Tesla’s Focus On Online Sales Could Be Exactly What The Customer Wants

Tesla’s move to focus mostly on online sales made investors and market analysts anxious about the carmaker’s financial status and its ability to increase its market share.

However, others say that Tesla might be on the right path, giving customers exactly what they want. “What Tesla is proposing is actually consumer friendly,” said Rosemary Shahan, president of the advocacy group Consumers for Auto Reliability and Safety to CNBC. “It gives you more of an opportunity to take control of the action. and you’re not on the dealer’s turf.”

The process of buying a car has been one of the most complained about, according to the Federal Trade Commission. In fact, the auto industry is among the Top 10 most-complained-about topics over the last five years, with more than 104,000 complaints received just the last year.

While the data includes auto repair and gas prices related complaints, over 70 percent of it is about auto sales and leasing, according to the FTC.

There are plenty of studies that show an increasing amount of customers doing most of their research online before they visit a car dealership. In fact, a study from Cox Automotive found that around 85 percent of car buyers would more likely buy from a dealership that allows them to start or even complete nearly all of their car purchase online.

“We don’t like negotiating,” said Jack Gillis, Consumer Federation of America’s executive director. “We’re matching wits with a person who is trained to negotiate to get as much money from us as possible from us, who does it 24 hours and is most likely rewarded for doing so. That simply lends itself to a very uncomfortable experience.”

Tesla’s shift to online sales will most likely reignite the war between the car maker and traditional car dealerships but the industry’s switch to this model looks inevitable.

“Over the next decade, many car dealerships will close,” said Gene Munster, founder and managing partner at Loup Ventures, a venture capital firm that focuses on technology. “We will look back at some of the absurdity about the way people bought cars.”

Despite acknowledging that online sales will reduce costs for Tesla, some investors worry that store closures might hurt demand. “Salespeople have been important in up-selling Tesla customers, as well as selling Tesla solar products,” said Toni Sacconaghi, Bernstein analyst.