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  • Spencer Tseng

Tesla's True Competitive Advantage (Hint: it's not the superchargers)

Updated: Dec 24, 2018

Move aside superchargers, beautiful design, Elon Musk. Tesla's real competitive advantage is that it does not have to battle an army of dealerships.



When you want to buy a Porsche, you go to a Porsche dealership. When you want to buy a Tesla, you go directly to Tesla. This may appear to be a small distinction, but it is what is going to prevent the current automotive giants from making the fast switch over to electric vehicles.


Around 47% of a car dealership's gross profit is from the service and parts department. According to the NADA 2017 mid-year report, the average gross profit per dealership in the service and parts department was $1.6 million. The average gross profit per dealership in new and used car sales was $1.8 million.


You can download the report here: https://www.nada.org/2017NADAdata/


Now imagine you are the owner of a Chevy dealership, and you are getting all excited about the new shipment of Chevy Bolts (Chevy's electric vehicle that is a great car!) that are about to arrive onto your lot. More cars sold = more maintenance! After all, that is how it has been for decades! And then you see the service schedule for the Chevy Bolt:

Chevy Bolt Service Schedule

That's right. Nothing but rotating tires and replacing the air filter until a whopping 150,000 miles. How are you ever going to make your money?


I will soon be doing a quick writeup for those who want to know more about my maintenance and service costs of owning two Teslas (Model S at 50,000 miles and a Model 3 at 6,000 miles). Quick summary - service and maintenance costs have been less than $1,000 for both vehicles.


Just for reference and to make sure you aren't going crazy, you go back and check on the service schedule for the Chevy Malibu:

Chevy Malibu Service Schedule

Now this is what a service schedule should look like! All those beautiful rows and checkmarks each symbolizing one more thing you can charge your customers for.


All of this boils down to is the reality that electric vehicles have incredibly maintenance free drivetrain systems. There aren't spark plugs to replace, oils that need changing, etc. Even brakes are expected to last 150,000-300,000 miles with regenerative braking.


As many dealerships will soon realize, electric vehicles are going to greatly eat into their profits, and we will definitely soon see a battle between dealerships and auto manufacturers over the direction of the auto industry. While Tesla may have went direct to customer out of necessity and the difficulty in creating a dealership network, this will likely be core to Tesla's ability to expand over the electric vehicle market.


I am an investor, entrepreneur, and environmentalist in Silicon Valley. If you have any questions or comments, feel free to contact me at spencer@spencertseng.com.

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© 2018 Spencer Tseng