Tesla Changes Gears

If you’re in the market for a Tesla, there’s some things you’ll want to know.

Yesterday, Tesla announced a new version of the Model 3 for a mere $35,000 (tongue in cheek). The new model is estimated to have 220 miles of range and will be able to reach a top speed of 130 miles per hour. 

It’s also offering a Model 3 Standard Range Plus version, offering 240 miles of range, and a top speed of 140 miles per hour. That model is $37,000.

That may still seem expensive, but the average new car cost in the U.S. now comes in at $37,000.  So, consider your new discounted Tesla 3 a bargain at the cost!

But the more notable news, I thought, coming from the company was that it announced it was moving all of its sales online.

Existing stores will turn into information centers and showrooms, according a report from TechCrunch and citing Tesla CEO Elon Musk, which means retail employees will likely be let go but there will be more technicians and mechanics.

The Wall Street Journal explained the moves this way:

Lowering the price to $35,000—a key part of the Silicon Valley company’s effort to become a mainstream auto maker—is a goal Tesla has discussed for years and repeatedly delayed, but the shift in its sales strategy was a surprise.

The move to online-only sales is likely to further rile U.S. car dealers that have spent about a decade fighting Tesla’s effort to sell directly to customers through company-owned stores. For more than 100 years, auto makers have relied on a network of third-party franchised dealers to sell their vehicles across the U.S.

My first question is, what will this mean for marketing?

Tesla has been notorious for not having a paid advertising budget, instead depending on word-of-mouth referrals and publicity stunts like sending a Tesla into space atop a SpaceX rocket.

Will the company move some of its savings on retail into traditional advertising to try and broaden the market? If it doesn’t, I could see ripples shimmering into Detroit and Madison Avenue — Tesla may not be just disrupting the traditional automobile industry sales model, but its marketing and advertising model as well.

As for Tesla’s competition and state regulatory bodies, something tells me that political fight is far from over. Those dealers will fight to the last hill against this direct model, although I can only presume we’ll all be buying our cars, and so much else, from AI-driven robots soon.

And where traditional (or used) car dealers are concerned, I’ll take C3PO every day of the week.

What does all this mean for consumers?

Instead of taking test drives, Tesla will extend its return policies, allowing new customers to own the car for a week and drive up to 1,000 miles and still return it for a full refund if they don’t like the electric glide. And the Journal cites Mr. Musk as claiming that shifting sales online could cut costs 5% to 6%.

Consumers used to balk at purchasing clothes sight unseen over the Internet, so could this dramatically change the way high cost, high consideration products like a Tesla Model 3 are sold?  Maybe Tesla will offset the lack of a retail car experience with a virtual reality one instead? 

“Sir, it’s very possible this asteroid is not stable” C3P0 said in the Star Wars epic, “The Empire Strikes Back.” 

Not stable, indeed.

Then again, Elon Musk may be taking the car industry to a whole other planet whether it likes it or not.