Top U.S. Auto Dealer Tells Musk I Told You So
(Bloomberg) -- Tesla Inc. could have avoided its recent struggle delivering cars to customers quickly if it hadn’t insisted on handling its own retailing, according to the head of America’s biggest auto dealership group.
Mike Jackson, the chief executive officer of AutoNation Inc., said Tesla CEO Elon Musk -- who tweeted last week that his company had shifted from production hell to delivery logistics hell -- should be free to run his business however he wants. But Jackson couldn’t resist taking a bit of a victory lap over the electric-car maker’s recent growing pains.
“For a boutique-y model, what he’s doing is fine,” Jackson said of Musk in an interview on Bloomberg Radio. “As soon as he wants to do volume, it’s gonna be an issue. Well, here we are, we’re now at the issue. It is hell.”
A Tesla spokesman didn’t have immediate comment. On Wednesday, Musk tweeted anew with the customer who complained to him on Twitter three days earlier about her Model 3 being delayed indefinitely, which prompted his apology in a post declaring that his company was in delivery hell.
The customer wrote on Tuesday that she now has her Model 3. She thanked Musk and Tesla and said the car “exceeds all expectations.” Musk wrote back:
Musk, 47, has flouted the traditional franchised auto dealer model that’s been around more than a century, opting to instead enable customers to order online and shop at company-owned stores. Tesla also has cast doubt on how committed traditional dealers will be to selling electric vehicles after decades of selling internal combustion engine-powered vehicles.
Choosing to circumvent the franchise model has put Tesla on a collision course with dealer associations in states including Connecticut and Michigan. While the company has waged several successful court fights elsewhere, laws in select states have stayed on the books to prevent Tesla and other manufacturers from handling the delivering or servicing of their own vehicles.
Musk’s approach to deliveries is being tested like never before now that Tesla has been making progress building more Model 3s, the sedan the company plans to eventually sell for less than $40,000. He said this month that the carmaker is about to build and deliver more than twice as many vehicles as it did last quarter. During the three months that ended in June, Tesla produced 53,339 vehicles and delivered 40,740.
Jackson, 69, predicted four years ago that Musk would have a hard time developing a superior approach to getting new cars into customers’ driveways. On a July 2014 earnings call, he said about 6 percent of the price consumers paid went to retailers.
“If we were sitting on big, fat margins that would be one thing, but it’s very hard to create another model that’s going to make that 6 percent even more efficient than what it already is,” Jackson told analysts. “It’s a system that works for all constituencies and I’m very optimistic, very confident that 10 years, to 15 years, 20 years from now, this auto-franchise system will still be in place.”
Jackson also said Wednesday that Tesla is about to face serious electric-car competition from established automakers, citing Audi’s E-Tron. He said that the unprofitable company has a capital structure that is “absolutely scary. So the sustainability and viability is very much open to question.”
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