiped out enough of the US Auto industry to put a lot more dealers out of business. The rebate bill that was passed was a massive handout to US auto dealers. All those people making $500K to $1m per year owning dealerships are essentially on welfare.

If more of the industry has been allowed to restructure after the credit crunch, Tesla would not have to worry as much about a legal battle. The public would rightly view Tesla as offering an innovative approach that will benefit consumers.

The worst part of it is that the reason the automotive OEMs tried to sell directly a few years ago was to put an end to predatory practices (dishonesty, etc.) by auto dealers. There is no reason car dealerships should quote a price and engage in haggling, etc. Many customers (particularly the elderly and the poor) are the direct victims of these practices, and they are supported by the Federal laws that prop up auto dealers.

akjj• 14 years ago

The US auto industry _was_ restructured by the government and dealerships _were_ closed. The first link I found with numbers for both said that Chrysler closed 789 out of 3200 of its dealers and GM closed 2600 out of 6246 [1].

[1] http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close...

grandalf4• 14 years ago

Compare that to how many would have closed without the massive handout.

Chrysler was able to force some to close by holding over the dealer organizations' heads the threat that the government would not do the bailout and all Chrysler dealers would go away.

Unlike a market-based failure, the government-led restructuring was surely not done fairly and likely some reputable and honest owners were penalized for not being more politically connected.

patrickk• 14 years ago

Is there any process for bring American-made cars into Europe tax-free?

Also, I've heard that you can get quite a deal on Japanese imported cars into Europe if you know what you're doing. They've some strict regulations which adds to the cost of owning a secondhand car, meaning that they look to sell off cars quicker than other countries.

But there is another factor here that determines what you’re buying in the secondhand car market: the notorious “shaken.” This consists of all the bits of bureaucracy you need to keep your car on the road — weight tax, vehicle inspection and compulsory insurance (car tax and more comprehensive insurance coverage are separate). If you buy a new car, you have three years until you need to jump through the hoops and start forking over cash. After that, you have to do it every two years, and it can easily cost you over 100,000 yen each time.

The end result of this is that people tend to sell their cars when the “shaken” runs out. Dealers will usually arrange “shaken” so that potential buyers have two years to go — a big selling point in the secondhand market. The upshot of all this is that used cars will usually be available when they are 3, 5, 7, 9, or 11 years old. So the first thing you want to check is the length of “shaken” left.

http://www.japantoday.com/category/lifestyle/view/buying-a-u...

Anyone have experience of importing Japanese cars to Europe?

pja• 14 years ago

A relative did this with an MX-5 a few years ago. They went via a company who managed the whole process, so they didn't have to deal with all the legal issues themselves. They seem to have been very happy with it.

£400 / year just to keep a car on the road seems steep! But if it includes insurance cover, then it's not really very different to the UK market which has similar requirements (annual tax, annual inspection, minimum insurance level). In the UK, you generally pay these yourself regardless of the age of the car (except for the annual inspection which kicks in after three years, but only costs £40). Interesting how the psychology of suddenly being faced with the 'new' annual cost (which of course you've effectively prepaid for the first few years as part of the purchase price of the car) nudges people into getting rid of their cars instead of keeping them running.

eli• 14 years ago

They've had a showroom like this in DC for some time. I walk past it all the time. I don't think I've ever seen a customer in there.

lnanek2• 14 years ago

It seems like they'd be in a whole lot more stores, and in front of a whole lot more eyes, if they just worked with dealerships. It is a lot like how many phones and other devices have attempted to get sold online without a lot of success compared to something that is actually placed in Verizon and other carriers' stores and sold to millions. Will they "lose" a ton of money if they let these middlemen play? Sure, but they will sell a lot more too.

at-fates-hands• 14 years ago

This business model allows Tesla to be incredibly agile in a slow moving marketplace.

With the current auto market, there is a lull between what consumers want and the production facility. Remember when Ford was cranking out SUV's and then the economy tanked, gas prices went through the roof and nobody wanted SUV's anymore? Ford's plants were still producing SUV's and shipping them to dealers who didn't want them and couldn't sell them. They were taking a huge loss on every one of those Explorer's they produced.

