Tesla Wheel and Hub Sales Model - Can it be made to work?

Tesla Wheel and Hub Sales Model - Can it be made to work?

Normally when I beat my head twice on the same wall it is time to figure out what I am doing wrong. Bad faith has seldom been an issue in my business dealings so most of my solutions are found in mismatched expectations. I think this might be the case with my Tesla sales experience. If so, where am I going wrong?

Tesla is using a direct sales approach. As a starting point, let's assume 20k a year in volume and a three month time from finalize (customer commits funds) to delivery and payment. This would yield 5000 sales in play at any one time.

The "Apple Store" model of sales places a reasonable number of bright, motivated and intelligent young people deployed at store fronts, service centers and Tesla call centers to interact with the buyer. I think of these people as populating a wheel with spokes going back to a central hub at the factory. Those on the wheel can handle a lot of the customer interface and even some of the sales related issues but the hub is where the decisions are made and it is here that I think the process is breaking down.

Eighty thousand dollar capital expenditures are not IPhone purchases. Tesla is aiming for the customer laying hands on the product at the store front then placing an order over the internet with the factory. Early adopters are more likely to blend in with this idea but most car buying customers are going to require some level of interaction to complete a sale; a function the typical dealer sales manager performs. Financing, trade ins and title requirements are but a few of the issues dealers deal with day in and day out. The nuances of these interactions will vary state to state. Add Tesla's dealer issues and production scheduling/commitments to the normal sales manager work load and you are going to need some creative decision makers playing a very active roll if the sales cycle is to go smoothly. These people carry the added burden of needing to be better than their Dealer Sales Manager brethren if Tesla is to meet its own goal of a better customer experience.

My expectations on a $100K capital purchase are that I am going to deal with an entity that is capable of, and willing to take the time to, understand my concerns and will work with me to find a solution that meets both parties needs. The entity should expect the same of me although the onus to be flexible normally falls more on the vendor in a vendor/customer relationship. I am now working my second issue with sales and I am getting the feeling that the wheel is functional but there is no one at home at the hub. Judging by some of the posts I have read, I may not be the only one.

So, how many engaged decision makers does it take at the hub of a management group to properly manage 5,000 active end user sales? Does Tesla seem to have anywhere near this level of support in place? Are they exhibiting the regional expertise required to sell in fifty states and abroad? I would love to hear what other forum members are thinking.

Also posted on TMC

Carefree | 21. Januar 2013

I LOVE their sales approach - would not have it any other way. No greasy sales people, no haggling, no stupid comments about other car manufacturers. I feel very comfortable dealing with Tesla. Whenever I had a question I would get the answer with a quick phone call - the interactions were always pleasant. I have bought many, many cars at traditional dealerships and EVERY time I was disappointed with the sales people - even with high end cars. I much prefer the Tesla way of selling.

lolachampcar | 21. Januar 2013

as do I. I'm just concerned that one of Tesla's goals with this new approach is not working.

gregv64 | 21. Januar 2013

I like the idea of the approach, and don't see any reason why it can't work. The dealership model is hugely inefficient. However many people it would take to make the current model work, it would take many more people to staff a bunch of dealerships. The only advantage of the dealership model is that you have other people investing to get things up and running more quickly, but in the long term all the costs of dealerships ends up still coming out of Tesla's profits.

Tesla is certainly going through growing pains at the moment, but I firmly believe it's not a problem with the model, it's just execution problems that will take some time to smooth out.

DonS | 21. Januar 2013

I like the Tesla model. I've never figured out why a dealer even has anything to do with financing; see your bank or credit union. As for trade-in, that's just another place for the dealer to get more of your money. Titling is a clerical task for a couple of admins. From my point of view, Tesla provides a better customer experience, and probably does it with about 1/3 the staff. If they can avoid letting things fall through the cracks, they will have a long term winner.

Brian H | 21. Januar 2013

The experience of the "empty hub" must be addressed, as lola says. It seems sometimes that the DSes can't find anyone home, either ...

Leofingal | 21. Januar 2013

I agree somewhat, but here is my experience:

I don't have any spokes, as I ordered my S through the website, with no intermediary store. the only human contact I've had from Tesla was e-mails from the Toronto store (before they had an actual store) since I went up there to see the Beta. Today was my first human interaction, and frankly it was too late (if I wasn't an early adopter). The real gap is in the automated contact points. There should be e-mails weekly after they have given you a delivery window (for me this was December 30th).

My delivery window is from 1/24-2/7, and I had specified that I needed financing and trade-in. Automated messages with simple updates and reminders of when I should expect a DS to contact me would have cut down my concerns. I broke down and e-mailed customer service on Friday, and was called by an extremely helpful DS today. I suspect I was only contacted because I sent an e-mail expressing concerns that time was short. If they had contacted me first, I'd say things are great. Now that I have people I am working with, I have to say, everything has been great and responsive, and all my concerns are gone. The hub is quite good, they just need some better database feedback e-mails, and this is software, not people, so I think this can be resolved.

