After reaching 100% progress in Tesla’s app referral program, Ben, a Tesla Model X owner in Guangzhou, waited confidently for his free Roadster 2, known as the crazy supercar with a range of over 1000 km and acceleration of less than 2 seconds per 100 km. In early 2017, Tesla’s referral program offered this car as the biggest reward for referring 55 other owners to buy Tesla vehicles. Fortunately, Ben received a free Roadster 2 car credit in April 2018.
However, on January 16th, 2021, Tesla abruptly terminated the referral program to reduce costs. Although disappointed, Ben remains a loyal fan and one of the top referrers in the Asia Pacific region. Although not a Tesla employee and with no affiliation with Tesla, Ben, an 80s-born Chinese private business owner, became a Tesla enthusiast and follower after purchasing his Model X in 2017 due to Tesla’s powerful product and unique brand personality.
The cancellation of the referral program is only a minor event. In 2019, the Model 3, accompanied by its remarkable sales success in the US, entered the Chinese and European markets. To cope with the pressure of production, delivery, sales, and services, Tesla’s direct sales system made a series of changes, such as reducing prices across all models (up to 300,000 RMB for old models of Model S and Model X), changing autonomous driving configurations, and even planning to close physical stores and encourage home delivery. Tesla’s rapid actions surprised even those who believed they had adjusted to Tesla’s style.
This industry-disrupting company has never followed conventions in any aspect. It challenges traditional car manufacturers and deals with mass-production hell, lack-of-funds, frequent personnel changes, and short-selling forces. Additionally, Tesla has been in a long-standing war with traditional auto dealerships and the consumer experience they cultivate.
“Salespeople in traditional 4S stores are uncomfortable and use fixed language to trick you. As someone who does business myself, I am familiar with these tricks,” says Ben regarding his positive experience with Tesla’s sales team. After placing his order, the process from customization to signing the contract was relatively simple, despite not initially considering buying such a cool and exaggerated electric SUV.Compared to the frustrating bargaining process and complex configuration choices in traditional 4S stores, the experience in Tesla’s stores is much simpler than that in traditional car 4S stores.
For Ben, the decision to purchase the Model X was sudden and even unbelievable. As a private business owner in the traditional manufacturing industry, his personality and business needs were completely incompatible with the disruptive character and representation of Tesla and its products.
He was stunned by the amazing acceleration experience when accompanying a friend to test drive the Model X, and immediately told the staff that he wanted to buy it. Ironically, his friend who test drove the car was unable to accept the acceleration and did not place an order.
Now, two years later, looking back at his car purchase decision, Ben believes that both Tesla’s staff and he himself had limited knowledge of the use experience of electric vehicles, and did not know how to choose the most suitable range version. As a result, he made his configuration decision in just five minutes — he knew almost nothing about electric vehicles before. He is grateful that he chose the long-range version at the outset, “when you don’t know how to choose, just buy the best.”
Due to uniform pricing, Tesla’s direct stores emphasize more on training and communication with customers. The stores do not have positions named for sales, and traditional sales positions at Tesla are referred to as product experts. Although the incentive for product experts to sell orders is much lower than that of other brands in their class, they still face the pressure of sales targets from Tesla’s quarterly financial reports.
As the world’s first automobile manufacturer to adopt a direct sales model, Tesla has faced many difficulties along the way. Since 2014, Tesla has been fighting against various state automobile dealer associations in the United States, hoping to break through the restrictions on direct sales brought to auto dealers by the franchised auto dealership laws. Until now, Tesla still cannot sell directly in several states in the United States, and can only set up showrooms for display. Once the staff introduces recommended products to customers, they may be sued.
What is the reason for Teslas never giving up on this difficult road?
As early as 2016, Todd Maron, a Tesla consultant, outlined seven reasons to the US Federal Trade Commission why Tesla insists on direct sales: 1. Getting closer to consumers; 2. Achieving zero inventory; 3. Educating consumers; 4. Different business model; 5. Tesla does not pay for advertising; 6. Dealers can’t make money; 7. There are conflicts of interest in traditional auto dealerships.
Direct sales bring Tesla more direct customer data and lower customer acquisition costs. It is understood that because customers are reached more directly, the cost of each customer’s sales lead for Tesla is much lower than that for traditional comparable models, probably less than one third of the latter’s.Thanks to Elon Musk’s personal charisma and Tesla’s strong brand effect, Tesla is used to using its own brand flow to exchange resources. Compared with other emerging brands, Tesla can more easily obtain stores and booths that gather people in commercial centers. On the other hand, the direct sales system has also partly avoided the cost of traditional dealers competing for customer information.
According to Tesla sales staff, many customers directly come to the store to buy cars and even skip the test drive. Elon Musk also mentioned this in an email to his employees, which proves the power of a strong product: Good products will sell themselves.
