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So why would Tesla even care about sales in Michigan? Musk always implies that Tesla is production constrained (again just two days ago in Q1 earnings call), a

So why would Tesla even care about sales in Michigan? Musk always implies that Tesla is production constrained (again just two days ago in Q1 earnings call), and Michigan isn't one of the states with ZEV program, so a sale in Michigan earns Tesla $30k less than a sale in California or Massachusetts or the other 8 ZEV states. Selling in Michigan costs Tesla money. And why is Tesla so against dealers? As long as Tesla is showing the "internet price" then customers can see exactly how much the dealer is higher so buying from a dealer wouldn't even be a bad experience. A Tesla dealer would be more like CarMax, or at worst a Saturn dealership. I think it's worth considering that Tesla may in fact be demand constrained not production constrained, and that's why they need to sell in these states where they earn less. And they don't want dealers because they are much more transparent about demand.

rosser 11y ago
Tesla isn't only selling in ZEV states. Are they also losing money to "prop up" numbers in the non-ZEV states they are selling in?
- bsdetector 11y ago
  If Tesla is production constrained then they can sell the same unit in Michigan and get $100k income, or they can sell it in California and get $130k income then use that extra $30k to increase production. So why sell in Michigan?
  - toomuchtodo 11y ago
    Because everyone's money is green.
    - wlesieutre 11y ago
      If they're production constrained, they can't do both. Sell one car and make $130k or sell one car and make $100k. Not sell two cars and make $230k.
NathanKP 11y ago
> And why is Tesla so against dealers? I'm not a representative of Tesla, but if I was Elon Musk I wouldn't want my product being sold by dealerships either. The dealership industry is an outdated, parasitic system that has nothing to offer Tesla. It is little more than a middleman which saps away profit that could be going to Tesla itself. On the other hand Tesla has everything to gain in revenue, image, brand value, and consumer experience by running their own boutique stores. The dealerships have also gone way too far trying to get legislation passed to stop Tesla and protect their parasitic business model rather than adding any real value that makes them useful to Tesla. That in my opinion turns this into something more personal, a battle in which Tesla wins more respect the more they fight back. By refusing to sell the vehicle entirely they actually gain in status (the more difficult to obtain good gains value) and they progress toward the longer term goal of making profit free of parasitic middlemen. The alternative would be to make a few more dollars in the short term by using dealerships but lose in the long term. The Elon Musk suite of companies has always been very long term focused so I'm not surprised to see them working toward long term vision rather than giving in on a short term battle. Basically to Tesla the future is selling their goods (not only cars but also Powerwalls, and whatever else they have in development) directly to customers in order to improve profit margin, and they aren't going to give in on the road to making that happen. A boutique store for selling vehicles today can sell Powerwalls the next year. This makes Tesla much more robust instead of being reliant on a middleman.
- nordsieck 11y ago
  > The dealership industry is an outdated, parasitic system that has nothing to offer Tesla. It is little more than a middleman which saps away profit that could be going to Tesla itself. Ordinarily, middlemen are great. Small farmers can get away with selling at Farmer's markets, but Supermarkets drive an enormous volume of sales. Likewise, Walmart, Target, Fred Meyer's, etc. are all generally pretty good to their suppliers and customers. The big difference when it comes to cars it that customers actively hate car dealerships. I don't know of a single person who is even ambivalent towards the process of buying a car. If Tesla could take that part of the car buying process and make it great, it would be an enormous competitive advantage. Dealerships and the other car manufacturers know this and are terrified that it might work.
vvanders 11y ago
Mind citing your 30k number? From most of the things I've seen the ZEV credits are a pretty small percentage of total revenue on a Tesla. I think the anti-dealer stance comes from dealers not having an incentive to sell EVs when they are familiar with traditional ICE cars. There's been quite a few stories of Nissan having issues with their dealerships not being very interested in selling Leafs for instance.
- bsdetector 11y ago
  It's hard to say how much they make on each car sold because they are purposely obscuring this. If you listen at 6:15 to the earnings call you'll hear them totally dodge a totally straightforward question on how many credits per car: http://seekingalpha.com/article/3147926-tesla-motors-tsla-q1-2015-results-earnings-call-webcast http://seekingalpha.com/article/3147926-tesla-motors-tsla-q1... Elon says credits sometimes sell for as little as 50%. They are rumored to be getting 9 credits for most cars sold in ZEV states (most cars in US). Credits are worth $5000 in offset fines. So $22k per car even at heavily discount ZEV prices.
- duaneb 11y ago
  I got the impression that, in addition, electric engines are less profitable to maintain because they wear out slower, so maintenance and repair have a much lower profit. Is there any truth to that?
pkaye 11y ago
Dealers will need a cut of the profit and due to the laws in the books, once they start using dealers, they cannot forgo them in the future. I think it should be the choice of the manufacturer whether to use dealers or not.
btian 11y ago
> And why is Tesla so against dealers? I don't think Tesla is against dealers per se, it just wants to control end-to-end experience like Apple does. It's totally understandable for a high-end manufacturer.