Tesla's model allows them to change much faster to the needs of the consumer, without wasting a lot of production costs and overhead. I think the time is right for a huge disruption in this industry.

001sky4• 14 years ago

This article lacks one important piece of context:

The Roadster has a base price of US$109,000 in the United States, GB£86,950 in the United Kingdom, A$191,888 in Australia, and €84,000 in continental Europe.[5]

Yes, the showroom in Chelsea is "Cool". But its like any other Art gallery, with hot underpaid 23 year olds staring blankly at iMacs. Ie, its just another White Cube. With a car parked inside.

URSpider943• 14 years ago

Tesla do no sell the Roadster any more. The car they are currently offering is the Model S, which starts at around $50k, and ratchets up to right around $100k with all the trimmings. Sure, there will be a lot of window-shoppers, but at those prices, they're within reach of many buyers, certainly enough to sell 35,000 cars per year.

001sky4• 14 years ago

Also, the Lotus based Roadster is/was very cool. I have no opinion on the new model, I havn't seen it. But vibe of the whole setup is [was] more 'Gagosian' than Apple store. The McClaren F1 was sold the same way, in London. The cool part, and the reason I walked in, was they had a work-bay w/Snap-On tools integrated into the space. You don't see that every day. That made it kind of cool. =D

[1] http://en.wikipedia.org/wiki/McLaren_F1

whatusername2• 14 years ago

So the Australian Price works out to just over $195,000 USD. Go team AU!

mirsadm• 14 years ago

"Shipping Cost" "Smaller market" "Australians are use to getting ripped off so it makes it easy"

brc7• 14 years ago

Taxes included in Australian price (using 109k USD base): - Impport Duty @ 5% : $5.5k - GST @ 10% (on dutied price) : $11.5k - Luxury car tax (any vehicle over $59,000, on pre-GST price) @ 33% : $15k Total Tax, Dutied Price : $141k

That leaves 54k unaccounted for. This is cash straight into the back pocket of Tesla. Shipping might be around $2000 per vehicle - assuming they pay 'full freight'.

Similar figures apply to any premium brand - a $55k BMW will set you back about $110k in Australia. It gets worse as you go up the scale - a Lamborghini Avantador costs $379k in the USA, but $745k in Australia.

The reason this price gouging goes on is because there is a further regulation that prevents parallell imports - you cannot import a vehicle (personally) unless you have lived in the country of purchase for 12 months, and used the vehicle for that entire period. It is also impossible in most states to register a LHD vehicle under 30 years old.

These regulations prevent people from flying to SF (or London), ordering a new RHD Tesla from the dealer there, and shipping it home on a boat. Thus they hand Tesla (and other makers) the ability to gouge Australian buyers by 40, 50, 100k - whatever they think they can get away with.

All these regulations and taxes are created with the idea of protecting the tiny local car industry - 224k cars made last year - but, to add insult to injury, the government regularly gives the foreign-owned car makers (Toyota, GM and Ford) cash payments to stay and keep producing.

So Australians get more expensive cars, and pay higher taxes so that global car companies don't close the unprofitable operations.

The entire thing is a poster child for the damage bad regulations and policies can cause.

EDIT : I also forgot about 'ADR' - which is Austalian design rules. These force a manufacturer to re-do compliance testing for local rules, which, although very similar to EU standards (and in some cases less stringent) - require a manufacturer like Tesla to re-crash a vehicle and modify it in insignificant ways. This raises the costs of bringing low-volume vehicles even higher. There has been talk of adopting EU standards, but it has never gotten anywhere.

BryanB552• 14 years ago

As an auto enthusiasts I absolutely love this idea. I recently purchased a new speciality car last year (2012 Jeep SRT8) and I must of said at least 10 times during the process that I wish there was a way to circumvent the dealer. Dealing with car dealers is one of the most fundamentally broken experiences I have ever witnessed.

