Can Tesla Sell Cars without Physical Showrooms?

Tesla announced that it was closing its showrooms/stores to realize cost savings to support the new lower-priced Model 3. As a consequence it’s going to sell cars online — exclusively.

While there have been some car sales over the internet in the past, especially used-cars, there has never been a major car company that has attempted what Tesla is now going to do. But given the strength and appeal of the Tesla brand, it may be able to pull it off.

According to the Wall Street Journal (citing an internal Tesla memo), 78% of Model 3 orders last year were placed online. Tesla delivered about 245,000 last year. And the Tesla Model 3 was the best-selling individual luxury vehicle in the US.

Well over 90% of goods and services are purchased offline; however the lines are blurring. More transactions now are started online (e.g., appointments) and fulfilled offline. And major retailers with stores see an increasing share of revenues coming from online. Stores offer consumers the confidence to buy online and return in store.

There are now enough Tesla’s on the street that consumers are familiar with them. The only real issue is test drives (and perhaps final paperwork/financing). But Tesla’s existing stores didn’t offer test drives, just the ability to sit inside and physically examine the cars.

This will be a very interesting experiment. If Tesla can sell cars online without dealers or showrooms, we may see others try to follow that lead. However, only very distinctive cars would see success; “regular” vehicle sales would probably suffer.

What are your thoughts? Is this a watershed moment for e-commerce? Will Tesla succeed? How will it impact other car makers?

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