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Tesla is Turning the Car Sales Model on Its Head

As Tesla Motors‘ CEO, Elon Musk, has said, he wants Tesla to be the next major American car company-shifting the paradigm of the last century from what has traditionally been known as the “Big Three” to the “Big Four.” With the introduction of Tesla’s first consumer-oriented vehicle, the Model S, early next year, and an even more affordable vehicle due in a few years’ time, the company is finally set to aim for these dreams in a big way.

But while the visions of grandeur may seem unattainable to many Americans given that Tesla is going to build electric cars and nothing else, the company has quietly been trying to use a perceived weakness-its lack of industry experience-to its advantage. By exploring every out-of-the-box avenue, Tesla is trying to create a model in which cars are designed, built and, ultimately, sold in very non-traditional ways.

It’s this last point-the typical car sales interaction-which Tesla views as fundamentally flawed.

“Traditionally a car company designs, engineers and builds a car they think the public will want,” said George Blankenship, Tesla’s VP of Sales and Ownership Experience, in an interview with “But even though that company has invested all this energy in the process, when they hand it off to the dealer the customer experience is out of their hands-and the dealer’s motivations are driven by the desire to sell as many cars as possible every day, which doesn’t lend itself to a happy customer.”

Tesla’s goal is completely different from this traditional dealer model, says Blankenship. To begin with, Tesla doesn’t even have dealers. Yes, the company has retail locations, but these Tesla stores – of which there are now 20 worldwide – are all self-owned. Tesla’s new push involves opening stores in high traffic mall locations, the most recent of which opened in Bellevue, Washington, just outside of Seattle, where we sat down with Blankenship inside a prototype of the Model S.

“We want to engage with people when they are not thinking about buying a car,” said Blankenship. “Our goal is not to sell a person a car, but to educate them on what electric cars and, particularly, what Tesla electric cars can provide. At a mall, people are already relaxed and out shopping on their own. Most of them will likely never have heard of Tesla, and so we are becoming part of their daily routines.”

Blankenship doesn’t expect many vehicles will even be sold at the mall locations, instead expecting the sales to happen online after the initial mall experience. In many states, independent dealers can’t sell cars at retail locations, but there are no such restrictions to online sales. This strategy is a way for Tesla to get around what they perceive as antiquated laws and control the entire ecosystem from conception to delivery of the product-much like Apple does by building the hardware and operating systems of their products and then selling them at an Apple Store.

This unique sales strategy in the automotive industry is just one of the things that makes Tesla a very different company, but according to Blankenship it’s key to their eventual success.

“If everyone who comes into a Tesla store leaves it with a smile, we’ve done our job,” said Blankenship. “Don’t take this the wrong way, but I don’t care how many of those people actually buy a vehicle after that first experience. Eventually they will come back and buy a Tesla not because it was sold to them, but because they really want to become part of the Tesla community.”

The Model S, a luxury vehicle, will be sold in several different configurations starting next year. Pricing will depend on the size of the battery pack a customer chooses (three options providing either 160, 230 or 300 miles of range per charge), but the base model can be had for about $50,000 after a $7,500 tax credit.

Tesla will be ramping up production slowly, selling only about 6,500 Model S’s in 2012, but by 2013 has plans to ramp production up to 20,000 vehicles per year. It will be built in a former Toyota factory in California that used to produce more than 400,000 vehicles per year-meaning Tesla has significant room for expansion if the visions of their CEO are borne out.

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  1. This strategy, combined with convenient service centers visible to the public, will increase consumer confidence and sell cars. Buyers have long been tired of conventional dealership B.S.

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