No oil changes.
The first and most striking way Tesla kills the dealer service department cash cow is downloads. As part of its sales pitch, Tesla says you should think of its Model S sedan as “an app on four wheels.” That may sound like vacuous Silicon Valley marketing copy, but the company isn’t just being metaphorical. Software is at the heart of what keeps Teslas running. These internet-connected cars are designed to self-diagnose their problems. The vehicles can also download software fixes or updates — even new features — much like an iPhone when Apple puts out a new version of iOS. When fixes happen over the air, there’s no need for a shop in the first place.
At Tesla’s most recent annual meeting, one shareholder asked founder and CEO Elon Musk about whether challenges to the company from traditional auto dealers hurt the company’s business outlook. Musk argued that consumer desire for a better way of buying and owning cars would win out. He said the traditional franchise model that dominates auto-selling in the U.S. wouldn’t work for Tesla for several reasons, including its reliance on maintenance to make money. “Our philosophy with respect to service is not to make a profit on service,” Musk said. “I think it’s terrible to make a profit on service.”
The shareholders applauded
Tesla shareholders might applaud, but conventional car dealers won’t, and they are, so far, firmly in control of the state legislators who can stop Tesl. Here’s an item from Greenwich Time earlier this week: Penske buys Greenwich BMW dealership. Nothing surprising about that, because Penske already owns the Mercedes dealership, and who wouldn’t want to own a luxury brand in this town? But buried in the story is this, which explains how those legislators, once bought, stay bought.
Despite being a major, publicly traded corporation, Penske Automotive Group participates in association meetings, which often focus on issues at the state and local levels, he said.
“We’re like a chamber of commerce for dealers,” [Association president] Fleming said. “They (Penske) are a good company.”
Good for car dealers and politicians; for consumers, not so much.