Tesla, too, sees service as central

Tesla Inc. doesn't sell cars through dealers, as other automakers do. But like the retailers for incumbent brands, the electric vehicle company is focusing on the service lane.

To improve sales, Tesla CEO Elon Musk said the company needs four things, including sensible pricing, charging infrastructure and consumer financing. Equal with those — and more important than retail outlets, according to Musk — is the availability of service.

Wherever all four elements come together, "our sales are great," the CEO said in July on a conference call to discuss second-quarter earnings. "So we're rolling out service centers like crazy," he said. "Service centers are the key to sales, not the retail locations."

This follows the company's on-again, off-again approach to retail. The disruptive upstart, which has eschewed independent dealers in favor of a wholly owned network, announced this year that it would close most of its stores and focus on online sales to save money.

But landlords weren't keen on letting Tesla out of rental contracts, so the number of stores has changed little.

The focus now is to expand the brand's in-real-life footprint, but to do so with service centers rather than stores. The company, of Palo Alto, Calif., opened 25 service centers in the second quarter and plans to accelerate the pace of openings, Musk said. With the number of Tesla vehicles in use roughly doubling each year, "we want to scale in a way that's sensible from a cost standpoint," he said.

It's "quite a difficult challenge," Musk said.

CFO Zachary Kirkhorn said the company is systematically mapping where its customers live and how long they need to drive (including traffic) to get to a service center.

In addition, Tesla added 101 mobile service trucks — an 18 percent increase — in the second quarter.

"Mobile service is really great because it's like, we just come to you and fix the car wherever you are — and it's hard to beat that for convenience," Musk said.

At the service centers, the company is storing more of the frequently used replacement parts so repairs aren't delayed to wait for parts to arrive from distribution centers. Musk said his aim is to provide not only same-day service, but same-hour service — "sort of like Jiffy Lube but applied generally to service."

Clearly, it's a high priority. Musk said he meets with the service team multiple times a week and that regional service heads visited Tesla's Fremont, Calif., assembly plant last month to share feedback with the production and software teams.

"The best service, of course, is no service," Musk said, meaning that as Tesla gets better at making vehicles, there will be fewer defect-related repairs.

The fast-accelerating EVs, though, can get away from a driver now and then, so Tesla has started insourcing collision repair to speed fixes and improve "customer happiness."

Of course, not all service is created equal. Sometimes the best service starts at the point of sale. Musk and Jerome Guillen, president of the company's automotive division, said the No. 1 reason for a service call is to learn how to turn on the Autopilot driver-assist system, which is done with a stalk, not a button.