Photo by Shannon Liao / The Verge

GM will launch a Tesla-style direct sales model in China, and Ford plans to pressure dealers to cut delivery costs. The purpose of the initiated changes is to hopefully get a chance to compete with Tesla, which is focused on consumers, not dealers.

Finally, legacy automakers have stopped denying Tesla's success in its approach to sales and have begun to seek imitation. Tesla's direct sales model has not only proved its viability, which has been questioned by automakers and dealers, but it has also proven to be the strongest competitive advantage. Over the years, Tesla has received special love and respect from customers who are no longer forced to overpay when buying a car, as buyers of other cars do.

In March 2022, Tesmanian was contacted by Ted Marena, who shared his story of buying an electric vehicle. He considered various options, and although most of them did not meet the desired characteristics, the main problem for those that were acceptable was the cost. Ted said his research showed that most dealers had a markup of 5-10% on the models he was interested in, which would mean a large overpayment. So, for example, the markup on Ford Mach-E is up to $10,000 compared to the manufacturer's suggested retail price. Ultimately, he chose Tesla Model Y, which was a perfect match for the expected features, delivery time, and cost.

Ted's story is not the only one and demonstrates that consumers now see a distinct difference between when they simply pay for a car and when they pay for car and the services of a dealer whose role in the sales transaction is too exaggerated. Obviously, Tesla has become a great option for many, given the desire to get a great car without extra fees. For several years, automakers have watched Tesla succeed in the sales field. Some of them made a conclusion and even began to act.

On Friday, Reuters reported that Ford Motor CEO Jim Farley will travel to Las Vegas next week to convince dealers to cut $2,000 in the cost of delivering an electric vehicle to a customer. He shared his strategy with analysts back in June, stating that the goal is to compete with Tesla and companies that sell directly to consumers without franchised dealers.

Some dealers say they fear that Ford's move to a Tesla-style build-to-order system could limit the profit they can make selling the new cars. They may even try to fight it and said that state franchise laws could give them leverage to resist Ford's efforts to fix prices or flatten charges for delivering electric vehicles. Obviously, the dealer sales model will change in the near future, and it will be very interesting to see exactly how this plays out.

On the other hand, General Motors has already taken some steps to change its sales model, although not yet in the US. On Thursday, Reuters said GM in China plans to use a new direct sales platform called the Durant Guild, which will host invite-only events to showcase possible products, open “experience centers,” and potentially stage pop-ups at selected sites. GM plans to do this without relying on traditional dealerships, although more detailed plans have not been revealed. However, the goal of this approach is to compete with Tesla and bypass dealerships in order to make their cars more attractive to consumers.

A car dealership or vehicle local distribution is a business that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary. It has salespeople who interface with buyers. It may also provide maintenance services for cars, and employ automotive technicians to stock and sell automobile spare parts and process warranty claims. Tesla has rejected the dealership sales model based on the idea that dealerships do not properly explain the advantages of their cars, and they could not rely on third-party dealerships to handle their sales. In addition, when selling cars through a dealer, they have a high markup, and for popular models, it can reach five figures. Instead, Tesla with a direct sales model prefers not to waste consumers' money but to make its electric vehicles better and more affordable to them.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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