Tesla is well-known for its impressive utilization of vertical integration. In 2016, Goldman Sachs determined that the electric carmaker achieved a 60% degree of vertical integration so far.
This includes the entire manufacturing process itself and as specific areas like seats, batteries, power electronics and drivetrain systems, as well as sales channels and the Supercharger network.
In comparison, most legacy automakers mostly focus on engine development and manufacturing, while outsourcing about 80% of components to a wide range of suppliers and delegating all sales-related responsibilities to dealership networks.
Tesla on the other hand, as mentioned earlier, owns and operates stores and galleries themselves. Serving as showrooms rather than typical sales points, these stores allow (potential) customers to inform themselves about the company and its product lineup of electric vehicles and energy products.
Tesla CEO Elon Musk said on multiple occasions that ordering a Tesla online takes “less than 2 minutes”.
Also, u can order online at https://t.co/46TXqRJ3C1 in 2 mins, have car delivered to ur doorstep & return for full refund https://t.co/OTAPpYMdcH
— Elon Musk (@elonmusk) August 28, 2019
Order online in 2 mins, 7 day return policy https://t.co/46TXqRrsdr https://t.co/K1eyiY2qTX
— Elon Musk (@elonmusk) May 4, 2019
Tesla’s strategy of selling cars directly to customers in the easiest and most convenient way possible is a stark difference to the traditional dealership model, where customers often have to spend lots of time on negotiating with sales staff.
However, in many US states, franchise laws prohibit auto manufacturers to directly sell their cars to customers — laws, that are primarily kept in place to protect the dealership model that all legacy automakers depend on.
As a result, Tesla has faced disputes with state regulators for many years now — and has been successful in fighting against these laws at least a handful of states. For instance, the company has gained the right to mostly unrestricted direct sales in Arizona, Missouri, Washington and more.
Some states still have a limit on how many stores Tesla is allowed to operate, ranging from one store (Colorado) to six stores (North Carolina).
Unfortunately, other states like New Mexico, Texas and more remain committed to a total direct sales ban. In some cases, this ban even includes service centers, forcing owners to have their car serviced in nearby US states.
At least, there’s some good news for (future) Tesla owners in Connecticut:
According to an image shared by the Owners Club Connecticut, Tesla is now allowed to offer leases and test drives at its gallery and service center in Milford, CT.
The Connecticut Automotive Retailers Association (CARA) is known for leading multiple efforts to block Tesla from gaining permission to directly sell its vehicles to customers — in order to protect their own monopoly.
In the past, this included an attempt to shut down a Tesla gallery by lawsuit, claiming Tesla is operating the gallery as an “unlicensed dealership”, and even sending secret shoppers to the location to check if Tesla staff would touch on the topic of sales.
While organizations like CARA remain influential when it comes to Tesla’s attempts at changing the law to allow the company to actually sell cars, it appears like Tesla found a workaround — allowing it to offer leases and test drives.
In communication with the Owners Club Connecticut, the company explains:
"A Tesla leasing location can offer leases but cannot conduct any activity related to the sale of a motor vehicle. Because it is a manufacturer, Tesla is not eligible to apply for a dealer license under state law, but Tesla is eligible to hold a leasing license, and thus is authorized to offer leases in Connecticut."
Here’s to hoping legislation regarding direct sales will change soon, so Tesla can continue to accelerate the world’s transition to sustainable energy.
