Tesla Motors is fighting a legal battle in Indiana against a legislation which prohibits direct sales to consumers. The company has faced similar hurdles to implement its direct sales models in several states in the U.S., as auto dealers are opposed to this model. While traditional automakers depend on their dealerships to stock inventory, provide after sales service and promote their financing schemes, Tesla’s focus on high-end, trail-blazing electric vehicles makes a direct sales model more desirable in cultivating sales and customer relationships. Since electric vehicles do not need as much regular service and the company does not offer financing schemes, a dealership model would put pressure on its margins. This is because it would need to ensure that franchises earn higher revenues from car sales. Electric and hybrid vehicles are projected to dominate the car market in future and a study by Google in 2013 suggests that they would account for nearly 90% of cars sold in 2030. Several traditional automakers including General Motors, Ford, Honda and Toyota Motors are increasing their focus on electric vehicles to capture this trend, thus questioning the unfair advantage to Tesla due to its unique selling model. Tesla currently operates in a niche space of luxury electric vehicles where new car sales are the primary source of profitability. Thus the direct selling model is key for the company to generate higher margins.

from Forbes – Tech http://ift.tt/1SkJFlW
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