rosser 11y ago

Tesla isn't only selling in ZEV states. Are they also losing money to "prop up" numbers in the non-ZEV states they are selling in?

bsdetector 11y ago
If Tesla is production constrained then they can sell the same unit in Michigan and get $100k income, or they can sell it in California and get $130k income then use that extra $30k to increase production. So why sell in Michigan?
- toomuchtodo 11y ago
  Because everyone's money is green.
  - wlesieutre 11y ago
    If they're production constrained, they can't do both. Sell one car and make $130k or sell one car and make $100k. Not sell two cars and make $230k.

NathanKP 11y ago

> And why is Tesla so against dealers? I'm not a representative of Tesla, but if I was Elon Musk I wouldn't want my product being sold by dealerships either. The dealership industry is an outdated, parasitic system that has nothing to offer Tesla. It is little more than a middleman which saps away profit that could be going to Tesla itself. On the other hand Tesla has everything to gain in revenue, image, brand value, and consumer experience by running their own boutique stores. The dealerships have also gone way too far trying to get legislation passed to stop Tesla and protect their parasitic business model rather than adding any real value that makes them useful to Tesla. That in my opinion turns this into something more personal, a battle in which Tesla wins more respect the more they fight back. By refusing to sell the vehicle entirely they actually gain in status (the more difficult to obtain good gains value) and they progress toward the longer term goal of making profit free of parasitic middlemen. The alternative would be to make a few more dollars in the short term by using dealerships but lose in the long term. The Elon Musk suite of companies has always been very long term focused so I'm not surprised to see them working toward long term vision rather than giving in on a short term battle. Basically to Tesla the future is selling their goods (not only cars but also Powerwalls, and whatever else they have in development) directly to customers in order to improve profit margin, and they aren't going to give in on the road to making that happen. A boutique store for selling vehicles today can sell Powerwalls the next year. This makes Tesla much more robust instead of being reliant on a middleman.

nordsieck 11y ago
> The dealership industry is an outdated, parasitic system that has nothing to offer Tesla. It is little more than a middleman which saps away profit that could be going to Tesla itself. Ordinarily, middlemen are great. Small farmers can get away with selling at Farmer's markets, but Supermarkets drive an enormous volume of sales. Likewise, Walmart, Target, Fred Meyer's, etc. are all generally pretty good to their suppliers and customers. The big difference when it comes to cars it that customers actively hate car dealerships. I don't know of a single person who is even ambivalent towards the process of buying a car. If Tesla could take that part of the car buying process and make it great, it would be an enormous competitive advantage. Dealerships and the other car manufacturers know this and are terrified that it might work.

vvanders 11y ago

Mind citing your 30k number? From most of the things I've seen the ZEV credits are a pretty small percentage of total revenue on a Tesla. I think the anti-dealer stance comes from dealers not having an incentive to sell EVs when they are familiar with traditional ICE cars. There's been quite a few stories of Nissan having issues with their dealerships not being very interested in selling Leafs for instance.

bsdetector 11y ago
It's hard to say how much they make on each car sold because they are purposely obscuring this. If you listen at 6:15 to the earnings call you'll hear them totally dodge a totally straightforward question on how many credits per car: http://seekingalpha.com/article/3147926-tesla-motors-tsla-q1-2015-results-earnings-call-webcast http://seekingalpha.com/article/3147926-tesla-motors-tsla-q1... Elon says credits sometimes sell for as little as 50%. They are rumored to be getting 9 credits for most cars sold in ZEV states (most cars in US). Credits are worth $5000 in offset fines. So $22k per car even at heavily discount ZEV prices.
duaneb 11y ago
I got the impression that, in addition, electric engines are less profitable to maintain because they wear out slower, so maintenance and repair have a much lower profit. Is there any truth to that?

pkaye 11y ago

Dealers will need a cut of the profit and due to the laws in the books, once they start using dealers, they cannot forgo them in the future. I think it should be the choice of the manufacturer whether to use dealers or not.

btian 11y ago

> And why is Tesla so against dealers? I don't think Tesla is against dealers per se, it just wants to control end-to-end experience like Apple does. It's totally understandable for a high-end manufacturer.