Originally published by EV Annex.
Auto dealers have waged a long (and mostly, losing) legal and legislative battle against Tesla’s direct-to-consumer sales model. While Tesla has won the right to sell directly to car buyers in many US states, the dealers’ relationship with major automakers hasn’t changed—they remain an integral part of the retail process. Their showrooms, however, are beginning to move online.
It’s important to note that Tesla’s adversaries in this war have been dealers and their trade groups. The automakers themselves were never directly involved in the conflict, and to the best of my knowledge, none of them have had much to say about it. Automakers and their dealers remain staunch allies—no automaker would publicly advocate dumping the century-old system of independent dealerships. However, as a character in a rom-com movie might say, “Don’t pretend you haven’t thought about it.”
As the auto sales process gradually moves online, the advantages of the dealership model become harder to see. And the advantages of selling directly to customers, as Tesla does, are easy to see—cost savings, more control over the presentation of the products, and the opportunity to establish deeper and more satisfying relationships with customers.
Of course, even if carmakers did want to dump their dealers, doing so would be illegal. The states that have allowed Tesla to sell directly have generally done so by carving out exceptions to existing law, which apply only to automakers that don’t have dealerships.
Doing an end run around dealerships would also be unfair. Elon Musk himself pointed out some years ago that automotive franchise laws exist “to prevent a manufacturer from unfairly opening stores in direct competition with an existing franchise dealer, which would, of course, be wrong” (Tesla, which has never had any franchises, does not have this issue).
The symbiotic relationship between automakers and their dealers remains, but as fate would have it, the coronavirus crisis has given automakers a glimpse of another sales model, by encouraging them to test online direct sales. These days, people may still want to buy cars, but they don’t want to go to a dealership (actually, I doubt many people ever did) where they’ll have to touch a bunch of germy surfaces, and interact with germy humans. As Sasha Lekach, writing in Mashable, reports, some automakers are offering “contactless” ways to shop for, and buy, their vehicles.
Ford has opened an online showroom, where buyers can compare different vehicles, pick out options and get price and financing estimates. Ford isn’t selling directly to customers—once you’ve picked out your car, you’ll be directed to your local dealership. However, once you’ve connected with the dealer, you can continue the buying process online. You can have a video chat with sales staff, finalize your deal, sign all the paperwork, and even arrange a test drive, without ever having to drive to a car lot, sit in an office, or shake a hand.
In response to the pandemic, Autoline speaks with Consumer Reports about the transition to online auto sales (YouTube: Autoline Network)
This is actually nothing new—GM has been offering online ordering options in some locations for years. However, a GM spokesperson told Mashable that online shopping has become much more popular in recent months. You can bet that GM and others have been working to expand and improve their online sales channels. Naturally, aspiring EV brands such as Rivian, Lucid and Polestar plan to sell their vehicles online, although some may choose to open a few showrooms.
For EV fans, there’s another good reason for automakers to move most or all of the sales experience online. Dealerships have emerged as a major bottleneck for EV sales. With rare exceptions, dealers have shown little to no interest in selling EVs—and why should they, with car sales as healthy as they have been for the past few years? Customers who walk into a dealership looking for an EV often find that there are few or no cars on the lot, and that the sales staff knows less about things like charging, range and available incentives than they do.
Of course, Tesla foresaw this situation from the beginning, and that’s one of the reasons it never got involved with the dealership model. “Existing franchise dealers have a fundamental conflict of interest between selling gasoline cars, which constitute the vast majority of their business, and selling the new technology of electric cars,” wrote Elon Musk. “It is impossible for them to explain the advantages of going electric without simultaneously undermining their traditional business.”
Volkswagen, which is one of the few legacy automakers that seems to be interested in actually selling its EVs (or is it?) is also well aware of this dynamic. In May, it announced that its German dealerships will not be the primary point of contact for buyers of the new ID family of EVs. Customers will place their orders directly with Volkswagen, and choose a local dealer, which will act as an “agent,” arranging test drives, finalizing transactions, and delivering the vehicles.
It’s not clear whether this agency model would be legal in the US, but in response to coronavirus concerns, VW has introduced a “Sign Anywhere” policy across all its 420 US dealerships, allowing customers to digitally sign documents and complete transactions without setting foot in a showroom. Like Ford, VW already has a pretty full-featured virtual showroom setup.
The folks at Tesla’s sales department must be more than a little amused as they watch their putative rivals rushing to set up systems that Tesla has had in place for years. Automotive World tells us that “it has taken time to adapt digital signature technology to meet the requirements found in the financial services space,” but we haven’t heard that Tesla, which has been selling cars online since 2008, ever found it to be a problem. And, as Mashable’s Lekach writes, “buying a Tesla has always been a contactless process.”
Once again, the legacy brands are playing catch-up with Tesla. Except in this case, it seems more like catching up with every other segment of the retail industry, most of which went online years ago. Could it be that dealerships have been resisting the online sales model? Once car buyers get used to virtual showrooms, most aren’t likely to be nostalgic for Crazy Cal and his buddies out on the airport road, and as we noted above, the rationale for using independent dealerships may become harder and harder to sustain.