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Are Franchised Dealerships in Tesla"s Future

Michigan Republican governor Rick Snyder signed legislation Tuesday officially banning Tesla Motors and any other carmaker from selling directly to car-buyers in the state, but this past weekend,Tesla chief executive officer Elon Musk hinted his position on direct sales is not set in stone.

Last Saturday, Musk sat down with John McElroy the host of program AutoLine Daily.

When McElroy asked Musk if he could really scale up his retail model of company stores in all 50 states and how they would handle maintenance and repairs, Musk made a surprising admittance.

He said, relying exclusively on company stores probably was not enough.

"We may need a hybrid system, with a combination of our own stores and dealer franchises," Musk told McElroy.

By the time of publication, Tesla representatives had not responded to Auto Remarketing's request for further comment.

According to the report, Musk made no mention of how this hybrid system may work and when franchises would become an option.

This discussion may come as a big surprise to those who have been watching the long battle between Tesla and franchised dealers across the country regarding its direct-to-consumer sales model, but it may just be part of the natural evolution of the company.

Now that it has launched a leasing and CPO program, and with new models in the wings, more Tesla's mean more maintenance, repair work and customers - an influx of work that could potentially be solved by launching a string of franchised dealerships.

Auto Remarketing discussed Tesla's new CPO program after the news broke earlier this month.

In an effort to source their new program, the company is giving Tesla Model S owners the option to return the car after three years and recover 45 to 50 percent of its sticker price.

It is still unknown whether Tesla's move into the used market will greatly expand its audience and analysts say there could be a chance the program will potentially cut into new-model customers.

The industry will also have to wait and see how the automaker prices its CPO units as the way the Tesla retail model is currently set up puts them in a place where they can potentially "control" the CPO market for the Model S, including price.

"They could control the roll out of used vehicles, and some could sit in reconditioning. They might cherry-pick others. So when you combine the idea that it is a used market but they are going to take the best of the best, and if they have the majority of them, it would be very easy for them to set a price with no negotiation, in that sense," said Ivan Drury, Edmunds.com senior analyst.

The question is this: Is Tesla going to come up with a condition and mileage matrix to price their CPO models or rather go with pricing every vehicle individually based on market and technician review?