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What We Can Learn From Tesla.

Updated: Oct 26, 2023

There are many things that Tesla does differently; they seem happy to tear up the automotive playbook. The author doubts that they were the only ones who didn’t expect Tesla to survive or even thrive the way they have. However, thrived they have, and Model Y is likely to be the best-selling vehicle in the world this year.


There have been so many innovations in their relatively short existence that sometimes we take these innovations for granted. There have been a small number of staid choices too. Model S is 10 years old for example, and in luxury sedan years that’s like 30 years.

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On innovations, there is a direct-to-consumer business model. Tesla is the only brand in New Zealand to do this. Their dealerships (or Tesla stores) are more like Apple Stores than car dealerships. They don’t seem to follow the road to sale in-store and are quite happy to let consumers walk rather than close a sale.


Trade-Ins? Not really encouraged. Certainly, there is no used car display in the traditional sense, and they only stock used Tesla (there’s a lesson here for many a dealer).


They are leaders in online buying experience for cars, with a customer experience and customer communications workflow that is the envy of many. If you doubt this point, take a moment to ask how aligned your CRM is with that of the manufacturer and how integrated your data flow is. Having mystery-shopped Telsa for a couple of clients I can tell you that their processes and data flow are miles ahead of nearly all other brands. Theirs is a customer-centric view that considers different stages of the buying cycle, whereas most dealers have an Autoplay view, then a DMS view, and then a patchy integration into the manufacturer CRM at best (with lost leads falling by the wayside). Tesla has plenty of smart automated contacts along the way. Their lead management arguably makes up for their lack of ‘selling’ in-store (but also bear in mind their online sales portal is likely to outperform anyone else’s online sales too).


Aftersales is different – mobile servicing and very few physical workshops must be challenging for customers, particularly given their market share and rapidly growing vehicle parc.


They have taken a while to understand fleet sales, particularly to local fleet management companies (some would argue that they still don’t understand, but are at least learning to understand).


For the first few years, Tesla didn’t transport their vehicles using RoRo either – everything was containerized. Most mainstream car brands will tell you that is not the way to ship cars as its labour intensive and expensive (to be fair, it may have been reflective of the shipping route for early vehicles from the USA factory). Now cars are RoRo from China.


Telsa derives revenue from non-vehicle-related activity. Superchargers for example, or how about Enhanced Autopilot or Full Self-Driving Capability (the latter is yours for $11,400, don’t forget to read the small print), accessories, including a Cyberwhistle. Nothing unusual about lifestyle accessories you say. Cyberwhistle is yours for just 890 DOGE.


I think we’ve established that Tesla is quite unique, and this is before we get to rapidly changing retail pricing.


Model 3 has just been reduced again and is now $14,000 less than 12 months ago (before rebate). It is their fourth price change this year. This level of volatility is unheard of in the local market. Most brands would offer service plans, low-rate finance, free wall chargers, or volume-related bonuses to manage sales volume or inventory levels. In essence, to avoid changing the MRRP a brand would use Dealer Cash, an American term, meaning the dealer gets the money for selling the car, or Customer Cash (meaning the customer gets the incentive).


Dealer Cash can be hidden and generic, volume related bonus is a great example, or targeted, like a registration bonus. But Customer Cash is much rarer. It’s also more effective because 100% of that money goes to the consumer, like a cashback (we haven’t seen these for a while) or a straight saving if ordered and registered by a certain date.


But Tesla, like the British ska band Madness, goes One Step Beyond. They go full retail price reduction. It’s brutal, visible and effective.


It also gets picked up by the media. No one cares too much about a free charger but chop $2000 off the price of your car and that story gets picked up by Stuff, Driven, and Autocar, and gets talked about.


Dealers bemoan MRRP changes as they argue it affects residual values. It does, usually for demos (which hurts if a dealer owns the stock) but not so much for cars at 36 months and 60,000 kms. So, for consumers, an MRRP adjustment is almost always a good thing, unless you’ve just paid the higher price.


If we look at the results, their unique approach to the market is working. They are now a top 10 brand (despite not having a light commercial vehicle) and they are New Zealand’s best-selling EV brand YTD (June data) and Model Y was NZ's best selling vehicle in September. In the USA they have over 65% market share of EVs. In NZ they are at close to 35% with 3636 units YTD; BYD is a relatively close 2nd (1362 units behind), and MG is #3 1680 units behind. Only 3 other brands in NZ are close to or exceed 100 units in pure BEV.


Telsa frustrates dealers and established players. Their latest price reduction will create ripples throughout their competitive set, and potentially start a wave of tactical offers or even changes in MRRP. MRRP changes are generally avoided at all costs, especially if they are price reductions, and regretfully applied if they are price rises.


Yet Tesla is using this blunt tool to stimulate or manage demand (or to mop up supply).


If you were MG or BYD about to launch a new model today, that price you had used in your volume planning premise better have some flex built in. Because in the new world order, as Mike Tyson said, “Everyone has a plan until they get punched in the mouth.” For consumers, the transparency is both refreshing and disquieting. The rapid re-pricing of EVs here right now has been triggered by the ripple caused by Tesla.


It is often the response of automotive leaders to be somewhat dismissive of Tesla, yet most times their moves have challenged the landscape and also been effective. Tesla is signaling is that the business model we are used to is not sacrosanct. There are a lot of new brands watching and taking notes, and we can expect more to follow. It’s unsettling to many that Tesla does all of this with just four retail stores and four mobile service outlets.


The time to dismiss them is long gone, now its time to watch and learn.




www.boostauto.co.nz/read-blog


Boost Auto is an automotive consultancy working in six main areas.

• Sales and Marketing effectiveness for brands and dealers

• Market Insights & Trends

• Business Planning and facilitation

• Get Ready process automations

• Green fleet facilitation for large corporates

• Go To Market strategies for emerging brands



You can contact us at hello@boostauto.co.nz


Picture Credit:

Tesla.

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