What Challenges Does Tesla Face in Its Sales Strategy?



Tesla’s sales strategy

Previously, we saw that Tesla (TSLA) sells its cars online with support from its physical stores. However, Tesla does not have a franchise dealer model, as do other automotive companies including Ford (F), General Motors (GM), and Honda Motors Company (HMC). Tesla has faced lawsuits in the past questioning its distribution strategy. However, last year, Massachusetts’s highest court ruled in Tesla’s favor in one such case.

In this part, we’ll explore a few more challenges Tesla faces in its sales strategy.

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Tesla faces challenges in certain states

Some states, including Texas and Michigan, do not allow automobile manufacturers to act as dealers. This can be seen in the previous chart. Mojomotors presents this information based on data from Tesla Motors and Georgia State University.

However, Tesla can still sell its vehicles online in these regions, as the regulations bar Tesla only from direct sales in these regions. There is no restriction on the ownership of a Tesla vehicle in any region. To put it simply, you can buy a Tesla car regardless of your location within the Unites States (IVV) (SPY).

Tesla has opened “Galleries” in such states where it is not permitted to sell directly. According to Tesla, these Galleries serve an “educational purpose.” Customers cannot buy a car at these Galleries or even discuss the car’s price. The Galleries are meant to showcase a Tesla car to help a car buyer make the purchase decision.

Tesla currently offers only Model-S to its customers. We’ll explore Tesla’s product portfolio in the next part of this series.


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