Tesla #3: Sales Challenges

Car companies sell their vehicles through dealers. Elon Musk though decided the best way was for Tesla to sell the car directly, writes Tim Higgins. But this brought the company into “unchartered territory” – in most American states, car companies are not allowed to sell directly to customers!

 

Given that Tesla had enough challenges – building a car company from scratch, not just another car but an electric one, and the need for huge cash investments – why was Musk trying to create one more challenge for the company? Well, Musk ideologically hated the “hard sell” approach – coming from the Internet age, he felt a great product would sell itself. In addition, Musk understood that buyers would need to be educated about electric cars – and for that, he didn’t trust the dealerships; instead, Tesla should build its own sales team. And yet:

“He tended to show little interest in the boring nuts and bolts of sales operations.”

This is just one of many contradictory stances Musk would take in the Tesla saga.

 

Charging stations, or rather the lack of them, was another major hurdle. Tesla would try creating charging stations in states where it felt sales would be high, like California, and hope that could be extended later to other states.

 

Outside the US, in Norway, Tesla’s business was booming (because of Norwegian government subsidies for electric cars). But Europe created other challenges – with countries so small and cross-country driving common, a Norwegian Tesla might break down while being driven in Germany. But Tesla had no service centers in Germany… Sales was a challenge every step of the way.

 

As Tesla struggled to get anywhere close to producing a mass market electric car, Musk thought of the option outside the US and Europe:

“To do that (make a mass market electric car), he needed scale, which would drive down costs. And to achieve scale, he would need money – a lot of it. It all pointed to one place: China.”

Plus, a car factory in China would be cheaper. And, in China, a factory could be built at lightning speed if the government favoured things – and the Chinese government was creating favourable conditions for environment friendly cars.

 

Just as Tesla was getting set to enter China, Trump started his trade war.

“Could there be a worse time to depend on China?”

Fortunately though:

“China needed Tesla as much as Tesla needed China.”

And so things moved at spectacular speed in China. Very quickly, China would become Tesla’s biggest market.