Elon Musk Says Tesla May Need Franchised Dealerships

Tesla Motors has long made its case for its factory direct sales model, auto dealers have said Tesla cannot scale up to meet the volume, and Tesla CEO Elon Musk has now said dealers may be correct.

In a face-to-face interview Saturday with Musk, Autoline Daily’s John McElroy asked how Tesla could grow to the capacity to which it aspires, as we quote McElroy:

“When I asked him if he could really scale up his retail model in all 50 states of the U.S. and asked how they would handle maintenance and repairs,” said McElroy in a video broadcast, “Musk admitted that relying exclusively on company stores probably was not enough.”

“We may need a hybrid system,” said Musk to McElroy,” with a combination of our own stores and some dealer franchises.”

This news lines up with news we printed in April this year in a series titled, Tesla Versus The Auto Franchising System.

In a closed door regulatory meeting in fall 2013, two witnesses cited Tesla’s Legislative Director Jim Chen who told a room full of industry stakeholders Tesla only means to sell factory direct until it reaches an undefined minimum volume threshold.

SEE ALSO: Tesla vs. The Auto Franchising System – Introduction

At the time it was unclear whether Chen/Tesla meant such a thing, but this otherwise confirms what dealer associations have said, namely, that Tesla cannot likely grow the whole business to support Model 3 and beyond to the scale it wants with all that on its shoulders.

Dealers defray costs and liabilities, essentially goes part of their argument for how dealers yet benefit automakers.

In May 2013 Musk did say he was not outright opposed to franchising in Texas where he fought to have legislation changed, but at the time he said Tesla was “a million miles away” from the point where it could consider franchising.

But more often Tesla has said dealers have an inherent conflict of interest, and its system that cuts out the middleman is superior, in several respects.

But now will Tesla employ middlemen in what Musk calls a “hybrid system” with a percentage of its own operations, and others independently contracted with Tesla?

McElroy’s comment was that dealers who’ve contested Tesla’s system to date “are going to feel vindicated that their system is superior.”

But thus far, all we have on the record is Musk’s brief quote, and reported statements over a year ago, suggesting Tesla has long-since seen issuing franchises to third-party investors as a possibility.

Tesla has otherwise not announced it would do so. What it actually intends to do, and how soon it would be deemed helpful for its business remains to be seen.

Autoline Daily