E Tesla: Demand Levers And Secret Weapon Against Dealers

Tesla (TSLA) bears probably had one thing right. The demand for the original Model S peaked, flatlined, dropped or something. But what is missed is that the current Model S is no longer the original Model S. The demand for the Model S never really meets bear expectations of peaking or dropping for the simple reason that the car is improving too fast. At a rate never before seen by industry. Constant refreshes every few months as opposed to waiting for annual changes with new model years.

Since Tesla doesn't release demand numbers (except quarterly Customer Deposits), all analysts can do is speculate and it is possible that the speculation could have been right. But just as it is about to be proven right, Tesla pulls a "demand lever" like adding a new market or these other things:

  • introducing the P85D,
  • the 70D,
  • the sneaky replacement of the S60 with the S70 in a way that the 60 buyers don't feel bad
  • introducing the "auto-pilot" hardware
  • constant new software updates
  • P90D

And Tesla does it with their own style - insane mode, ludicrous mode, maximum plaid. Keep things interesting and stay in the limelight with zero advertising costs.

So what will the new referral program do for Tesla?

First, it will help Tesla nullify or at least reduce the Osborne effect of the X launch.

Second, this is common and extremely successful with with online retail like Amazon (NASDAQ:AMZN). There are many sites that run on referral revenue from retailers. Tesla has experimented with this on a smaller scale with Roadster owners with free charging stations and 500$ referral checks. This is a new larger experiment to bring ideas from online retail to the auto industry. After all, Tesla is the only auto manufacturer with online retail in the US. Also on a percentage basis, the referral fee is a lot lower than Amazon. See details about Tesla's program here.

Third, comparing large luxury sedan sales, we know it is possible for a luxury sedan to have sales of over 100,000 because the Mercedes S class does. And we know that the Model S outsells the Mercedes S Class in the US even with the limited sales footprint. How can Tesla get from their current 50,000 annual rate to a 100,000 rate as they ramp up production significantly without serious expansion of their retail presence and without advertising? Is a referral program the answer? We'll find out if Tesla decides to continue the program after October 31.

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Disclosure: Long TSLA.

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Shita Hallymah 5 years ago Member's comment

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