Tesla Disrupts Old School Dealer Model

24 March 2014 Dashboard Insights Blog

The staggering pace of innovation has led to a number of industries being disrupted by upstarts providing similar services or products outside of the established model. Want a taxi? Use Uber. Need a hotel? Try Airbnb. Looking to watch television or a movie?  The choices are almost already endless: Chromecast, Netflix, Roku, Apple TV, etc. As the Chicago Tribune reported recently, these business all face regulatory issues – state and local regulation.

Did you think that the Automotive Industry was immune? While it might be a manufacturing industry, not a service industry, it is just as susceptible to innovation and disruption. One of the most disruptive forces in the Automotive Industry today just might be Tesla Motors. Most people react to that statement by thinking of the fact that Tesla sells a fully electric car. However, this would be at least partially wrong.

The truly disruptive maneuver by Tesla in the Automotive Industry is with respect to dealers. Quite simply, Tesla does not have them. Tesla uses a direct-sales model. Want a Tesla, buy it directly from Tesla. As Bloomberg reported, this has led to a full scale war between Tesla and dealers all over the country. Specifically and most recently, Tesla is actively at war with the State of New Jersey and Governor Chris Christie according to Business Insider.  According to Business Insider, as of April 1, 2014 (April Fools’ Day?), you cannot buy a Tesla in New Jersey except from a dealer.  The New Jersey Motor Vehicle Commission approved a proposal (PRN 2013-138) requiring applicants for the licenses required to open a motor vehicle dealership to be “a motor vehicle franchisee.” Since “motor vehicle franchisee” is defined by New Jersey law as a “a person to whom a franchise is granted by a motor vehicle franchisor,” the law arguably forces Tesla to have intermediaries open dealerships – and prevents Tesla (or others) from doing it themselves.

As dealers fight state by state to stop Tesla, Tesla marches on seeking to disrupt this one aspect of the Automotive Industry. What it should tell companies is that whether their business model will be disrupted is not a matter of if, but a matter of when. What will be the next aspect of the Automotive Industry to be disrupted?

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