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3 Things You May Not Know About Electric-Car Maker Tesla Motors, Inc.

Tesla (NASDAQ: TSLA  ) is still new to the automotive scene. Sure, the stock now boasts a market capitalization about half of General Motors', but it was only two years ago when Tesla was delivering only hundreds of cars per quarter. This year, Tesla is looking to sell 35,000 vehicles on the continued success of its Model S luxury sedan. Even in the U.S., a Tesla Model S remains a rare site in some states.

Model S. Image source: Tesla Motors.

Consumers and investors are still digesting all the details surrounding this fast-growing company -- many of which are quite surprising. Tesla undoubtedly wants to disrupt the way things have been traditionally done in the automotive industry.

On that note, here are three items regarding Tesla Motors that aren't so well known.

1. Tesla has vowed vehicle service will never serve as a profit center.
Tesla takes a totally different approach to vehicle service than other auto manufacturers. First and foremost, by eliminating the dealer and selling vehicles directly to consumers, customers can deal directly with Tesla when they have problems with their cars. But where Tesla really departs from the rest of the auto industry is in its approach to charging for service.

For dealers, the majority of their profits come from servicing vehicles. But Tesla doesn't see this as an ethical practice. 

I have made it a principle within Tesla that we should never attempt to make servicing a profit center. It does not seem right to me that companies try to make a profit off customers when their product breaks. Overcharging people for unneeded servicing (often not even fixing the original problem) is rampant within the industry...

Tesla service center. Image source: Tesla Motors.

2. Tesla's retail locations are meant to serve as a place of education, too.
Beyond the obvious reason for Tesla retail locations -- to sell vehicles -- Tesla is also aiming to educate consumers about electric cars and plant seeds for when its more affordable Model III finally goes on sale.

To do this, Tesla is deliberatly locating stores (or gallery locations in the states where direct vehicle sales are illegal) in retail venues with high foot traffic and high visibility. If you spot a Tesla store, it's probably in a mall or on a popular shopping street. 

This allows us to interact with potential customers and have them learn about our cars from Tesla Product Specialists before they have decided which new car to buy. The Product Specialists are also trained to answer questions about electric vehicles in general, not just ours.

Tesla retail store. Image source: The Motley Fool.

3. Need service? Get a fully loaded loaner car.
Tesla vehicles need much less service than gasoline cars, Tesla says. The company cites a number of reasons for this benefit.

Model S has at least a thousand fewer moving parts than a traditional car -- no internal combustion engine, no transmission, no mufflers or catalytic converters -- thereby lowering the chances of things breaking down or wearing out. Thanks to regenerative braking, even brake pads will last longer on Model S than on other cars.

With fewer cars to service per cars sold, Tesla is able conduct service far differently from peers. For instance, Tesla is able to offer fully loaded Model S Performance vehicles as a loaner to owners who need to their Tesla serviced. Going a step further, Tesla has implemented a valet service in which the company picks up an owner's car and replaces it so owners don't have to drive to service centers.

These are just three ways in which Tesla is completely disrupting the way we have become accustomed to understanding auto manufacturers. For investors who haven't started looking into this disruptor, it might be time to add this American car company to your watch list.

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A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.


Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 19, 2014, at 4:37 PM, Ustauber wrote:

    ThxTSLA from Belmont, California

  • Report this Comment On July 19, 2014, at 7:51 PM, 76R906 wrote:

    For all of these reasons and more, I'll gladly wait 18 months from my deposit (in June '13) to delivery of my Model X. Tesla is revolutionizing the automotive industry with high-performance cars and innovative, ethical operations.

  • Report this Comment On July 20, 2014, at 12:26 AM, arno wrote:

    when the car needs a repair, I suppose the valet will drive say 300 miles to deliver a loaner and pick up car,i do not think so, or is it going to be towed for that far if necessary I am sure the customer is going to love that

  • Report this Comment On July 20, 2014, at 7:52 AM, TMFDanielSparks wrote:


    Service centers are expanding at a very rapid rate, so I doubt this is a problem very often.

    But if it does... First of all, Tesla's Ranger Visit option where they come and work on the car where the car is at, bringing a van with them packed with tools and parts, is a likely scenario I would imagine.

    Second, driving around a fully loaded Model S for an extended period of time likely isn't something that would irk a Tesla owner.

    Third, As I said, the service profile is very low... So an electric car -- particularly a Tesla -- doesn't need service as often as an ICE vehicle. Even Tesla's annual visits are not mandatory to keep the warranty active.

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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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