I am in a car that is driving itself on the Brooklyn–Queens
Expressway (one of the busiest highways in the US) and I am freaking the hell
out.

 “Hold the steering wheel, but still let it do its own
thing,” Michael, a product specialist for the electric-vehicle maker Tesla
Motors, gently cautions me, trying to snap me out of the wide-eyed stupor
brought on by watching the wheel of my Model S steer around a curve as if
guided by invisible hands.

As we pass through Brooklyn’s Carroll Gardens neighbourhood
and the waterfront complex of Industry City, my anxiety eases enough to start
asking Michael about how the autopilot feature works (the car’s sensors analyse
traffic patterns and read lane markers), how frequently Tesla beams software
upgrades to its vehicles (as often as once a month), and the car’s top speed
(250km/h, 0 to 60 in 2.8 seconds). “Just by taking a good look at you, I feel
like you’re already comfortable with driving a Model S,” he remarks halfway
through our 35-minute ride.

Yes, that’s what every car salesman is supposed to say, but
he’s right. If I could afford the black, all-electric Model S P90D—which drives
like butter, but costs $108 000 (R1.5 million)—I could see myself following
Michael into the company’s Red Hook, Brooklyn showroom to buy it, even though
until today I’d never been in an electric vehicle, much less one that could
drive itself. Tesla is betting that if it can get millions of other people like
me comfortable with its cars, they’ll want to buy one too. In fact, Tesla is
going to have to connect with people like me: Its current $33-billion (R469-billion)
valuation hinges on the ambitious assumption that the carmaker can not only
make superior long-range electric vehicles but also convince lots of newbies to
buy them.

This task has been complicated by lingering fears over the
safety of autonomous vehicles as the US National Highway Traffic Safety
Administration investigates a fatal Tesla crash that took place in May. (That’s
not to mention the SEC investigation into how Tesla disclosed the accident.) Much
of Tesla’s success depends on the 2017 launch of its $35 000 (almost R500 000)
Model 3—the fi of its futuristic, all- electric luxury vehicles created for the
masses.

And the Model 3’s widespread
adoption hinges on Tesla’s direct-to-consumer sales model. Tesla has chosen to
eschew the traditional dealership method—in which automakers sell their cars to
independent dealers, who are granted exclusive territories—in favour of
company-owned showrooms staffed with product specialists who can talk people
through the tech and their safety concerns. It’s an approach that Ganesh
Srivats, Tesla’s vice president of North American sales, says is essential. “We
knew we couldn’t rely on dealerships to promote our mission, to operate the
business the way we wanted to, to provide this great customer experience,” he
explains. “So we’ve really had to chart our own course.” 

For all the talk of Tesla’s product innovations, it is
leading another battle: this one centred on how vehicles are sold, as much as
how they’re made. The company has been embroiled in a series of brutal
legislative skirmishes in more than a dozen states including Connecticut, Texas
and Michigan—home to the Big Three automakers—where long- standing franchising
laws handicap (or completely quash) Tesla’s ability to engage customers without
an intermediary. On the opposing side is an alignment of auto manufacturers and
dealerships, along with the lawmakers who support them. Whatever the outcome,
it could fundamentally change the way cars are sold in America.

Car dealerships have been the backbone of the US automotive
industry since the 1950s, when the Big Three—General Motors, Ford and
Chrysler—were pumping out around three-quarters of the world’s cars from their
mammoth Michigan plants. While they focused on designing and mass-producing
vehicles, their franchised sales operations reached customers across the
country. At the same time, dealer associations pushed state legislatures to enact
franchise laws designed to protect dealerships from coercive and arbitrary
practices by manufacturers—with the added benefit that customers’ interests
would be served by increased competition among franchisees. But, over time,
automakers have become disconnected from the sales experience, hindering both
dealerships and the brands they represent. Today, consumers increasingly want
to research and even buy their cars online: A 2015 survey by Accenture revealed
that 75% of respondents would consider conducting the entire car-buying
transaction online if they could.

“When you go to a dealership, there’s all this sort of doubt
about the process,” says Srivats, who was senior VP at British fashion house
Burberry before joining Tesla last year. “The haggling, all the nastiness
around it. Did I pay the same amount as the next customer? Did I get tricked?”

Tesla fashioned its retail model in response. Its 3 700m2,
red-brick store in Brooklyn’s gentrifying Red Hook neighbourhood features only
two vehicles on the sales floor—a cherry red Model S and a white Model X with
falcon-wing doors. Though Tesla’s cars are currently luxury products, the
industrial space doesn’t exactly scream high-end. What it offers instead is a
disarmingly transparent sales process. There’s a Model S chassis illustrating
the layout of the vehicle’s unique, battery-powered engine. A large touchscreen
display lets visitors view Tesla’s expanding network of high-speed charging
stations and enables them to customise their own cars—from basic features
(60-kilowatt battery versus 90) to offerings like “Bioweapon Defence Mode”: a
cabin-air-fi system. When you’re ready to purchase, you can do it on-site or at
home on Tesla’s website. “We like the idea of owning the entire process,” says
Srivats. “It creates an information loop from our customers straight into
manufacturing and vehicle design.”

Not all of Tesla’s stores look like the one in Red Hook.
Tesla can’t sell cars directly in Arizona or Texas, for example, so it opened
“galleries”: showrooms minus any mention of price or sales. Cars ordered online
in Texas arrive with California tags and must be reregistered. Some states
allow Tesla to negotiate a set number of stores under a trial period; New York
gave it fi (including Red Hook). But that didn’t stop the company from adding a
pop-up shop— via a tricked-out shipping container—in Long Island’s South
Hampton.

(Tesla later opened a permanent gallery in East Hampton.)

“They have gone on and said, ‘No, the law doesn’t apply for
us,’ ” says Don Hall, president of the Virginia Dealership Association, which
filed suit against Tesla in May when it applied for a DMV licence to open a
second showroom in the state. Hall and others in the dealership community
accuse Tesla of flouting regulations put in place to protect car
salespeople—and consumers: They claim that, without having to operate under
franchise law, Tesla is free to obscure details about data regarding recalls
and processing fees, for example. (“We operate within the law in every state
we’re in,” says Srivats.) It’s not just dealers who are aligning against Tesla.
Ford worked fervently to get Tesla showrooms banned in Texas. General Motors—
which will release its first long-range electric car, the Chevy Bolt, this
year—stands to benefit even more if laws crimp Tesla’s growth. As GM CEO Mary
Barra pointedly told attendees at this year’s Consumer Electronics Show:
“Unlike some [electric vehicle] customers, Bolt EV customers never have to
worry about driving to another state to buy, service or support their
vehicles.” What she didn’t tell attendees about was GM’s active role supporting
anti-Tesla legislation in Indiana.

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