Ready to drop $65k on a new vehicle I walk into a dealer and the first thing that happens is the sales man walks me to a desk, pulls out a piece of paper and starts asking questions and writing "whats your name?, how much do you want to spend per month?, what is credit like?, we can offer you really great financing." I had to interrupt him to explain that I just wanted to have a normal conversation first to even see if he could get the car. Turns out they couldn't.

After many other slimy conversations with car dealers (and being hassled in the parking lot before I even walked in the door) I finally found a dealer that was willing to special order the car I wanted at the price I wanted. I waited 4 months for the car and 2 weeks before it was ready to arrive a the dealer they called to tell me they didn't want to sell it to me for that price anymore and they were going to sell it for $10,000 over MSRP. Long story short, I had to threaten legal action just to be able to buy the car that I had put a deposit on and waited for 4 months for.

This is not the first terrible experience I have had with buying cars. The "car sales man" attitude is fundamentally wrong. About 80% of the sales people that I talked to at dealerships did not even know about the car I wanted to buy, mentioned the wrong engine or did not even know it existed.

I'm waiting for the day that I can just click "buy now" online and purchase a car with Zappos-like customer support at one fair, up front, low price without all the bullshit in between.

andrewl• 14 years ago

Agreed. And check out Edmunds' account of what goes on behind the scenes in a car dealership by a writer who went undercover as a salesman:

http://www.edmunds.com/car-buying/confessions-of-a-car-sales...

johnyzee• 14 years ago

As a sign of the disruption to come, even the sales people in that article (which is from 2001) were moaning about savvy "internet buyers" who show up at the dealership knowing exactly which car they want and how much they should be paying for it.

ams61103• 14 years ago

All this moaning about how scummy and awful dealerships are... just don't buy a car there. First and foremost buying a brand new car is a stupid idea from a financial perspective, the depreciation is greatest in the first few years. Buy a used car from a private seller, or if you feel you must have a dealer involved go to a fairly low-scum-factor place like Carmax.

All that aside, I love Tesla's direct sales idea. It is disruptive, but I would think a few forward-thinking states are going to allow it (or not stand in the way of it), and people who want to buy a Tesla direct will just arrange road trips there to pick up their cars. Eventually word will spread, public demand will build, and the political barriers will fall elsewhere.

james-skemp• 14 years ago

Thank you. This was an extremely well written read.

thesis• 14 years ago

I had a miserable experience the last car purchase I attempted as well. The manager wouldn't give the sales associate any pricing unless I test drove the car. Needless to say I walked out of there.

CarWoo.com saved the day for me simply because I got a price narrowed down before they even knew who I was. The only person I had to say no to after that point was the financing guy who tries to sell you tint, pin striping, and all that extra stuff. (Disclaimer: I have no affiliation with carwoo at all.)

r00fus• 14 years ago

Interestingly, I had a great time buying a car (minivan) with several dealers who were willing to haggle the price (within reason) and compete for my business. The winner actually drove by and we signed all the papers in my home and he took a check then left the vehicle there.

Perhaps it's all about supply - in my case, they had over-supply and were willing to play ball. If you have to get a car special ordered, you're already over the barrel as far as they are concerned.

atourgates• 14 years ago

I expect this is obvious to most of the HN crowd, but the current answer to this problem is: Use The Internet.

Most dealerships now have dedicated online sales managers that workd more like fleet sales than a traditional salesman. You email, tell them what you want, and often get pretty straightforward answers. You can do the whole thing online, and walk in with a cashiers check the day you want to pick up your vehicle. Or often have them drive it to your doorstep.

It cuts through much of the bullshit of going to a dealership. This is really the only worthwhile way to buy a new car, particularly a special order.

Plus, you have a paper trail.

