Tesla Direct Sales Drawing Dealer Fire in Australia

Tesla is preparing to start up in Australia with its direct-to-consumer retail model, but the auto industry is questioning the electric-vehicle maker’s template.

Tesla signage has been erected at a service center in Sydney and the Fairfax news service reports a Melbourne site will follow within two months, marketing the Model S sedan at a price of about A$90,000 ($79,312).

Australians have been able to buy Tesla cars online for several months, but the California-based company is to operate its own sales and service operations as opposed to the traditional dealer model in which third parties sell cars rather than the manufacturers.

Michigan this month become the fifth U.S. state to legislate against Tesla selling directly to consumers, following Arizona, Maryland, New Jersey and Texas.

A Victorian Automotive Chamber of Commerce spokesman tells the Business Spectator website the business model doesn’t make sense.

“Australians are well served by the current dealership network, a business model which has worked well for decades,” the spokesman says. “Car buyers know, understand and trust the dealership model, and VACC questions why there would be any move away from this model.”

The chamber says there is more to buying a new car than simply picking one from off the shelf.

“Buyers invest years building up a trusted relationship with their local and/or preferred-brand dealer,” the spokesman says. “Trade-ins, test drives, service and repair, and spare parts are often the key questions car buyers ask of their dealer, and it is unknown if supermarket outlets will be able to offer this.”

But Tesla Australia’s Heath Walker tells the website “familiarity for the consumer doesn’t change with Tesla.”

The automaker will handle a customer’s information with every action from purchase to service, guaranteeing a seamless experience, he says.

“The customers are dealing with one company the whole way through,” Walker says. “We know the whole history of the customer, and can therefore provide what we believe is the best service outcomes for the customer.

“With the traditional model you may change from the dealership you bought the car from and go to another dealership, and that relationship starts again. It doesn’t continue on. We’re able to continue the relationship from the purchase day right through to servicing, and if they purchase again.”

VACC says the Tesla model leaves no room for negotiation on pricing. The spokesperson says a significant benefit for consumers dealing directly with dealerships is that they have the opportunity to negotiate the vehicle’s sale price.

Walker says Tesla has a set price and the customers know that up front: “They’re going to leave our retail outlet knowing they’ve paid the same as the person walking in before them, and the person walking in after them. Sure, you can negotiate with dealers, but you don’t know if you’ve got the best price.”