This video is cover some of my concerns and excitements of Tesla deciding to shut down its retail efforts.
I mentioned in my last video about $35K Model 3 pricing that it is a bitter sweet decision. This is because Tesla has managed to finally offer a $35K all electric vehicle and at the same time say they are going to lay off employees. On August 2, 2006 he summarizes his “secret master plan” at the end of the post by saying their goal was to build sports cars, use that money to build an affordable car, use that money to build an even more affordable car. While doing the above, also provide zero emission electric power generation options.
I echo Fred Lambert when he said this on Electrek’s most recent podcast where he said, “People assumed that the way they would do it would be production efficiencies, economies of scale, making some parts cheaper, and be able to produce the car for less - and pass some of those savings to customers - achieving that lower price point and mass adoption. That was how it was always sold to us by Tesla. Now, how they apparently achieve it, the way that it was presented to us in the blog and press call with Elon, is that the main factor that contributed to the cost reduction here is that Tesla is moving its entire sales strategy online. The only way to buy a car is online and that’s going to result in closing stores and firing retail employees.”
With that said let’s dive into first some of my concerns, then we’ll finish it up with what makes me excited about this move.
1) The decision to close stores seems to be extremely sudden. Typically when a major move like this is done, there
2) We don’t know how many, but some employees are likely to lose their job. Hopefully most will be transferred to service and delivery.
3) For people that want to kick the tires before they spend tens or hundreds of thousands of dollars, this move makes it a bit more difficult.
4) Moving a manufacturing company to online only sales is a HUGE unknown. Will consumers go for it?
On the positive side, here are some things that make me excited about this move to online sales:
1) A $35K Model 3 means a larger pool of buyers who will be able to afford a Tesla
2) It’s efficient. You kill the high overhead associated with physical locations.
3) If Tesla can make the transition successfully, they will be a far more nimble of a company, poised for growth, even in a recession.
4) This means a 5-6% savings pass down to consumers
5) Tesla has a fantastically engage owner community. This could be Tesla’s opportunity to engage Tesla Owners Clubs and owners across the globe to talk about the product. Perhaps a global tally of who refers the most owners to Tesla, without the expensive prizes.
Finally, if there’s any automotive manufacturers that can pull off an online sales strategy it’s Tesla. They have an extremely loyal following and most owners are extremely tech savvy.
Shopping online provides consumers the ability browse and peruse at their own convenience without being pressured or hassled. It allows for a consumer to make a buying decision when they are ready, not when a salesperson is ready. In fact, it reminds me a lot of how Amazon retrained consumers to buy everything from A to Z on an app.
Many critics thought no one would buy a book without physically reviewing it first. Amazon made it easy and convenient to buy books, ship them quickly, and if necessary, return them without hassle. Anyone who says that Tesla can’t do the same thing with cars lacks an understanding of history. Innovative companies have changed consumer behavior throughout the 20th and 21st century. Don’t believe me, look up the Sears catalogue, Model T, radio, television, and Internet - they were all ideas that created markets where they did not exist before.
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