BryanB552• 14 years ago

Very true. The best way to buy a car right now is to figure out what the cheapest is that you can get for it. Particularly if it is a new car you can generally get down to somewhere around invoice pricing. Email a handful of dealers in your area saying "I'm shopping around and I'd like this car at x price with x features, can you do it? Yes or no?" and if they say yes, print it out and take it with you to the dealer. Carwoo seems to be very helpful with this process but at the time I was purchasing my car Carwoo didn't even have an option for 2012 vehicles.

After that it's just a matter of keeping your eyes open as they can sometimes try to change the price on you or some other cheap shot. The internet managers at dealers generally seem a bit easier to work with but beware of their managers that start pulling out all the tricks. I've even had a dealer finalize a price, hand me the papers to sign and they conveniently added a $2,500 fee that "they add to all purchases"

When you go from working with internet companies all day to old-fashioned car dealers suddenly the convenience of straight forward "honest prices, no surprises", zappos customer service and a generally painless sales process is gone.

Maybe I'm spoiled from buying too many things too easily on Amazon all day with 1 click purchasing at fair prices but even if I am, why can't car sales be this way? It even seems like less hassle for the dealership and the ethical thing to do.

dhimes• 14 years ago

You could do this with faxes even in the days before the internet was so pervasive- even getting dealerships to bid against each other in metropolitan areas.

matwood2• 14 years ago

When I bought my first car the finance guy tried to rip me off. After catching him in his trick we finished the deal to my terms. When I left his office he told me not to come back

Oddly enough that was the most patient I ever was with a car dealer. With places like carmax available it doesn't make sense to deal with any hassle.

zzleeper• 14 years ago

What was the trick?

rdl2• 14 years ago

I love everything Tesla is doing except the price of the vehicles, which will come down in time with better battery tech and higher production volumes. I've never gotten any value from a car dealer, and being able to do on-site support for vehicles might actually be more efficient on the service front, too (with Tesla locations in major markets like the Bay Area). They could just pay for a rental car (like anyone buying a $100k Model S doesn't have another car...) during the wait to send a team to Wyoming.

I wish Elon Musk would go into some kind of medicine/healthcare startup next, after fixing cars and space.

Nevaeh2• 14 years ago

As someone who lost a few loved ones to cancer, I wished the same thing. It'd be awesome if Elon tried to innovate healthcare.

But unfortunately, it is very unlikely according to what Elon said in an interview: Source: http://www.gq.com/news-politics/newsmakers/200901/elon-musk-...

----------------------------------------------------

Elon: "It's important enough to be on the scale of life itself, and therefore goes beyond the parochial concerns of humanity," Musk says of our interplanetary destiny. "We're all focused on our little things that are of concern to humanity itself. People think of curing AIDS or cancer as being very important, and they are—within the context of humanity. But curing all forms of cancer would improve the average life span by only two to three years. That's it."

"In other words, while eradicating disease is a worthy pursuit, and would extend the lives of individual human beings, my life's work is extending the life span of life itself."

----------------------------------------------------

Interesting to hear that coming from someone who has 5 kids. http://www.forbes.com/pictures/mkm45fjlie/elon-musk-10/#gall...

By the way, Elon did talk about some projects he would like to do if he had the time. http://www.youtube.com/watch?v=5FESP1h7IZM

cincinnatus5• 14 years ago

What is 'interesting' about it? Having 5 kids fits perfectly with his stated philosophy of improving our odds overall.

zepobud• 14 years ago

He kind of did--he was one of the founders of Halcyon Molecular. They were aiming for low-cost DNA sequencing but things aren't looking too great. There are even rumors that the company has run out of funds and is shutting down.

dalke• 14 years ago

Yes, it's a lot harder to be successful in a highly competitive market with many well-funded companies.

KeepTalking• 14 years ago

About a year ago the new GM (post bail out) had talked about a partnership via ebay. The basic premise being dealers can bid for your business. Not much has been spoken since and I have never seen GM market the this concept actively.

I found a bunch of links that talk about that: http://www.theatlantic.com/business/archive/2009/08/why-sell...

