Has Tesla Killed Off Car Dealerships?
With new technology comes disruption. And self-driving cars are attracting a lot of attention from a technology point of view: how do they work? Are they safe? Will they be affordable?
Far less attention is being given to the way they will disrupt the motor industry. But the reality is that self-driving cars will not only revolutionise the way we move. The method by which cars have traditionally been distributed, sold and traded will be transformed in ways that most of us haven’t even begun to imagine.
When streaming services like Netflix entered the market, they didn’t simply replace DVDs. In one fell swoop they made Blockbuster and the corner video store irrelevant. The arrival of e-books similarly didn’t change what happened when you went into your local bookshop, so much as negate the need even to go there. Just like Blockbuster had the rug pulled from beneath its business model, so too Borders and Angus & Robertson found themselves becoming increasingly irrelevant, given the new, digital method of buying and reading books.
Apple gives us a clue about the future of car buying. Apple took the view that it would not only make iPhones and iPads, it would also sell them directly to consumers. And it went to some lengths to ensure that Apple stores, where people came into contact with the company, would be quite unlike any comparable, retail experience. The very tempting product displays, user-friendly encouragement to try out devices, ‘Genius bars’ for technical support, wrapped up in a unique package of lighting and branding, all add up to a distinctive user experience with a qualitative feel completely different from going to a regular phone or computer store. Other retailers have become more Apple-like in the past few years, but Apple were the innovators.
Tesla has also taken the decision to avoid being just another set of wheels on the showroom floor. CEO Elon Musk explains: "The reason that we did not choose to do this is that the auto dealers have a fundamental conflict of interest between promoting gasoline cars, which constitute virtually all of their revenue, and electric cars, which constitute virtually none. Moreover, it is much harder to sell a new technology car from a new company when people are so used to the old. Inevitably, they revert to selling what's easy and it is game over for the new company."
Tesla is already battling with legislation and vested interests in USA, which protect established manufacturers. Right now this may seem like a David and Goliath battle, but the race is already on to dominate the self-driving car market. The technology is already with us. Once it becomes more affordable and we have some celebrity early adopters, the floodgates will open. Not only Tesla, but other names completely new to the motoring world – most notably Google – will be fighting to become the dominant technology as fast as possible. If you'd like to cash in early, the Tesla Model S will cost you $4,634 a month on a Fleetcare Novated Lease*.
As soon as momentum towards self driving and electric cars builds, the price of regular, second hand vehicles will plummet. The developed world will shift to driverless technology in just the same way that smart phones moved from novelty to mainstream within just a few years. While traditional manufacturers like Mercedes, VW and Nissan are working on automated vehicles, the big names of the future are more likely to be Google, Tesla, Cruise Automation or Bosch. And it’s highly likely you won’t replace your Hyundai with a Google at the local dealer. The gleaming, Google or Tesla store will be stand-alone, manufacturer-to-customer interfaces, with the vast tracts of car yards reduced to second hand trading before largely fading into oblivion.
Where will this on-road revolution happen? It’s already underway. My guess is that the traditional dealer will be dead sometime in the next 10 to 15 years.
*Quote is correct at the time of publishing and is based on a 5 year lease with 20, 000kms travelled per year, and an average income of $300, 000. We chose this income, because for the majority of financiers, a vehicle worth more than 80% of the finance applicant's salary is not ordinarily accepted. Price is subject to change and all quotes generated will be based on individual cicumstances.
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