WHO MOVED MY CHEESE? – The end of car dealership

We all heard about the contemporary business icon Elon Musk and his "Master Plan." No, we are not here to talk about the Tesla dealership rights on Mars, we will talk about it next time.;) Let’s try to understand Elon's strategic thinking.

One of the items in his Master Plan says that Tesla will pay you money if you buy Tesla. It seems complicated but, generally speaking, you pay $ 80,000 to Tesla and use the car only 5% of the time but the remaining 95% you will have to give your car for others to use. For this, Tesla will pay you, say, $ 8.000 per month. (Calculations here – change the car value). What businessman would not dream about 120% annual interest? I presented just rough estimates here, to help you grasp the essence.

In other words, everything is simple here, but why do they talk about car sharing like the future, if it is already the present for most of us?

New Tesla intentions not to use the traditional dealership model in selling cars causes tensions in the car dealership community. Tesla is going to take advantage of the Apple’s product marketing strategy and sell cars directly to the end user, i.e. bypassing importers and dealers. Furthermore, they are not alone, Lynk & Co not only goes on the same path but will already have a built-in Share-my-car functionality. Who moved my cheese? You will ask. By the way, such activities are forbidden in many states in the US.

Now imagine the year 2040 for a while. Having or buying a car sounds as crazy as buying a plane or a beer factory back in 2016, because you want to drink beer this weekend in Barcelona. 

Having your own car in 2040 means having the manufacturer’s app on your smartphone (or wherever they are in the future) and unlocking any car of that brand, anywhere in the world, using it on demand, leaving and going away, and paying according to the fact of use - eg. the "last mile" solution.

Do you understand now who moved my cheese? Already, Daimler AG has Car2go, BMW has ReachNow and they are well aware that in the future it will not make sense to sell cars, not only because future generations want everything on demand and are willing to pay based on the facts and not to link themselves to the assets. It is much profitable to give the car for use, i.e. charge the full 100% of the time than to take a one-time fee. 

When you sell a car once, you get $ 80,000 and it is used only 5% of the time. If you charge it fully 100% of the time, you will get $ 960,000. 

Agree that selling a piece of iron and an app requires different strategies, tools and channels. Why would you need dealers in promoting the use of apps? Exactly - you don’t need them, because we no longer sell cars, we sell a service, i.e. a nonmaterial object, and you don’t need a physical representation office for selling these things.

I made a small survey among car dealerships. The question was, whether you would like to start a car sharing business. The results did not surprise me, but one comment said it all: "Buy our cars and lease them as much as you want." 

It is very drastic to say that all manufacturers will destroy many years of their cherished relationship with their dealer's networks. Most likely car brands develop parallel sales channels like car on demand and step by step a change in sales strategy and the product (cars vs. car-as-a-service) will bring change to car dealerships responsibilities. If you do not need to sell anything and do not even have to show the car in the showroom, because everyone can perform a test drive of a new model on the streets on demand free of charge, and the manufacturer will get the online driver’s details, behavior, needs, opinions, etc. dealers will probably turn into repairmen, fleet management operators, interior cleaners, battery changers, etc.

As the Chinese proverb says, “A journey of a thousand miles begins with a single step.” So now it is time to consider what your next step will be. You have a different vision? Write what you think in the comments.

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