When is the last time you saw someone waiting in line three days in advance to order a car? That’s something you see for an iPhone launch, not a car. Tesla Motors has infused a dose of Silicon Valley into car buying, and the Tesla Model 3 may be the start of a car-buying revolution.
With the Model S, Tesla created an EV like no other that came before. It was a luxury car first and a “green car” second. There were some buyers who bought one because they wanted to reduce their environmental impact, but Elon Musk knew the tree-hugger market is limited.
The reality is most buyers don’t put “low carbon footprint” at the top of their priority list when it comes to buying a car. It may sound shallow, people buy a car because they think it’s cool. And the Model S has proven to be a very cool car.
Of course, different buyers define “cool” in various ways, but just look at how many SUVs are purchased instead of minivans. Because a minivan, despite being the better tool for the job, is not “cool.” From pickup trucks that will never see dirt in their bed to sports cars whose owners won’t even come close to the car’s performance limits. People buy cars not necessarily for what they can do, but rather how the vehicle makes the owner feel.
Love it or hate it, the Model S is a technological showcase and can demonstrate performance that rivals supercars from legendary manufacturers like Ferrari and Lamborghini. Unfortunately, those cars were out of reach for most people—until now.
Given the hype, deserved or not, that surrounds the Model S and Model X, for your average consumer, Tesla has become an aspirational brand. Not only that, Tesla’s business model of bypassing the outdated dealership franchise system is hugely appealing to your 21st century car-buyer. The average American doesn’t want to hear all that crap about how franchises protect the consumer; all they know is they can buy practically anything in their home online, and they want to do the same for their automobile.
Dealership franchises with their protectionist legislation, coupled with a history of sleaziness and ripping off consumers, have made Tesla the poster-child for a generation of consumers fed up with buying cars the old fashioned way.
The average transaction price of new cars sold in the America is about $33,000. The Model 3's target price of $35,000 before incentives will put it within reach of your average buyer. Of course, the big question is whether or not Tesla’s business model can be sustained when scaled to a much larger volume.
If the brand can pull it off, we will likely see a generation of consumers demanding the “Tesla style” buying experience from other brands.
Established luxury automakers have seen the writing on the wall and are adjusting their marketing and product development strategies in anticipation of the Model 3. Audi’s new A4 sedan, which will compete at a similar price point as the Tesla, has an ad campaign that focuses on the technology in the car. Most new cars do the same. Mainstream buyers want technology in their car and Tesla has most of them beat.
Luxury car dealers have been turning into Apple-stores with “product geniuses” and interactive kiosks. However, what is holding all of them back is the fact that they are still shackled to the dealership franchise system.
Lexus has been trying a “no haggle” model in select dealerships, but this only works if every dealer buys-in. In order for “no haggle” to work you must universally implemented, or buyers will still have to negotiate.
As of now, the other European brands have been fairly ambivalent to Tesla’s fight with the dealerships. However, the entry level luxury sedan segment is hyper-competitive and very crowded. If the big players start to see a drop in market share due to the Model 3, they could pivot their position and desire a direct sales model of their own.
The dealership lobby is a powerful one, but if more brands step behind Tesla and a larger portion of the population expresses frustration that they can’t buy their car the way they buy everything else, the car buying landscape will have to adjust.
Many luxury buyers express a desire to buy a Tesla simply because they don’t have to navigate the frustrating dealership system. It’s a buying process that, even for someone who is skilled, can be time consuming and frustrating.
The success of the Model 3 may just be the flash-point that wakes American consumers up to the fact that there really is a better way to buy a car. That is not to say that dealerships will disappear in the near future, but how they operate will be very different.