Hearing about a new automobile or new technology for autos is exciting. There are a myriad of new and innovative technologies emerging in the automotive industry. From self-driving automobiles, alternative fuel vehicles, to the latest in in-car electronic gadgets, this industry is evolving.
But there is a more mundane trend that could soon change the automotive industry. This is happening concurrently with the introduction of new alternate energy vehicles. Of course with many changes, success sometimes depends on overcoming litigation to keep the status quo.
I am referring to Tesla’s sales business model. Their approach is to sell their product directly to the consumer.
In many states, this approach is highly contentious, as there are large, powerful lobbies of automotive sales organizations who wish to keep the existing model intact. States have passed laws that require a franchised dealership along with their sales teams to sell to the consumer. The manufacturer provides a certain amount of product to an authorized franchise for sale to the consumer. This creates jobs and provides outlets for other services such as repairs and general maintenance as well as handling warranty and logistical services such as product delivery, removing direct responsibility from the manufacturer and passing this to the dealer.
This creates additional costs and these costs are passed to the consumer in the form of higher prices for the product.
Two questions have to be answered. Should the state or federal government dictate an entity’s business model? Can the states or federal government provide regulatory oversight to this industry where the business’s product creation to sales to consumer is direct?
These two questions are not easily answered in today’s litigious business atmosphere. There will most likely be many arguments from state to state as whether Tesla or any other automobile manufacturer will be allowed to modify this sales model, and if they do, can they take on full ownership of the entire process from production to final delivery to the consumer.
Tesla’s argument is partially based on its belief that a new technology such as their electric vehicle needs less restriction in getting the product to the consumer at an assumed lesser cost. If they are successful with this argument, and the consumer recognizes a value here and embraces it, other manufacturers may follow suit in a more competitive environment changing how you and I acquire our next new car drastically.