Why Tesla needs to change how we buy cars

Colin Lalley 1600


Colin Lalley

Colin Lalley

Insurance Expert

Colin Lalley is the Associate Director of SEO Content at Policygenius in New York City. His writing on insurance and personal finance has appeared on Betterment, Inc, Credit Sesame, and the Council for Disability Awareness.

Published January 26, 2016|3 min read

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Tesla Motors is a very cool company.They make very cool cars that are about as close as I’ll ever get to riding in a spaceship.They’ve made very cool advancements in battery technology. As everyone knows, batteries are the worst part of anything requiring batteries.Their CEO Elon Musk has a very cool take on patent nonsense.Traditional car dealerships have none of these cool things and are actually the worst. Which is why the coolest thing Tesla might do is shake up the consumer side of the auto industry.

You see, Tesla and representatives from auto dealers have recently been meeting with the FTC because Tesla has the wild idea that, in 2016, people should be able to buy things online. That’s normally fine, except for when those "things" are new cars.The bigger picture is more than just selling cars online, but rather selling them directly to consumers, including manufacturer retail stores. Cars have to be sold through independent dealerships – it’s why you can’t go to the Ford Store and pick out your new ride – and big proponents of this model are independent dealerships. But Tesla wants customers to be able to buy from Tesla and not forced to buy from Jim Jenkins’ Tri-State Tesla Automotive.So what’s the roadblock? (Driving puns!)The same as it always is when disruption is in the air: legacy players who are stuck in their ways.

The laws and regulations that Tesla is running into stem from the Great Depression, when they protected dealerships from manufacturers who kept pumping out cars that wouldn’t sell (because of, y’know, the Depression), but it’s allowed dealers to have free rein to do business however they want with little or no competition.Have a terrible experience with your local Chevy dealership? Well, there’s nothing Chevy can do about it, and good luck finding another Chevy dealer that isn’t a hassle to get to.Dealers argue that competition between dealers ("intrabrand competition") keeps costs low. But it’s hard to see how providing more options reduces competition. If consumers can buy directly from manufacturers, it just means that dealers would need to be more creative about how they bring customers into their showrooms.Of course, if you’re the only game in town and you don’t need to get particularly creative, you can see how this becomes a thorny issue.Tesla’s way just makes sense, and the crazy thing is that it isn’t really "Tesla’s way", but rather the way buying nearly anything else works. Why should buying a car be different than buying other appliances? I can buy a fridge from any Best Buy or any Lowes or direct from GE, and all of those outlets – and consumers! – seem to be doing just fine.Have you ever bought a Tesla? If so, then I’m totally jealous. But if you haven’t, check out their website. You customize your car like you’re buying a MacBook, and you can schedule a test drive online. You’re not limited by what a dealer has in stock; there’s no haggling that makes you somehow feel like you’re being taken advantage of at every turn; and no dealing with car salespeople (the most distrusted profession. Even lower than Congressmen. Yikes.)It makes shopping like a car feel like shopping for...well, anything else.

This will probably change eventually. Tesla is slowly becoming a more powerful player, the FTC agrees that regulations around local dealers are ridiculous, and eventually people will realize, "Wait, it’s crazy that a car is the only thing I can’t buy online, right? Yeah, that’s crazy."In the meantime it’s a head-scratcher that this business model is still a thing. The real question is who will go along with it and adapt accordingly, and who will keep their heads in the sand while they let opportunities pass them by.Image: Jeremy