Tesla opens its store

By Jonathan O'Connell
Monday, February 14, 2011; 15

It's not a dealership, it's kind of a showroom or perhaps an education center.

Tesla Motors, the Palo Alto, Calif.-based maker of luxury electric cars, unveiled its newly leased space at 1050 K St. NW in downtown Washington last week, offering shoppers, reporters and fans the opportunity for a test drive.

Tesla is not all that focused currently on sales. It is offering its Roadster for $109,000 after accounting for tax incentives, but it only produces between 500 and 600 annually and has no projections for how many it would like to sell here this year or next.

Instead, Tesla is betting that it can help expand the market and reduce the price for electric cars, as happened with cell phones and personal computers. Initially, buyers of all three products were early adapters who could afford to experiment with a new technology. Eventually, as manufacturing costs fell and interest expanded, phones and computers became ubiquitous. In the second half of 2012, Tesla plans to offer its Model S sedan for $50,000 after tax incentives, and it plans to produce and sell around 20,000 annually. Diarmuid O'Connell, Tesla vice president of business development, explains how:

Why is Tesla here?

In Washington, that's sales in part but it's also policy. The mission of this company, broadly writ, is to try to stimulate the market for electric vehicles. We wouldn't have gotten into the business if that weren't the case.

So are you inviting members of Congress and of federal agencies to come by?

Yes, we're doing that. Also as important or maybe more importantly sometimes is the staffers who are actually directing the prioritization and the policy efforts, that they come in. Because every market is different; this place is being set up as much as an education center as anything else.

This showroom feels like an odd combination of a start-up and a car dealership.

Well, it's not a dealership. This is a store. We're vertically integrated up to the design of the vehicles and down to the customers and sales and service. So we own the store, everybody in here is an employee, there's no intermediary relationship.

People compare Tesla's vertical integration to Apple.

Well, that fails on one level, in that Apple doesn't own their manufacturing. But in terms of trying to deliver a customer experience in a novel way, they were the first to do that in the computing industry and we're I think the first to do it in the auto industry. Having our employees representing the product to your face at all times, trying to solve your problems for you at your locus of interest, that's consistent. And then, aesthetically, it's not dissimilar at least in some respects.

Does this mean there will be more vertically integrated sellers in other industries?

I don't know about that. That's possible. But in every sector the business requirements are different and the business incentives are different, so I wouldn't say it would work everywhere. But if you can make it work it's a good idea because it helps you stay fresh. In the epoch that we're in right now with high media, real-time environment, people wanting fresh, innovative and novel things, it's important to refresh your product. My point is product cycles have become extremely compressed. So in that context, you want to be as close to the trends as possible, and if you have a bunch of intermediary points in the marketing channel, then you're losing those inputs.

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