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More Evidence That the Dealer Model Can't Work for Tesla Motors Inc.

Tesla Motors (NASDAQ: TSLA  ) wants to sell its vehicles directly, but auto dealers feel threatened. Fortunately for Tesla investors, consumers don't seem to be opposed to the electric-car maker's attempts to bypass the franchise model -- it's just the dealers who want to stop Tesla. Still, dealer lobby groups are seeing some success at infringing on Tesla's attempt to sell its vehicles directly to consumers. Should investors be worried that the direct model isn't going to work for Tesla? Put another way: Is having consumers on Tesla's side enough to help the company overcome the hurdles facing it as it looks to expand its direct sales model over the long haul?

As Fool technology specialist Daniel Sparks explains in the video below, the clarity of Tesla's argument should be enough to help the company stick to its direct model. To highlight just exactly how clear Tesla's argument is, Daniel points to General Motors' currently failing attempt to use the franchise model to sell the Cadillac ELR plug-in hybrid as evidence that Tesla's argument has grounds.

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  • Report this Comment On May 16, 2014, at 6:14 PM, RobertFaheyJr wrote:

    In the future, if Tesla is no longer supply-constrained and is able to create retail stockpile, then maybe Tesla will leave the mall and build stand-alone, dealer-like facilities -- owned and operated by Tesla, of course. This would allow Tesla to capture two types of buyer that it can't really capture now:

    1. The urgent, need-based buyer who can't order a vehicle and wait.

    2. The impulsive buyer who simply HAS TO DRIVE IT HOME TODAY.

    Of course, these Tesla stores would have to accept trade-ins and have an on-site financing office. In other words, the dealer model could work as long as it's entirely under Tesla's umbrella and unpolluted by:

    1. Other marques.

    2. Franchise middlemen and their 24% (at least) penalty.

  • Report this Comment On May 17, 2014, at 9:58 AM, tonyzink wrote:

    Regardless of what state lawmakers have managed to do, Tesla is still selling cars. I live in Texas, where the hillbillies have passed the law preventing direct sales, and people are still buying Teslas. You can still walk into a showroom, sit in a Model S, talk with an expert, and schedule a test drive. I drove a Model S a couple of weeks ago, and I left wanting one. It is a well-engineered vehicle, it's comfortable, it's fast, and it has all of the software-driven convenience features that a modern vehicle should have. It is a gadget lovers' dream.

    Ordering a Tesla online and waiting a couple of months for delivery is not a show stopper. I am surprised at how many Teslas are still being sold here in Houston; I see one humming along at least once or twice per week.

    When the product costs a hundred grand, it's not exactly an impulse purchase... at least not for me. It makes me think seriously about the purchase before slapping down my $2,500 deposit.

    I am proud to own TSLA stock, and will continue to buy on price drops.

  • Report this Comment On May 17, 2014, at 10:46 AM, abductivethinker wrote:

    The motley fool is one source that attempts to put a negative spin on Tesla.

    Establishment in the oil industry and car industry have a lot to lose by the US changing to driving electric vehicles.

    It makes a lot of sense from several points of view so I believe that in the long term that will happen.

    The initiate to change will not come from companies like GM who have to much tied up in the past.

    The greatest advantage will come for consumers. Consumers need to take the iniative to choose electric despite the negative propaganda from organizations like motley fool.

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Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

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