Home News Tesla’s online-only sales model defended by used car dealer Carvana CEO

Tesla’s online-only sales model defended by used car dealer Carvana CEO

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Tesla’s online-only sales model defended by used car dealer Carvana CEO

Tesla’s decision to embrace an online-only model to market its electric cars was recently defended by Carvana CEO Ernie Garcia, who went on CNBC’s Squawk Alley to go over the electric car maker’s new sales plan. Garcia noted that while Tesla will face challenges caused by the shift in its sales model, the company’s return policy will likely be a difference maker for some buyers.

“I think every company has its challenges, but they’ve done a pretty good job overall. I wouldn’t be betting against them. I think when you buy a new car, questions are distinct, but the return policy is enormously powerful like it’s about the used side. A customer knows they can return it,” the CEO stated .

Garcia added that he does not see Tesla’s move to an affiliate sales plan as a threat to his company, since Carvana only deals with used cars. The CEO even pointed out that Tesla’s shift can really be good for Carvana. “Tesla has an unbelievable megaphone,” he said.

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Garcia’s perspectives on Tesla is coming out of a well-established position, as Carvana currently stands as one of the United States’ premier online used car dealers. Carvana sells, finances, and buys back used cars through its site, and its growth has been so remarkable that the firm ranked as 5th in Forbes‘s list of America’s Most Promising Companies in 2015. The online used car dealer even went public in April 2017.

Garcia’s perspectives on Tesla is coming out of a well-established position, as Carvana currently stands as one of the United States’ premier online used car dealers. Carvana sells, finances, and buys back used cars through its site. Its growth has been remarkable through the years, with the firm ranking as 5th in Forbes‘ list of America’s Most Promising Companies in 2015. The online used car dealer even went public in April 2017.

Tesla’s shift into an online-only sales model has been shown to be a polarizing choice for the firm. Tesla inventory (NASDAQ:TSLA) has remained volatile since the change was announced last week, and some analysts in the Street have expressed their reservations about the new strategy. Among them was Barclays analyst Brian Johnson, who advised Tesla by stating that the company’s adoption of an online-only model was its “un-iPhone” moment.

Other analysts were more optimistic. Toni Sacconaghi from Bernstein wrote in a research note that Tesla’s sales figures in 2018 seem to validate the company’s online-only sales plan. “The move to direct sales is bold, though we are comforted that 70%+ of Tesla buyers in 2018 did *not* test drive before purchase,” Sacconaghi wrote.

Tesla’s online-only sales model is a means for the company to accelerate the rollout of the $35,000 Model 3, a vehicle that’s regarded as the company’s first true mass market car. Addressing the press in a call Thursday last week, Musk clarified that the shift will result in a reduction of the company’s headcount, but it’ll be also provide a means to decrease the production costs of its vehicles by 5-6%. “We will be closing some stores, and there will be a reduction in headcount. Unfortunately, there’s no way around it. We’re sort of in a binary choice. Reduce headcount and market the $35,000 car and have fewer people, or not offer a $35,000 car,” Musk said.

Watch Carvana CEO Ernie Garcia’s segment on CNBC’s Squawk Alley in the video below.

The post Tesla’s online-only revenue model defended by used auto dealer Carvana CEO appeared initially on TESLARATI.com.

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