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1\ Thread on the logistics nightmare that will cost $TSLA billions it doesn't have.
The bull case is that Tesla's vertically integrated model is brilliant: Tesla gets closer to the customer, and the customer is not exploited by a profit-seeking "stealership".
2\ The bull case often explicitly mentions that OEs are prohibited by law from operating their own dealerships. The implication is that Tesla is the brave David disrupting an archaic and exploitative business model operated by crooked Goliaths
3\ All of this is 100% nonsense. To begin with, OEs rarely choose to run their own dealerships, even in countries where they are allowed by law to do so. This is because dealers are service businesses, and they need intimate knowledge of local market conditions
4\ Dealers operate on tiny margins, and they can only keep customers happy by relentlessly optimizing their processes. An OE ensures his dealer base is strong by allowing franchisees to compete for franchises. The profit opportunity ensures quality!
5\ In this regard, Tesla's approach is like a Soviet "command and control" model. Tesla can never know conditions on the ground well enough to optimize the complex day-to-day business of selling and servicing cars.
6\ Worse, Tesla's dealerships must compete with other parts of the business for capital. Anyone reading the Tesla forums lately knows that Tesla service centers are in total disarray. You will not believe the things you read in this thread:https://twitter.com/Trumpery45/status/994678595837616132 …
7\ And while Tesla service centers are starved for parts, Tesla is proving incapable of getting new cars into customer hands. Customers are paying $55,000 for hellish experiences like this:pic.twitter.com/g6MZwvSxDA
8\ All of this is, frankly, a LOT worse than the average ICE dealership, which, "stealership" jokes notwithstanding, is a responsive and efficient operation.
9\ This is not just growing pains. A large dealer might deliver 1K cars per year. Tesla has fewer than 100 delivery centers in the US but aims to deliver over 200K US cars per year shortly, or 2K cars per delivery center.
10\ A VERY charitable assumption is that they need to add another 100 delivery locations in the US. If each costs ~$5M, that's $500M that needs to be spent in the US, before accounting for other countries
11\ Tesla also needs to invest heavily in factory-to-dealer quality assurance processes and logistics. This is yet another savagely efficient business that Tesla bulls blithely assume the ICE OEs haven't optimized already.
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