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If you haven't heard already, Tesla was in a world of hurt after reporting its Quarter 1 sales. In fact, the pain was so great that some could say it almost became the Titanic with a series of unfortunate events including sales reported lower than expected, missed essential tax credits and Elon Musk was forced to appear in front of the SEC as he was unable to keep his (Twitter) mouth closed.
Tesla sales fell 61% in the United States and 31% worldwide resulting in an 8% drop in stock price. While that may not sound like a lot, that effectively reduces Tesla’s market cap by $17 billion! That’s nothing to shake an iceberg at!
You do have to give Elon Musk some credit though. While his changing behavior puzzles and angers many, he’s also widely regarded as a visionary and a genius. But, while his cars are beautiful, innovative works of art, it seems he can’t get his fundamentals in place to solve the problem of auto manufacturing and sales at a scale that meets promises he has made and keeps up with consumer demand.
It doesn’t matter how great the vehicle is if Tesla can't deliver it. Also, cars need to be serviced and, while Tesla seems to be working to make that easier, it just can't effectively handle sales and service with the limited number of locations it has. There is a reason why Toyota and other major brands are so successful … because they are accessible! With a Ford dealership every 3 miles, consumers find it really easy to buy and service their Ford vehicles. In fact, Ford has about 3,000 dealerships in the United States alone!
Do you know how many Tesla has?
Eighty in the United States.
While Elon Musk tries to reinvent the retail vehicle sales system, it looks more like his sales (and stock) have taken a ride to Mars on SpaceX.
Almost all of Tesla’s sales are online. Customers can touch and feel a car in a gallery -- but not THEIR vehicle. Anyone that sells cars knows that the getting the customer to take mental ownership of a car is the whole point of a test drive and, by tapping that emotion, it becomes much easier to close the sale.
But Tesla can’t do that. Why? Because Elon Musk is busy fighting with state auto dealer associations and legislators so he can have his direct-to-consumer model. Meanwhile, vehicle manufacturing and sales are suffering.
Perhaps it is time for Tesla to reconsider its strategy. Vehicle franchises have been around for decades and are likely to continue for a long time yet. Tesla has undoubtedly created and adopted some cutting-edge technologies, including over-the-air updates, and their cars certainly have sex appeal. The company has also made the process of BUYING a car online a breeze (even though it can’t necessarily deliver one on time.)
Perhaps if Elon Musk were to adopt a franchise model, he could put the legal woes, battles, sales issues and, potentially even manufacturing issues behind him. And, here's a thought, maybe this could be made even simpler if he partnered with an existing manufacturer that has an established quality manufacturing infrastructure.
In my opinion, that is how Elon Musk and Tesla can break away from the iceberg and continue their journey. Failing to do so just means that "all aboard" are bailing water to stay afloat.
And we all know how that story ends. I’m sure we’ll read all about it on Twitter!