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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Tesla Fights The Good Fight

 

Forget the electric thing... this is a better future we can achieve now.

Forget the electric thing… this is a better future we can achieve now.

Regular readers of my work probably consider me something of a Tesla skeptic, and the record doesn’t exactly dispute the charge. But as I’ve maintained throughout my criticisms of other automakers, criticism is hardly a sign of disrespect or antagonism. In fact, as a lifelong resident of the West Coast of the USA, Tesla represents the closest thing I have to a hometown team in the auto industry. Perhaps I’m out of touch with the self-esteem-centric values of our times, but I firmly believe that critical analysis is the most constructive contribution the media can make to the health of a company or industry. Certainly the history of the US auto industry confirms the fact that companies can drift dangerously and self-destructively out of touch with reality in the absence of regular gut checks from an independent media. [Continue Reading]

US Car Sales On Fire… But Who Is Doing The Buying?

Bought... but not paid-for.

Bought… but not paid-for.

With America’s Seasonally Adjusted Annual Selling Rate (SAAR) creeping  above 16 million units in November, driving the market to new post-bailout highs, the usual cheerleaders are out in force to celebrate the strength of the US auto sales. But in the rush to spread the good news, few are looking at the troubling data underlying these frothy sales numbers. In the US, automakers count sales upon delivery to dealers rather than consumers. When times get tough and demand shrinks, OEMs often force dealers to take on more inventory in order to temporarily improve sales numbers. We saw both GM and Chrysler dump huge amounts of inventory on dealers in the leadup to their 2008 collapses, and we’ve reported on a similar dynamic at play in the current European downturn.

We won’t know the extent to which dealers are stacking up inventory until we see a full December 1 report from Automotive News, but initial signs are not promising. Already in October, Wards Auto saw an uncomfortable build-up in inventories across the industry that has apparently only grown among the worst offenders. At the time Wards predicted that “the excess will be alleviated in November, when most of the lost sales are recouped,” but although pricing discipline has remained high the inventories are continuing to build as we head into December.

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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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