Tesla: reinventing car sales—or not?

Tesla is on a roll lately, in all sorts of ways. It’s innovating in areas that are making electric vehicles a viable—and very desirable—option for many people, for the first time. They’re changing the way performance options work, by offering software-based upgrades for features like autopilot and even acceleration rates.

And the way Teslas are sold has always been different from most manufacturers: Tesla has maintained retail locations with a few examples of cars on the showroom floor, but instead of having an inventory of cars with various combinations of colors and features ready to drive home, they’ve built cars to customers’ preferred specifications.

That model makes a lot of sense, considering that traditional dealers lose $5-10 or more in interest costs daily, on every single car in their inventory. And those cars usually sit for weeks or months before they sell. So building each car only when there’s a buyer for it is kind of a stroke of brilliance.

tesla store greencarreports
Tesla’s pulling the plug on most retail stores. (image source: greencarreports.com)

Of course, this model has also meant that a big backlog, as orders have come in way faster than Tesla could produce the cars. Which in itself might also be a stroke of brilliance—the scarcity and wait time has seemed to stir even more excitement and anticipation among expectant Tesla owners.

But recently, Tesla changed the game again. While it’s long offered online speccing and ordering of cars, the company is now making their website the only method of ordering. The retail stores as they previously existed will be no more. Many will be closed, and some will stay open as information centers, without sales operations.

Tesla ordering
Most people buy a lot of things online. But do they want to buy a car online? (image source: http://www.tesla.com)

This shift to online-only sales is a radical one; while many people are intimidated by the experience of engaging with sales staff at a car dealership, it’s also an ingrained part of the shopping process for most buyers.

But the most notable part of the dealership/car sales experience that will no doubt be a glaring omission for many would-be Tesla owners: the test drive.

Tesla used to offer test drives the way most dealers do, but they also often allowed prospective buyers to take cars on multi-day loan, to really get a feel for it and make sure it was a good fit for their day-to-day life.

Now, instead of a test drive, Tesla is offering… a return policy.

That’s right. That $40-140k car you just bought without a test drive? You can return it within 7 days of delivery, if it has fewer than 1,000 miles on the odometer, and hasn’t been modified or damaged in any way.

It’s a generous return policy for sure, but buying a car is sort of a big process… there’s registration, and often a finance or lease contract that are sort of involved to process and to cancel. A lot of people have raised questions on social media about whether state license fees (required to be paid at the time of purchase in most states) will be hard to get refunded, and whether it will be complicated to apply for a lease or loan on another car soon after, if you return a leased or financed Tesla.

Tesla purchase screen
The Tesla purchase page. Just like you’re buying a new TV on Amazon. (photo credit: http://www.tesla.com)

CNBC reports that numerous customers have had problems getting their money back once they’ve returned a car to Tesla‚ even though the returns met all of Tesla’s criteria. Even when refunds are issued within the promised timeframe, it’s a long timeframe: Tesla promises refunds will be processed and money refunded within 30 days. That’s a long time to wait for a refund of tens of thousands of dollars.

The CNBC article also raised another concern about the return process that many customers have characterized as sloppy: the company doesn’t seem to be very meticulous about electronic security, either. One customer described how, after returning his Model 3, he found he still had access to the car via the Tesla drive app, and could still remotely control the infotainment system, AC, and other aspects.

Whether or not Tesla can shepherd the car shopping public into acceptance of a new buying paradigm remains to be seen. Maybe they will find success with this new model, once people have time to understand it and get used to the idea, and maybe other manufacturers will follow suit. Or maybe enough of Tesla’s future buyers will reject this new model, and force them to backtrack on their sales strategy. The only certainty is that Tesla remains a fascinating company to watch—its victories and its missteps are always spectacular, such is the speed and scale of its innovation.

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