Strong product power, higher customer traffic, lower customer acquisition costs, and Tesla’s almost no investment in marketing, have brought efficient and high-profit product sales.
After paying the deposit for a Tesla, the product experts at Tesla will hand over the customer to a delivery specialist who is responsible for all matters related to vehicle sales. Delivery specialists are a position first created by Tesla in their direct sales system.
Mr. Ma, the owner of a Model S in Nanjing, praised Tesla’s delivery personnel and even felt a sense of nobility that he did not feel in the sales process. “I feel very good about the delivery process, it is better than the experience of traditional brands. They added me to many WeChat groups and provided direct contact personnel for vehicle registration, insurance, and other procedures. I think it’s great to have six or seven people serving you like a small team.”
On February 22, 2019, Tesla China held the first batch of Model 3 delivery ceremonies in Beijing, and at the same time announced the “Special Delivery” service in China. Customers can choose trailer or chauffeur-delivered services. Among the six car owners who received the delivery on the same day, one of them chose the “Special Delivery” service and he was a Tesla employee.
Wang Yubo from Shanghai participated in this delivery ceremony and became one of the first six car owners to get the car. He volunteered to pick up the car in Beijing and drove it back to Shanghai. From the day he picked up the car, one of his daily routines was to share his thoughts on the Model 3 owner group. On February 28th, just a week after Yubo drove the blue Model 3 from Beijing to Shanghai, the car had already driven over 1500 kilometers. One day he shared in the group that he made an appointment with the service center to ask about the direction of the steering wheel and the problem of the car door leaking air.Despite experiencing after-sales service in just one week, Wang Yubo expressed that it wasn’t a big deal, and self-deprecatingly said, “It’s not like I can’t drive it.” He added, “You probably can’t find a car without any problems anyway. Tesla’s workmanship was never really good.” Despite that, the fans’ attitude remained calm as usual.
When asked why the first batch of cars delivered also had minor flaws, Tesla insiders explained that Tesla’s workmanship is indeed different from that of some traditional luxury brands. Tesla doesn’t have enough people and time to do these things. Team resources are maximized to tilt toward the development and launch of new products.
By March, Wang Yubo no longer boasted about his car experience in the group as he did a few days before.
After Tesla significantly reduced the prices of the two older models, Model S and Model X, Tesla owners, who were originally considered rational and calm in the public’s impression, began to hang banners at stores. The Tesla price-cutting storm became a hot topic on Weibo, and financial media that rarely paid attention to Tesla began reporting on the events.
At the same time, a large number of scheduled Model 3 car owners, who were supposed to receive their cars between March 27th and 28th, received delay notices. The bad mood began spreading to the Tesla owner community. Many expressed helplessness, saying that the atmosphere of communication had changed.
Meanwhile, facing customers’ service window – Tesla’s delivery specialists felt more severe pressure than in previous quarters. They added words such as “Please leave a message, and reply later” to the beginning of their WeChat names. After answering customers’ inquiries and complaints one by one, they were at a loss.
Due to issues with customs clearance procedures, the delivery order of Tesla Model 3s has been disrupted, and pre-order customers who paid in advance cannot receive their cars first. Coupled with the uncertainty of delivery times after multiple consultations, some Model 3 pre-order customers have gradually lost patience.
Uncertainty factors from external sources such as multiple tariff adjustments, shipping, customs clearance, etc., have been constantly troubling Tesla’s delivery team every quarter. On the other hand, China’s response to policy adjustments from the United States has also been somewhat passive.
Tesla’s full-year sales in 2018 were almost equal to the total sales since its establishment, and this exponential growth was still based on the highly innovative foundation of the Model 3 product. Making an innovative car in the traditional auto industry and putting it into mass production is already challenging. Doing so quickly and delivering a large number of cars is even more difficult.
However, from the consumers’ perspective, the development of enterprises is not the primary concern. In the past decade, the good consumer access brought by the direct sales model has laid a good foundation for Tesla’s brand aura, and the tolerance and support of fans have played an important role in Tesla’s survival and development.If the delivery order of Model 3 has caused trouble, the measures taken by Tesla in dealing with Model S and Model X owners have led some loyal fans to question the unequal treatment they received, with price reductions not being the key issue, but rather the lack of equal treatment.
Efficiency Behind the Loss of Human Care
“Never mind, next time when Model Y comes out, I won’t be a scapegoat.”
Ryan wrote this sentence in the Tesla owner group. After Tesla’s latest autopilot hardware sales plan was released, the Tesla owner group immediately exploded. The old customers complained that Tesla’s move to attract new users with this wave of price adjustments was discriminatory and unfair to former customers, and some even began to seek compensation or return their cars.
As a dual owner of Model S and Model 3, Ryan, a software engineer living in Silicon Valley, has always been very enthusiastic about promoting Tesla’s products and constantly upgrading their software and hardware technology. His delivery reports and car sharing posts on social media are often reposted by various media, making him a typical representative of Tesla’s geek fans.
