Should Tesla Motors Franchise? If Yes, With Whom?

Tesla Motors sells direct in Tesla Stores. Might the company benefit from entering franchise agreements?
Tesla Motors sells direct in Tesla Stores. Might the company benefit from entering franchise agreements?

Tesla Motors has long been chastised for its adoption of the direct-sales model, much to the dismay of many automobile dealer associations.

Tesla Motors CEO Elon Musk, at the 2015 Automotive News World Congress (link might be behind a paywall), was encouraging other automakers to adopt electric vehicles, expanding on the success of models such as the Nissan Leaf and Chevy Volt. Such expansion would certainly help drive down electric vehicle pricing, not to mention transportation emissions. Something else that caught my attention was the part where he mentioned that, once Tesla Motors established “a solid base of customers,” it might consider franchised dealers. Musk went on to say that it would “only be if [Tesla Motors] was sure that the customer would have a really good experience.”

Now, having been a Lexus man for years, I may be somewhat biased in my opinion, but I think that Lexus might be a good partner for Tesla Motors, in spite of some misgivings I’ve had on the part of Lexus hybrid vehicle marketing. Think of this: Tesla Motors likes the fact that they have only a few stores (• – see note), relatively speaking, which gives the brand a certain level of exclusivity. Think of it like Toyota and Lexus. Currently, Toyota has 1,500 (or 1,800, because the same page has two numbers) Toyota, Lexus, and Scion dealerships. According to an email I got this morning, Lexus runs just 235 dealerships, 188 of whom qualify as Elite of Lexus dealers for their exceptional attention to customer satisfaction.

Would 188 Elite of Lexus dealers be the exclusive connection that Tesla Motors needs to expand its sales? Considering that the upcoming Tesla Model 3 is expected to sell in far greater numbers than the Tesla Model S, will Tesla Motors need a dealer network, or can they continue with the direct sales model?

On an interesting side note, Lexus has been looking closely at Tesla Motors direct sales model, specifically the Tesla Galleries, as perhaps another method of reaching new clients. Most studies have shown that people do their best to avoid dealerships, but love the no-pressure atmosphere in Tesla Stores and Tesla Galleries. Look for a “Lexus Gallery” in a mall near you?

  • I’m waiting to see if Tesla Motors PR emails me back with a current figure. I will update if they answer.
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