The Tesla effect on future motorcycle sales

Publish Date: 
May 20, 2014
By Mike Vaughan

The situation has come to a head as Tesla has expanded into states such as Texas and Arizona, where the notion of an OE-owned dealership violates existing franchise laws. Dealer associations in 14 states are legally challenging Tesla’s business model and have been successful in a number of efforts.

On the other hand, Tesla has found friendlier sales environments in Virginia, Massachusetts, California and Colorado.

Musk claims that since Tesla has no independent dealers in any country in which their autos are sold, no existing dealers are hurt by the company's practices.

Musk makes some interesting points defending Tesla’s retail marketing plan. “Franchise laws were enacted to prevent a manufacturer from unfairly opening stores in direct competition with an existing dealer franchisee,” he has said.Tesla has built its galleries, where one can view the cars, in high foot traffic areas like shopping centers. Their front-line staff isn’t made up of sales people but, rather, “product specialists” who are paid a salary, not a commission. They do not “sell” vehicles; they only educate buyers with regard to the costs and benefits of owning a Tesla, or as Elon Musk, Tesla’s CEO and chief product architect says, “other electric cars.” Buyers also can design a car online, or visit a Tesla gallery to spec and arrange financing for the car of their choice.

Musk claims that since Tesla has no independent dealers in any country in which their vehicles are sold, no existing dealers are hurt by the company’s marketing practices. He further maintains that the vehicles, gas and electric, are fundamentally different, and the typical multiline dealer would have to deal, perhaps unfairly, with the question of electric vs. gas.

'Shop-Click-Ride' is near

The aforementioned GM business model, Shop-Click-Drive, is almost here for the motorcycle industry, given the OEs’ current programs with clothing and accessories. Whether it’s a good or bad deal can be argued. The customer may find this sales model easier to use. The dealer doesn’t pay a commission to a salesperson. I doubt that many buyers will insist on having their bikes delivered, though I bet most would prefer a test ride near their home, but that may be academic given many brands’ reluctance to offer them.

The question in my mind is how soon -- or if -- an OE will try to replicate Tesla’s business model in the motorcycle business. And who will it be? The cost for an existing brand such as Harley-Davidson or Honda would be prohibitive. They’d have to buy out existing dealerships, and dealers who refused to sell would create a conflict of interest in direct violation of franchise laws in many states.

My guess is that if it happens at all, it will be someone, like Tesla, new to the market with new technology. But in reality, there simply isn’t enough sales volume in our industry for a single-line startup to be viable. What do you think?