If I can keep working with the same contacts after delivery, I feel very confident that the Tesla model will be superior to what I have had to deal with in the past. Also, please keep in mind, since the beginning of December, the shipments are at full scale, so things will be settling out nicely in the next month or so, and they can start massaging their process instead of fire-fighting and scrambling to keep up with the delivery cycle.

I am very excited about the Tesla model (and the Model S!). I think they will definitely come out on top.

Cattledog | 21. Januar 2013

lolachampcar - Excellent question. Logistics is not my area of expertise, but here are some random thoughts.

1. 20,000 is out the window. They could probably sell 40,000 this year if they could only deliver them. Then Model X. Then Gen3. If I were Tesla, I wouldn't be solving for 20,000 in 2013, I'd be solving for 100,000+ in 2016. They need a paradigm shift. White glove delivery should be part of what you get when you pay for a Signature, period. Really. It hardly gets you anything else except a cool logo and more glitches.

2. If by March 1st 90% of all owners will be within 100 miles of a service center, then 90% of all deliveries should be through those service centers. If they aren't acquiring enough real estate to do this, now's the time to start.

3. If they are doing #2, then the sequence of ordering is approximately thus:
a. A customer gets familiar with Tesla any number of ways - referrals, internet, mall store, getting blitzed by one on the freeway, whatever.
b. That customer gets info they need to make a decision - referrals, internet, mall store, getting blitzed by one on the freeway, whatever - then orders by computer, at home where necessary, through stores if allowed.
c. At this point, the customer gets a delivery specialist from Tesla HQ, whose job is to treat that new reservation holder like a 6-week old baby. Along with all the other babies he/she's nurturing.
d. That delivery specialist is the point of contact until delivery, whereby it switches to the service center manager. First point of contact, closest geographically, not another random voice from an 800# at HQ.
e. I want a relationship with a person at this point, cause we have all become accustomed to things being perfect and when they are not, I want an advocate working with me to get it back there.

4. Here are reasonable numbers:
a. In 2016 they will deliver 50,000 cars in US, 50,000 overseas (don't ask me about that)
b. In 2016 they will have 50 service centers (guess)
c. Each service center will have 1,000 cars to deliver, or 20/week.
d. Most reservations will be within a 1-2 hour drive of service center - I would have taken a day off to get my car if necessary. Deliveries from over 2 hours will probably migrate to Saturdays.
e. The average car carrier carries 7 cars (I did exactly 20 seconds of google research to come to that conclusion) so 3 carriers/week to each service center, but 30 a day leaving factory.

5. At some moment they are putting east coast and gulf coast cars on a boat and sending them through the Panama Canal. Seriously.

Lots of logistics. Their weakness right now.

tezco | 21. Januar 2013

How large is the super luxury market in the US.?

lolachampcar | 22. Januar 2013

I'm happy to hear that others are having their business related questions answered. This means my experience is an isolated one. It's just been odd that my DS is so friendly, helpful and enthusiastic but unable to provide answers to the most basic of business questions.

I agree. I think Tesla has a bull by the horns.

I seem to remember BMW selling 12Kish 7 series in the US a year. That being said, I read from some of the forum posts that the MS is appealing to a much broader audience. People that would never have considered an $80K car before are saying they are doing so for the first time.

Cattledog | 22. Januar 2013

tezco - All Porsche models combined sold about 35,000 units last year in the US. With a little digging, I'm sure someone could find similar for BMW, Audi, Lexus, MB, Acura, Infiniti, Land Rover, Jaguar. Depends if you want to include Maserati, Aston Martins, Ferrari, on the one end and Cadillac and Volvo on the other. I'll do that homework tonight.

My guess - If you include all except Volvo, you're talking >400,000/yr. I'll try to verify.

txjak | 22. Januar 2013

At some point they'll probably use the rail system, as I assume the plant did at some time in its prior life.

lolachampcar | 23. Januar 2013

I did not get any feedback from my initial note last week so I escalated my current issue this morning and immediately got a call from the SE regional sales manager. He was friendly, knowledgeable and we were able to address all open and previous issues in a matter of minutes. I was thoroughly impressed with the quality of person, depth of knowledge and willingness to say "I do not have the authority to make that call" when he could not make a call.

The call this morning tells me that Tesla does have highly talented sales management in place (at least for the SE) so the breakdown I experienced is in the method in which issues are escalated and tracked. I do not know if the sales managers are overwhelmed or if issues are being dropped. If they are overwhelmed, I fear the problem is only going to get worse with the inevitable added workload of even more customers.

The good thing that came from this morning's conversation is that Tesla's Sales Management are thoroughly committed to the improved Tesla Customer Experience. They just need to tune the process so that the capable people on the wheel are plugged into the capable people at the hub.