23 August 2014

If you had to go about setting up a new car sales network today, with no pre-conceived ideas and no (automotive) experience, just a focus on making money through offering the best customer experience and technically advanced vehicles, how would you do it?

That’s essentially how Tesla has approached its UK sales operation which has, this month, just started to deliver the first right-hand-drive cars.

Heading up the operation in the UK and Ireland is country director Georg Ell. Mr Ell puts forward the proposition that Tesla isn’t a car manufacturer, but a tech company that sells cars.

“We are accelerating change in the automotive world,” said Mr Ell. “We believe in electric vehicles. We aim to demonstrate why electric vehicles are better and we will be profitable doing it. And this will force others into doing it too.

“So we are running our own stores and service centres. We have built the best technology for that. Why? For several reasons.

“Firstly, we are a new comer, bringing a disruptive new product into the market. We’re using a-typical locations. Here [London] we’re in a shopping centre where 13,000 people come through showroom per week. Obviously not all buy, but they tell their friends and the message gets out. We don’t invest much in advertising, so this is how people experience us.”

Mr Ell said the second reason is that it’s important people get accurate information.

“In this way, we can control that information. Also we are looking for the best experience so we can control that too – people aren’t sold to.”

Tesla operates a Daewoo-style no-haggle, no discount, sales policy, which Mr Ell insists also applies to celebrities.

“Sales staff are commission based, but it’s a flat rate on all cars. They don’t get additional bonus – not even on finance or options.

“They are helping buyers to find a model that works for them. It’s a sharing experience too, which is why we encourage buyers to bring their friends along for a test drive.”

As well as opening showrooms that are slightly different to a typical franchised dealership, buyers can ring and place an order or do order and pay online.

“They can do everything online and have the car delivered to their door, but we don’t expect many to do that. We will call them and discuss their order, check if they want a test drive.”

Tesla will grow its network to six locations in the next few months, up from the current single location it has in London.

Tesla has already revealed that it intends to open in Manchester and Birmingham, but will also open stores in Bristol and Newcastle as well as its first Scottish site in Edinburgh. Mr Ell said staff recruitment and location finding was already underway for these locations. He also hinted more points would be added in future, particularly in the South East of England.

“Our thinking is that if the customer knows there’s no negotiation to be done, then they don’t have to get ready for a battle in the showroom. There’s no stress of having to set themselves up for that,” said Mr Ell.

In a contradictory move, despite wanting total control over the sales network to make sure the customer experience is first rate, Tesla has outsourced the home installation of charging points.

“We use Chargemaster, a third party, but we have pretty tight control on what they do and monitor feedback closely.

“However, in the US we do build and install our own charger and that will come to the UK eventually.”

In another move that’s very similar to a traditional manufacturer operation, Tesla’s approach to the fleet market sees a small team dedicated to the corporate arena.

“These people will talk direct to larger fleets, like any other car maker. These ‘ranger’ staff will spend most of their time on the road,” said Ell.

However, Tesla’s plans for aftersales and used cars are anything but conventional.

Before speaking to Auto Retail Bulletin, Mr Ell had not heard the term ‘overhead absorption’. “We’re not looking to make a margin on aftersales,” said Ell. The aftersales side of the business will only cover its own costs and not run at a profit.

Equally, Tesla does not require its cars to be serviced in any way to maintain the validity of the eight-year unlimited mileage warranty.

“We recommend an annual check, but servicing is not a requirement,” said Ell. However, the cars will have their software updated free of charge via a 3G or wifi connection whenever improvements are developed.

As for used cars, Tesla does take trade-ins but these are immediately off-loaded to an unnamed partner company.

And for the moment, Mr Ell is remaining tight-lipped about how a used-Tesla operation would work: “We don’t want to have large used car plots. We have an idea for when we start generating our own used cars, but it’s not finalised yet.”

Mr Ell refused to be drawn on exact sales expectations, but offered a comparison with the Californian market: “The Model S outsells the S-class in California, which was the best seller in its class.”

Last year in the UK, Mercedes sold 1864 S-class – taking first place and 30% of the luxury car segment.

The Model S is priced between £50,000-£100,000 depending on power outputs and options, Tesla is also planning an SUV for the near future, to be called Model X, and “there will be a third model that will be lower in price and more mass market” some time after 2017.

And despite all this, Mr Ell claimed that Tesla “made a 25% margin on our automotive business last year”.

Tags: Georg Ell, Tesla