Tesla deprives dealers of profit

Tesla deprives dealers of profit

A new report finds that Tesla accounted for roughly $700,000 in lost gross profit per dealer in California during 2022.

One of the most substantial hurdles facing traditional automakers currently is their sales systems. Reliant on the dealership model, Tesla has proved that legacy automakers are less profitable and slower to react to market trends. Now, that financial impact has been seen in high definition thanks to a new report from Automotive News, which found that Tesla and other direct-to-consumer (D2C) brands were responsible for a $910 million drop in gross revenue for dealers in California alone.

The new report published by Automotive News included the sales of three top D2C carmakers, Tesla, Rivian, and Lucid. It multiplied the sales numbers from these brands with the average gross profit per vehicle sold at a dealer in California. Specifically, the 193,707 D2C EV sales, of which 97.1% were Tesla vehicles, which amounted to a gross profit loss of roughly $700,000 per dealer and a $910 million loss for dealers cumulatively.

It should be noted that, due to the higher average sales prices of EVs from Tesla, Rivian, and Lucid, these losses most predominantly affected the state’s luxury brands, especially those that currently lack EV offerings.

In response to these findings, Californian dealers pointed to Tesla’s supply capabilities as the differentiating factor. With consumers able to order online and receive their vehicles in a matter of weeks, Tesla was able to more quickly address customers than dealers, who are often limited in available inventory. Not only did this save customers from having to search multiple dealers for the vehicle they wanted, but it meant they could select every aspect of the vehicle they desired.

Not all dealers pointed to supply as the only constraint, though it was at the core of many of their concerns. Some dealers noted that Tesla’s availability of EVs specifically made them attractive to consumers who were often not interested in a gas vehicle as an alternative. Moreover, until recently, traditional automakers lacked a large variety of EV offerings for consumers, meaning customers would more often be further constrained in their choice.

Looking to the future, with many major automakers now dramatically increasing the number of EV offerings available for order or available on dealer lots, competition in the Golden State could become more heated. However, as noted by the analysts at Automotive NewsTesla still holds a significant profit margin lead over its competitors, which could make price competition quite difficult for dealers.

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