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Tesla won't use franchises; will handle sales, service

Automotive News reports on Tesla's sales plans.

Automotive News

Tesla Motors will expand sales into four more U.S. and Canadian cities this year, but interested dealers need not apply.

The maker of electric sports cars is skipping the traditional U.S. franchise system to maintain total ownership of its retail chain as the company grows, says Tesla spokeswoman Rachel Konrad. "Our model is more like the Apple Store" found in shopping malls, she says.

The California venture now faces the challenge of handling service problems.

The company has only four U.S. retail outlets: in Los Angeles; Menlo Park, Calif.; New York; and Seattle. Tesla has sold about 700 of its cars spread across all 50 states. This year the company plans to open stores in Chicago, Washington, Toronto, and Dania Beach, Fla., outside Miami.

The stores will not rely on service business to make a profit, because electric cars have fewer serviceable parts. The cars have no need for oil changes or fuel filter replacements, for example.

Instead, Tesla is developing a mobile field service organization that will travel to owners as necessary. A fleet of service vans will handle customer problems outside the cities in which Tesla has a store, Konrad says.

The concept got an unexpected test this summer when a part was recalled by Tesla's chassis supplier, Group Lotus. Tesla dispatched service technicians by car, truck, and airplane to each of its 700 customers, Konrad says.

For now, Tesla's retail plans probably are irrelevant to most U.S. auto dealers. Its sole product so far is a $100,000-plus electric two-seater. But within two years, the company plans to market an electric family sedan that costs less than $50,000. After that it plans to bring out an electric car for less than $30,000.

Konrad says Tesla's retail sales and service personnel will be paid a straight salary in hopes of keeping distribution costs lower than those at a traditional auto dealership.

The company thinks that factory ownership will reduce distribution costs. "We will be the retailer," she says. "It won't be a third party trying to make a profit on sales or service."

(Source: Automotive News)