Tesla’s Electric Shock

Newcomer Tesla has arrived on Australian shores with a retail model that does away with the Dealer.

No matter what your position is on electric cars, it’s hard not to watch American electric vehicle maker Tesla Motors with interest.
In little over 10 years, Tesla has gone from producing its first car – the niche-focused Roadster, to delivering over 22,000 Model S sedans globally in 2013. Since officially breaking onto the scene, Tesla’s ambition to offer consumers affordable, mainstream electric vehicles has been well-documented, and the marque plans to add its Model X SUV and Model 3 mid-sized sedan to the line-up over the next two years.

In Australia, the Model S (currently the only Tesla in production) has been available to purchase online for several months, however in December the company expanded its presence with the opening of two physical showrooms.

The first, in the Sydney suburb of St Leonards, was actually an old Holden dealership – just don’t go calling the new Tesla showroom that. Instead, the company insists that its locations are referred to as ‘stores,’ in a move that’s purposely removed from the way Australians have been buying cars.

The first Melbourne store, a ‘permanent pop-up’ can be found at the iconic Chadstone Shopping Centre amongst retailers selling clothes, jewellery and homewares.

Due to some licensing issues, Tesla was  unable to sell cars (or even discuss) the pricing of their products in the new Victorian store for the first weeks of operation, but that’s since subsided and the marque has no plans of slowing down. A new store in Melbourne’s Richmond is due early in 2015 and reports have indicated that more Melbourne/Sydney locations (as well as expansion into Brisbane) are all on the agenda.

But once you’ve purchased your Model S, which starts from $102,009 in Victoria, where do you top up its energy supply?
Tesla’s thought of this too.

In fact, the company plans to build 16 ‘supercharger’ stations between Melbourne and Brisbane, allowing Tesla owners to stock up on energy, for no cost, over the lifetime of owning their car.

The supercharger stations take just 20-minutes to restore 50 percent of the car’s battery range, and can fully replenish the battery in an hour.

Aside from these charging stations, Tesla is partnering up with hotels, enabling customers to charge their cars whilst enjoying the accommodation. The Marriot in Melbourne and the Darling Hotel in Sydney have already got on board.

So indeed, a brave new move for Tesla – but is everybody happy about it?

Tesla’s direct manufacturer-to-customer approach, which bypasses third-party Dealers, will leave consumers lacking many of the essential aspects that make up owning a vehicle, according to the Victorian Automotive Chamber of Commerce (VACC).

In statement to Business Spectator, a VACC spokesperson said:

‘Australians are well served by the current dealership network, a business model which has worked well for decades.’
‘There is more to buying a new car than simply picking one from off-the-shelf. Buyers invest years building up a trusted relationship with their local and/or preferred-brand dealer. Trade-ins, test drives, service and repair, and spare parts are often the key questions car buyers ask of their dealer,’ according to the VACC.

The United States Backlash

The sentiments expressed by the VACC above have been echoed in the US, and a movement has begun to stop Tesla from selling their cars without a dealership network.

Whilst Tesla’s American website shows a network of stores operating in over 20 states – not all of them are legally allowed to sell cars directly (although online sales are still allowed).

Elon Musk, Tesla’s cofounder and CEO, is trying to establish a unique retail model and has been fighting legislation in the US state-by-state. Whilst Tesla’s freedom to sell directly through stores has been successfully prevented in Texas, Michigan and Arizona, the electric vehicle maker has won the right to operate its retail model in Massachusetts, Minnesota and New York.

Whilst Tesla has argued that its model is necessary because of the uniqueness of its electric products, many Dealers in the US have viewed the company’s approach as a breach of the fair and accepted system of purchasing a new car.

Disruptive Technology

The million dollar question: Will Tesla’s new retail model disrupt dealership operations in Australia?

Whilst the auto maker’s unique offerings continue to service a small niche of market, it’s unlikely that its presence will cause a major stir. However, Tesla’s Australian (and global) operations and re-charging infrastructure will continue to be examined by the AADA with interest.

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