How Tesla blazed a trail in auto retail

From the wave of upcoming electric vehicles to a push toward direct sales online, Tesla Inc. is a driving force behind many of the biggest changes to automotive retail in recent years.

CEO Elon Musk believed customers would be willing to try battery-powered propulsion if it was packaged in luxurious, fun-to-drive models. A long-standing disdain for the traditional car-buying experience — Musk in 2013 told Automotive News that he's "never had a good experience" at a dealership — led him to think shoppers wouldn't mind buying those models directly from the manufacturer.

He's been proved right on both counts.

Despite a recent stock slide, Tesla remains the most valuable company in the auto industry, worth almost twice as much as No. 2 Toyota Motor Corp. Most major automakers are investing heavily in EVs, large center screens are en vogue and some companies have adopted Tesla-like online reservation systems in which customers plunk down a small, refundable deposit to secure their spot in line for new models. In addition, legal victories challenging state franchise laws have opened the door for other startups — including Rivian, Lucid Motors and Lordstown Motors — to sell directly to consumers in some parts of the country, with additional decisions looming.

"I have nothing but respect for Tesla," Ford Motor Co. CEO Jim Farley told The Verge last month. "It was one of the most magical things that happened in our industry, to see a company so single-minded, so focused on simplicity and really reinventing the customer experience."

Ford has tried to capture that magic on a number of occasions.

It was no secret whom the company was targeting with the reveal of the Mustang Mach-E in late 2019. The electric crossover was introduced at an airplane hangar steps away from Tesla's Hawthorne, Calif., design center.

The Mach-E's interior looks similar to that of a Tesla. The electric vehicle maker has popularized a minimalist style in the cabin and large, iPad-like touch screens. Ford also used the Mach-E reveal to launch an online reservation system, which was new territory for the century-old automaker but old hat for Tesla. It has expanded the system with each of its subsequent vehicle launches.

General Motors has adopted the reservation system for the electric GMC Hummer pickup and SUV and the Cadillac Lyriq, and at least one dealer credits Tesla for pushing GM to improve its infotainment systems and make one-price sales models more standard.

Mahmoud Samara, vice president of Cadillac North America, has said the introduction of the Model Y crossover helped fuel Tesla's recent stock surge and shape Cadillac's product strategy. The brand plans to launch an all-electric lineup by 2030, starting with the Lyriq midsize crossover early next year.

"What you've seen with Tesla is nothing more than a clear indicator that there's a high demand for luxury EV products," he said. "This is exactly why we are launching Lyriq at this moment in time and starting with that segment, because it is ultimately what the luxury customers want."

Aside from more quickly transitioning the world to EVs, Musk has long been focused on disrupting the traditional automotive retail model.

"How you buy a car and the quality of people you interact with, what their motivations are, all those things; Tesla has redefined all of that," Howard Drake, dealer principal at California dealerships Casa de Cadillac in Sherman Oaks, Buick-GMC Sherman Oaks and Subaru Sherman Oaks, told Automotive News.

Early on, Musk said dealership salespeople, who mostly relied on commission from selling gasoline-powered vehicles, realistically couldn't be expected to push EVs. Musk's contempt for dealers — he labeled many as "extremely heinous" in an internal email that leaked in 2013 — has led to a number of legal battles in states challenging long-standing franchise laws.

Tesla is still fighting those battles today in Connecticut, New York and Washington state. And now it's teaming up with rivals such as Rivian to rewrite franchise laws to benefit other EV makers.

"We support our other EV-only manufacturers and their desires to sell direct to consumers, to invest, to create jobs and to do that unfettered, as we are allowed," Thad Kurowski, senior policy manager at Tesla, said at a hearing in Washington state this year, according to legislative committee records.

Despite legal victories elsewhere, such as Michigan, the company is still barred from selling vehicles in Texas, where it will soon open a massive assembly plant. That means Tesla will have to ship its Texas-built vehicles outside the state for Texans to buy them.

And while a number of startups have indicated they plan to adopt a Tesla-like direct-sales model, most state laws continue to prohibit established manufacturers such as Ford or GM from doing the same.

For what it's worth, Ford executives say dealers will remain a key piece of their retail strategy even as they introduce new online sales tools. Farley used a speech at this year's NADA Show to praise retailers for adapting to change while noting they'll soon have many more EVs to sell.

Last month, Farley outlined a new strategy focused on two upcoming commercial EVs, the E-Transit van and F-150 Lightning pickup.

"Our dealer network," he said, "can be a huge advantage."

Hannah Lutz contributed to this report.