Musk Loses: Tesla Giving Up on Direct Sales Model

Elon Musk

After bitter courtroom battles and a brutal stare-down of dealership lobbying groups across the country in a bid to establish a unique (in the auto industry) direct-to-customer sales model, it looks as if Elon Musk has blinked first, if his comments on Autoline Detroit last week are to be taken at face value.

“We may need a hybrid system,” explained Musk, in answer to an Autoline question about scaling up his fledgling car company. “… a combination of our own stores, and some dealer franchises.” (emphasis mine).

If it happens, it would be a stunning turnaround for both Tesla Motors and Elon Musk, who have built a rabid following and loyal customer base in part because of its radically different approach to selling cars and the transparency and customer access afforded by the lack of a franchisee/middle-man. You can read more about Musk’s apparent surrender in the article, below, which originally appeared on Cleantechnica.


Tesla Going The Way Of Franchise Dealerships? Elon Musk Hints, Yes!


Elon Musk touting the idea of franchise Tesla dealerships? Sounds about right, doesn’t it? Wait- what!?

In a rather surprising comment — but, I guess he makes those a lot, doesn’t he? — Musk recently noted that as Tesla continues to expand it may need to utilize franchised dealerships, in addition to its Tesla Stores.

That’s a bit of a turnaround for Musk — and a bit humorous considering how hard the dealerships have been fighting against Tesla — but I guess that there’s some logic there. Once Tesla begins selling the Model X, and more importantly the Model 3, the potential is there for huge growth — perhaps a mixture of franchising and direct sales would be the right choice?

The comment was made in a recent face-to-face interview with Musk conducted by Autoline Daily’s John McElroy. Here’s McElroy’s summation of the question: “When I asked him if he could really scale up his retail model in all 50 states of the US and asked how they would handle maintenance and repairs. Musk admitted that relying exclusively on company stores probably was not enough.”

Here’s Musk’s exact words: “We may need a hybrid system, with a combination of our own stores and some dealer franchises.”

Some ambiguity there, but the comments do square up with those made by Tesla’s Legislative Director Jim Chen last year at an industry meeting.

“In a closed door regulatory meeting in fall 2013, two witnesses cited Tesla’s Legislative Director Jim Chen who told a room full of industry stakeholders Tesla only means to sell factory direct until it reaches an undefined minimum volume threshold,” Hybrid Cars notes. “At the time it was unclear whether Chen/Tesla meant such a thing, but this otherwise confirms what dealer associations have said, namely, that Tesla cannot likely grow the whole business to support Model 3 and beyond to the scale it wants with all that on its shoulders.”

With the release of the Model X fast approaching, I guess that we’ll probably find out sooner rather than later if there’s anything to these comments.


Source | Images: Autoline Detroit, Hybrid Cars, via Cleantechnica.

Jo Borrás

I've been in the auto industry 1997, and write for a number of blogs in the IM network. You can also find me on Twitter, at my Volvo fansite, out on two wheels, or chasing my kids around Oak Park, IL.