- On Thursday, Tesla announced it would eliminate most of its stores and move to an online-only ordering model.
- Tesla is also doing away with the traditional prepurchase test drive.
- It’s unclear if this plan will work in the US, given the prevalence of franchised auto dealers who have traditionally opposed direct sales.
There was a lot of speculation about what Tesla CEO Elon Musk would announce this week after he tweeted that some big news was coming.
But nobody expected Tesla to kill off its physical retail locations.
The top news was the arrival of the long-awaited $35,000 Model 3, the true mass-market vehicle that Tesla promised in 2016 but hasn’t been able to deliver until now.
Arguably, the bigger news was that Tesla is going to an online-only (or mostly) sales model.
“You can now buy a Tesla in North America via your phone in about one minute, and that capability will soon be extended worldwide,” the carmaker said in a statement.
“Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6% on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected. Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers. The important thing for customers in the United States to understand is that, with online sales, anyone in any state can quickly and easily buy a Tesla.”
Potential opposition from franchise car dealers
It’s not clear how Tesla will achieve this e-tailing objective in the face of the resistance it has traditionally received from franchised auto dealers in various US states. It is possible to configure and price a vehicle via a manufacturer’s website, but a customer must complete the purchase by connecting with a dealership.
On a conference call with the media after the announcement, Musk said that the new plan would enable Tesla to sell cars more effectively and that the carmaker would be ramping up its service side. But in response to a question from Business Insider, he acknowledged that Tesla expects pushback from established auto dealers.
“This is 2019,” he said. “People want to buy things online.”
But he added that franchise-dealer opposition would be a violation of interstate commerce, and that is unconstitutional.
“Good luck with that,” Musk said.
To achieve the shift to online-only sales, Tesla will also streamline the buying experience.
“We are also making it much easier to try out and return a Tesla, so that a test drive prior to purchase isn’t needed,” the company said.
“You can now return a car within 7 days or 1,000 miles for a full refund. Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free. With the highest consumer satisfaction score of any car on the road, we are confident you will want to keep your Model 3.”