Ryan said that Tesla’s new pricing plan for the autopilot suite hurts the first group of customers who spent money to buy the autopilot the most. They were the first to support Tesla’s autopilot system with their attitudes and money, but now they have been discriminated against in the face of new consumer prices. Most loyal old customers are angry, and forums overseas are filled with angry comments.
“Although I am a Tesla fan, I will not blindly follow and accept Tesla’s practices, including this price adjustment. The car owners who just received their cars have the most objections, followed by those who received their cars six to seven months ago…There is a popular joke recently that no Model X owner dares to say that they are driving a million-dollar luxury car,” Ben said. He expressed disappointment and dissatisfaction with Tesla’s recent price adjustment, although he himself was not the most affected part of the customers.
The price adjustment reflects Tesla’s urgent need to speed up sales while also possibly accelerating the delivery of new products. This reflects the unbeatable efficiency advantage of the direct sales system, but Tesla’s experience in these price wars is still immature. Complex consumer levels and immature consumer psychology cannot withstand such impacts. In Ben’s words, people can gradually adapt using the “boiling frogs in warm water” approach, rather than making sudden changes.
Tesla is running fast to focus on products rather than people, and the lack of human care in its tool rationality may eventually bring some potential harm to the brand.
Now, as Tesla moves towards becoming a mature car company, the effect of niche fans may be diluted, and the ability of the enterprise system will be tested by the market. Can they win this battle of direct sales?
The Ultimate Version of Service: Product as a ServiceIn Elon Musk’s eyes, in the face of sweeping reforms, all difficulties can be overcome.
After a whole day of answering customer questions on Twitter, Elon Musk quickly began promoting and teasing new products. There is not much time to hesitate on the battlefield – destroying old pains with new revolutions and moving forward at all costs is the gene that has brought Tesla to where it is now.
Product as a service, Tesla pursues “the best service is no service”, and believes that a good enough product does not require excessive service.
One summer day in 2018, when Mr. Ma was driving his Model S, he suddenly found that the air conditioning was not working. He immediately called Tesla’s service hotline, and the service personnel diagnosed online that there was no problem with the car, and suggested that he park the car in a safe place and let it rest for a while.
Mr. Ma parked the car by the roadside and waited for a while, and restarted the car. The air conditioning was back on. The service personnel told him that the problem might be due to overheating protection. Mr. Ma was not too concerned about the principle behind it. He was more happy that the problem was solved with just one phone call. “This car has a lot of minor problems, the seat cannot be adjusted, the air conditioning is not working, and the car suddenly cannot move and stops in the middle of the road… But for this car, basically any issue can be resolved with just a restart, without the need for repair or going to the service center.”
During the conversation, Mr. Ma expressed obvious admiration for Tesla’s “one-click restart, full recovery” function: “I am not a Tesla fan, and I am not very interested in tech products, but Tesla’s restart and repair function is too powerful… If it was like traditional cars, I would have gone crazy having to bring it to the shop every time there’s a problem. For many issues of Tesla, the service personnel can diagnose online, and I have been driving for more than ten months and have not been to the delivery center.”
The intelligence of Tesla’s products is the fundamental reason why Tesla can pursue minimalistic services. According to insiders at Tesla, in those projects that require on-site repair, the vast majority of them can be diagnosed and repaired online at Tesla, or mobile service teams can be dispatched, which is very convenient.
To understand Tesla’s sales and service system, we must return to its essence. Elon Musk’s first principle – not referencing any experience and starting from the essence – requires only the theoretical feasibility to be considered when doing anything, without considering any redundant factors or uncertainties. This has led to great difficulties for Tesla’s products from research and development to production.
When it comes to sales and service, the same logic applies: the essence of buying and selling is value exchange. There is no need for dealers, nor is it necessary to be fixed in a real-world setting. As long as the product is good enough, it can sell. Eliminate redundant links, maintain survival and continue to produce better products with the maximum profit.
However, all of these are logically sound theories. In reality, there are too many complex variables to consider.“`
The first principle is the fundamental reason why Tesla can embody subversiveness in products and services, but the first principle is not unbeatable. In the attempt to automate factories, Elon Musk tasted the bitter fruit: the ultimate is impossible to exist and develop continuously – uncertainty is an inevitable factor in any evolutionary process.
It took Elon Musk ten years to bring Tesla to its current industry position, and the persistence and uncompromising brought by the first principle were indispensable during this period. However, there is still a big difference between developing products or conducting research and providing sales and services. Sales services cannot be established or sustained without experience, and people in the process of consumption are also full of uncertainties. Is it really good to move forward regardless of this?
Elon Musk arrives in Shanghai, and the catfish enters China
Elon Musk shoots, can you avoid it?
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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.