The real revolution is in the way cars are sold
For veterans of the auto industry, the company’s jaw-dropping achievement doesn’t popularize electric cars. Perhaps this was inevitable as the consequences of climate change began to hit Americans.
Instead, the big achievement was making it possible to sell cars directly to consumers.
A miasma of state and local laws govern car sales in America. But when Tesla first opened in 2003, one rule applied almost everywhere: Automakers couldn’t sell cars to buyers.
They had to go through dealerships as middlemen, and those dealerships had to be independent businesses.
This structure evolved in the first half of the 20e century, largely as a means of spreading risk. A bad model with little public appeal could sink an automaker, and companies didn’t know if their new models would succeed until after they hit the market. So working with sales experts who knew the local communities helped them succeed and spread the success when they failed.
These conditions have no doubt disappeared today. Thanks to the proliferation of press and internet enthusiasts, automakers usually know the public’s reaction to a new design before it even hits the market. They are better at designing cars that perform consistently.
So Tesla lobbied for the right to sell cars directly to consumers.
In some states, it worked. Corporate lobbyists got the laws changed. Tesla now directly owns dealerships in some states. In others, it operates “galleries” where interested buyers can view the cars but must order them from home.
Related: Secret Shoppers Say Traditional Dealerships Are Better For Selling Electric Vehicles
Ironically, Tesla has moved its headquarters to Texas but cannot sell cars there. Texans can order a Tesla delivered to their doorstep, but must take care of it themselves.
In a handful of states, however, Tesla is still prohibited from operating any kind of gallery.
Tribal lands are not subject to state jurisdiction
Native tribes, however, control land within a state but are not subject to most of its laws. Tribal lands are subject to federal law.
As Stephen Pevar of the American Civil Liberties Union explains in the book “The Rights of Indians and Tribes”, which discusses Indian federal law, “The tribes were sovereign nations centuries before the arrival of Europeans on this continent, and they continue to exercise the powers of sovereign government.”
Tribal land, legally, is something akin to occupied foreign territory. It is often governed by treaties that the tribes have signed with the United States (although the federal government has a poor record when it comes to honoring its treaty commitments). But, above all, they are not treaties between the tribe and a state government.
The tribes then enforce their laws on their own lands and are often subject to federal law. But they sit outside the jurisdiction of the state.
Thus, Tesla has just opened its second store on tribal lands.
Move brings Tesla service to Albuquerque, Santa Fe areas
Both are located in New Mexico, which prohibits automakers from owning dealerships or even indirectly performing services on cars. Prior to this move, New Mexico residents could order a car out of state, but had to title it themselves and bring it to nearby dealerships in Arizona or Colorado for service.
Now they can take it to Nambé Pueblo First Nation, where they’ll find a fully functional Tesla store with service bays. It’s just north of Santa Fe.
Next May, a second will open on land in the Pueblo de Santa Ana, about 30 minutes north of Albuquerque.
The Albuquerque Journal explains, “Although New Mexico prohibits direct-to-consumer car sales – which is the only type of sale Tesla conducts – as sovereign nations, the pueblos of Nambé and Santa Ana have no not follow state law.”
Under an agreement with the tribal government, Tesla will train tribal members to serve as service technicians.
Car sales are changing and the evolution is difficult to predict
Tesla can’t operate in every state and lacks service centers near some sizeable auto markets. Traditional automakers have an advantage because it’s still much easier to service your new Hyundai in many areas than your Tesla.
Related: Ordering a car from the factory – Everything you need to know
As traditional automakers increasingly launch electric cars, Tesla’s huge lead in electric car sales is eroding.
But the company’s creativity has left it in an enviable position wherever it seizes a beachhead – it doesn’t share profits from car sales with dealerships.
It’s telling that many new EV startups, like Rivian and Lucid, are embracing the Tesla model rather than turning to established dealer groups to build relationships.
How will traditional automakers compete?
Most seem to be sticking to the concession model for now.
Volvo has announced plans to sell part of its lineup entirely online.
Ford has publicly considered switching to a Tesla-like sales model. But, earlier this year, Ford CEO Jim Farley withdrew that option to entice dealerships to commit to selling electric cars.
Maintaining a dealership network gives these companies a huge footprint advantage – there’s probably a service bay near you for most automakers. There may not be any for Tesla.
But with 574 federally recognized tribal governments in 35 states, Tesla’s new strategy could do a lot to reduce that advantage.