By now you have heard of the pricey electric sports car manufacturer and its' high profile line of battery-powered automobiles. The company is barely profitable, and probably wouldn't be at all without government subsidies, but no matter. It's a cool-looking car, and rich folks love how it makes them feel. But the major problem at present isn't getting people to fork over the money for the prestige-priced product, although that is indeed a problem that Tesla must overcome in the long-term. The current problem lies with the state regulation of car dealerships.
Most states have laws that forbid direct selling of automobiles to consumers, instead opting for a "middleman" model involving dealerships. We are all familiar with how this works, and it seems that the laws might be somewhat antiquated. In other words, consumers can't buy new vehicles directly from the Tesla website after visiting Tesla showrooms, which are often found in shopping malls. Tesla wants to sell direct to consumer and the states won't let them. Why? Dealers say that allowing direct sales would "harm consumers, limiting their ability to shop around for the best price, trade in vehicles, or obtain financing for a new car". Is this true?
Perhaps for regular consumers, but high-income Tesla purchasers might not be interested in any of the above "protections". And the company is small enough to operate without large facilities, for the time being. As Tesla grows, it will probably be forced to adopt a more traditional, full-service dealership model. The existence of value-adding intermediaries would surely boost the purchase price by 25% or more, and Tesla can ill-afford to raise its already prohibitive prices. What will happen?
Tesla should be able to do what it wants to do as long as it doesn't harm competition or the consumer, so the antiquated laws, which seem to favor large companies with deep pockets, should probably be changed. But don't hold your breath waiting for that to happen on the state level. Any real change would have top be enacted on a federal level, which would take years plan and execute. So what about Tesla? Don't worry. The Zeitgeist certainly favors "green" goods and services, and this adminstration in particular has demonstrated a propensity to forward the cause with taxpayer subsidies. Perhaps an exception will be made for those companies deemed "green" enough. Who knows? What is clear, however, is that Tesla's non-traditional business model is under a very serious legal and regulatory threat. Can the company affect that landscape politically? Time will tell.
Filed under: Product, Business-to-Business Marketing, Retailing, Product Design, Consumer Behavior, Marketing, Marketing Environment, Competition, Technological Environment, Social/Cultural Environment, Political/Legal Environment, Marketing Strategy, Place Strategy