I ordered a Tesla last year, motivated more by the desire to expose myself to the ‘no-Dealers’ sales process rather than wanting to own the car. Everything the company does reflects the astonishingly innovative business thinking of the owner and founder, Elon Musk, and I wanted to see if there really is a secret sauce.

The test drive was utterly convincing and the in-store staff demonstrated exceptional training with strict adherence to process. All sales and promotional material is electronic; they print almost nothing. I’ve never received any printed material in the last year.

There is no discounting – zero; all cars are sold at listed retail. Because the stores are owned by Tesla and staffed by employees, there is no problem making this policy work. They do not face the ‘maverick’ discounter we experience in traditional franchised Dealer networks where there is often some lunatic chasing a fantasy volume target for bonus bucks.

I don’t see traditional OEMs discarding their legacy Dealer networks, but I do see lessons here that they must think about and embrace in some form in the future.

The interesting point on this latest update is Tesla’s move into adjacent revenue streams: used Teslas, car finance, leasing and insurance, home power batteries.

Tesla’s acquisition of Solar City (California’s largest solar panel installation and financing company), combined with the completion of the Nevada lithium-ion giga-battery plant and the announcement of the European giga-factory, confirms Musk’s signalled strategic intent. He plans to transform Tesla from being just an electric car manufacturer into being a participant in the full renewable energy value chain.

In fact, electric cars could well be a relatively less important contributor to corporate revenue in 10 or 15 years, as the traditional OEMs match and then surpass Tesla’s capabilities as an electric car maker. Musk’s main game is commercialisation of solar opportunities, including creating industry-leading battery storage and related software innovations.

If you look at the history of the automotive industry over the last century, it’s likely Tesla’s car manufacturing business will be acquired by an existing aspirant OEM that sees value in Tesla’s platforms – a more affordable short cut to market compared with massive R&D spending to create unique IP.

Musk has his critics and, importantly, the company continues to burn cash at unsustainable rates. Interestingly, however, he has no trouble tapping the debt and equity markets as needed, so there are still lots of believers out there.

Finally, if you look at the TSLA NASDAQ stock price, you have to wish you’d bought in 2011. But then, who knew?

TSLA trades at about USD185 today – still a healthy return for the early investors.

Elon Musk may succeed – he may go broke. Either way, fascinating to watch this story unfold.


David Blackhall

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