Monday, March 17, 2014

Editorial: The fight for direct-to-consumer automobile sales

By now, you have probably heard about Tesla's latest defeat at the hands of New Jersey Governor Chris Christie. The new legislation put in place will halt all sales of Tesla cars by April 1, meaning that those interested in getting a Tesla Model S will need to move quickly or be forced to travel to one of the neighboring states to be able to get their car. This ongoing battle between Tesla and the dealership associations of various states seems to have become more than just an isolated battle about the desires of a single manufacturer to shake up the way in which the car selling business is done. In fact, it seems to have sparked a debate about the value of dealerships to the average consumer, including the value of a dealerships service department.

The New Jersey Coalition of Automotive Retailers (NJCAR), a dealership lobby group, is trying to promote the argument that dealerships are good for consumers and are there to protect the consumer from the evil car manufacturers who are just out to rip them off. Of course, this argument completely overlooks all of the stories that seem to pop up regularly about unscrupulous salesmen taking advantage of an unsuspecting victim. While a few bad apples should affect our impressions of all dealerships, it is hard for them to take the high road when the negotiating process for a new car results in a hugely varied range of prices based on the negotiating skill of the individual consumer. This does not even begin to get into the service side of things, where dealerships have earned the rather unflattering moniker of "stealerships" for their less than forthcoming practices.

While not all dealerships are evil and not all salespeople are swindlers, it is a lot more difficult to justify their continued existence when Tesla, with its company owned stores, keeps its locations stocked with personnel that have exceptional knowledge of their products and chooses not to pay them on commission, focusing instead on helping to educate potential customers to the benefits that Tesla's vehicles can offer. This makes for a very low pressure purchase environment and really encourages consumers to feel comfortable with their purchase before pulling out their checkbook. An educated consumer is much less likely to have buyer's remorse and also much more likely to promote the product to their friends and family. Tesla's model is about so much more than just direct-to-consumer sales, it is about restoring confidence in the car-buying process.

So rather than putting all of their efforts behind fighting Tesla's model, groups like NJCAR as well as the National Automobile Dealers Association (NADA) should look at the model and figure out how to incorporate aspects of it that seem to inspire confidence in potential customers. Start by providing proper training of personnel to help ensure accurate knowledge of the products. Examine the pricing structure to make "negotiations" less exhausting, and work on changing dealership service practices to improve the customer experience. Working on these things will go a long ways towards improving consumer confidence in dealerships. In the meantime, the fight continues for Tesla to do business the way it deems necessary to get its product in the hands of the people.

Tags: automotive, dealership, New Jersey, sales process, Tesla