Model 3 Reservation Holder Survey Underlines Tesla’s Mass Market Challenge

 

They waited for reservations… will they also wait for service? (image courtesy Investors Business Daily)

Much of the critical coverage of Tesla Motors, both here at Daily Kanban and elsewhere, has focused on issues that Tesla is able to get away with as a small-volume manufacturer serving an affluent, early-adopter market segment. From manufacturing bottlenecks to quality control problems, from inconsistent, hype-happy communication to poor service, Tesla has been able to weather a storm of problems because its customers and fans are so patient with and passionate about the company. But as Tesla moves from expensive, low-volume cars to the mass market Model 3 these problems are taking on a new significance. In part this is because higher volumes increase the likelihood of quality and service problems, and in part it is because mass market customers who depend on a single car for their daily routine are more demanding than luxury car buyers who can always take the Lexus to work if their Tesla is broken.

Given Tesla’s pattern of releasing cars with insufficient testing as well as its chronic quality problems, it’s safe to assume that the Model 3 will face its fair share of issues. Thus, investing in service infrastructure that will allow Tesla to promptly and affordably repair and upgrade high volumes of Model 3 is extremely important. As Bertel has written about at Forbes, Tesla is behind the curve on those investments and it will cost billions to catch them up. Just yesterday a piece by former Tesla employee Evan Niu dramatically illustrated just how far Tesla has to go to improve its service time, which has dragged on for 8 long months in Niu’s case. Now an exclusive study of about 800 Tesla Model 3 reservation holders, EV owners and luxury brand car owners conducted last year on behalf of a major automaker and provided to Daily Kanban by an industry source, reveals why Tesla’s quality and service woes are so critical to the success or failure of the Model 3.

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Who’s Afraid Of Direct Sales?

This is how you don't change a business... (courtesy: Opensecrets.org)

This is how you don’t change a business… (courtesy: Opensecrets.org)

In my most recent post at Bloomberg View, I draw a connection between Michigan’s new law blocking Tesla’s direct-sales model and the interests of the automakers based there. General Motors has taken the lead among Michigan’s automakers in opposing Tesla’s state-by-state battle for direct sales, publicly pushing Governors to protect the franchise system in Ohio and now in Michigan. In both cases, GM positioned itself as defender of “an even playing field” in the car business rather than arguing against direct sales or defending the franchise model. As I point out in the column, this is nothing short of absurd: GM’s extraordinary bailout make it the auto industry’s least-qualified advocate for fair play. But it’s also strangely telling: GM may not want Tesla to sell directly to consumers in states where it has a franchise dealer network, but it is hardly settled on the issue of direct sales themselves.

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The Mystery Of The Unsold Cars

Ah, look at all the lonely automobiles...

Ah, look at all the lonely automobiles…

One of the great frustrations about writing on the internet is the constant reminder that words can never compete with images for immediate impact. The human symbol-based psyche craves simplicity in a frighteningly complex world, and images provide their impact immediately, without need for further consideration. The old chestnut that “a lie is halfway ’round the world before the truth gets its pants on” is especially true in the modern world, where ever more is shared in images that can only ever show so much.

When Zerohedge posted photos portraying huge parking lots where, allegedly, “the world’s cars go to die” it was inevitable that the photos would have a huge impact. After all, 1) ZH is very well read and 2)monstrous overflow lots stuffed with unsold vehicles were to the 2008 US auto meltdown what suburbs full of foreclosure signs were to the mortgage crisis. In my naivete, however, I believed the shocking (if not entirely accurate) imagery of the post would inspire a closer look at the current auto inventory situation around the world. Having warned of inventory buildup in the US in a recent Bloomberg View post, I thought I could busy my weekend with other issues.

Yeah, right.

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Blankenship Departure Underlines Tesla Retail Issues

Going down with the Blankenship?

Going down with the Blankenship?

For all the praise it receives for “innovating beyond internal combustion,” there’s nothing especially unique or disruptive about Tesla’s core technology.  On the other hand its approach to automotive retail, forgoing dealerships for direct sales, is both unique and potentially very disruptive. Especially at a time when some of the biggest OEMs in the US market are opening  online sales channels that could someday allow online-only retailers to bypass the dealer franchise system. With the man behind Apple Store and The Gap retail successes leading Tesla’s direct-sales strategy, car dealers have had good reason to worry that the future might be passing them by.

Now with Tesla under NHTSA investigation for what is clearly an anomalous incidence of fires and effectively banned from retailing in one of its largest potential markets, Tesla’s retail guru has suddenly and quietly retired. As much as the fires themselves, this is another clear sign of Tesla’s growing pains… and possibly the most concerning.

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