I have a hunch a large part of retail sales in the post amazon economy( or after best buy) will transition to this model. Large brands set up stores in malls where you can touch and feel your product. You can then go online and deal with the paper work/ordering.

it also surprises me the legality of forcing you to sell via dealerships has not been challenged.

adrianbg• 14 years ago

Does anyone know what economic conditions cause a market to transition from being car/house-like (no fixed price, annoying sales process) to what is normal for cheaper products in first world countries (more-or-less fixed prices, less aggressive selling)? Is it related to products'scarcity?

From my own experience I know that even products that normally have fixed prices in the first world (cell phones, bikes, anything really) are sold more like cars in a lot of developing countries where bartering is the norm. You might find them available for drastically different prices even in the same locale and it is frequently necessary to waste time and energy keeping track of the going price for a particular product that you are considering buying.

solsenNet• 14 years ago

my guess about the car industry is it had to do with the interaction between diverse customer preferences (car colors, options) and the realities of car production (large batches, economies of scale).

basically, the economies of scale cause the production of large batches of cars that then all needed to be sold (even that last white one on the lot).

cincinnatus5• 14 years ago

Maximal value extraction is probably the answer. If more profit can be made in a given market/product combination through direct selling then this will be the model, if a commodity approach extracts more value then it will prevail. There should be a natural progression from the former to the latter as a market matures and buyer sophistication increases. In the case of cars the purchase is infrequent and specialized enough that the market has been slow to mature in buyer sophistication.

Of course the buyers are uneven in their knowledge, so in the phone market you have a range. Similarly in cars there is now an opportunity with a small number of highly informed and opinionated consumers who find Tesla attractive. (disclosure: I'm a happy shareholder)

beefman• 14 years ago

For those who don't know, Blankenship was a key architect of Apple retail http://www.teslamotors.com/about/press/releases/tesla-hires-...

sonnekki• 14 years ago

I had a great experience buying my first car, a new-used car, from Enterprise Car Sales, a branch of the car rental company. We were able to have a good conversation, and I found that they are a "different" kind of car dealer because they have fixed, no haggle prices for all of their cars.

They are, however, still a car dealer as customers are not able to buy the car online, but they are able to pay to ship the car to the nearest Enterprise dealer. Like every other dealer however, there is a surprising amount of paperwork.

It wasn't entirely painless, but it was the closest to a pleasant experience as I was comfortable with. I was not comfortable negotiating how much I lose with a normal dealer.

I wish I could buy a Tesla vehicle now, but I don't have the money to do so, and I don't want to be in debt for a long time.

WiseWeasel2• 14 years ago

Seeing how hard I am on rental cars, I would never buy a used rental car.

MartinCron2• 14 years ago

This could go both ways, though, as I would expect that at least the cars are reasonably well serviced.

magoon• 14 years ago

> I found that they are a "different" kind of car dealer because they have fixed, no haggle prices for all of their cars.

I love this sales tactic -- tell the customer that your sticker prices are set in stone as if it's some sort of benefit.

TimGebhardt• 14 years ago

But there is a big benefit: you know what the price of the item is. If you don't like it, don't buy it. Think about Apple gear: your gear-head computer friends scoff and say "I'd never pay the Apple tax, they're not worth the extra price".

More transparent pricing is always better for the consumer. It forces the market to price their items more competitively.

Now imagine if everyone got their Apple at a different price based on the mood that the Genius Bar guy was in that morning.

vladoh• 14 years ago

BMW also plans to sell the BMW i3 and i8 online:

http://green.autoblog.com/2012/07/30/bmw-will-sell-first-car...

Zak• 14 years ago

I wish Tesla luck in this. Laws mandating franchise car dealerships seem to be fairly bad for consumers, and I can't think of any compelling government interest in maintaining them. Maybe seeing a better model at work will help them to go away.

dman• 14 years ago

Heres something that worked for me recently - walked into the dealership 15 minutes before closing time on the last day of the month after confirming on their website that they had the color / accessories combination I was looking at. I had a fairly good idea of what I wanted to pay, and they were eager to close the deal and to go home, the whole deal including the test drive was done in under 30 minutes.

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