Will dealership, service centers give Detroit automakers an edge over Tesla?

Jamie L. LaReau
 
| Detroit Free Press
Electric pickups: Tesla, GM, Ford, Rivian to release EV trucksTesla, General Motors, Ford and Rivian are among the automakers betting a truckload on their electric pickups.staff video, USA TODAYAs dusk settles over Matt Cooper’s home in the small town of DeWitt, Michigan, he’s relaxed knowing his 2020 Model 3 Tesla is in the garage getting a repair.Not a mechanic’s garage, but Cooper’s own garage. Service was a concern for him when he was considering buying the car because Tesla has only one service center in Michigan.“If something went wrong, where would I get it fixed?” Cooper said. “But they said they have people who can come to you to fix it. A lot of the car’s fixes are software, so my Tesla gets the technology fixed by itself at night in the garage.”Those conveniences, along with the car itself, make Cooper a loyal Tesla fan. But not all owners feel the same.COVID-19 stimulus package: Jobless Americans get a tax waiver of up to $10,200 on unemployment benefitsDisney Store closings 2021: Is your closest location holding a liquidation sale? See the store closures list.A flurry of complaints fills Tesla forums about the difficulty in scheduling a service appointment and often waiting weeks or months for a car to be fixed. The 2021 J.D. Power Customer Service Index released Thursday shows that compared with their premium competition, the Tesla service experience trails with customers.Tesla, based in Fremont, California, sells directly to consumers, so it owns its sales and service centers. As it sells more cars, it will increasingly face fixes that require hardware, meaning a trip to a Tesla service center for a repair that can’t be made in a home garage.Therein lies the Achilles’ heel that could give General Motors, Ford Motor and Stellantis (formerly Fiat Chrysler Automobiles) an edge in the EV war, industry observers say.The Detroit carmakers collectively have more than 9,600 dealerships scattershot across the United States, versus Tesla’s 133. In Michigan, Tesla has a service center in Clarkston that serves the entire state, unless you drive to Toledo, Ohio.’A choke point’Tesla CEO Elon Musk founded the company in 2003, and it has dominated the electric vehicle market since, though GM and Ford are gearing up to take it on.GM’s GMC brand will launch the first edition Hummer electric pickup this year, starting at  $112,595. Ford is selling the Mustang Mach-E, which starts at $42,895.Tesla sells a Model S, Model 3, Model X and Model Y, which some enthusiasts say spells SEXY. In 2020, Tesla delivered 499,550 vehicles.The Model 3, the least expensive, starts at $38,190. Cooper paid about $70,000 for his Model 3 because of his “add on” features, he said. The Model X, the high-end, starts at $79,990.Musk has talked of adding more service centers to match rising sales, but industry analysts think his goal will fall short of what’s needed.Just last month, after pressure from U.S. regulators, Tesla recalled 134,951 Model S and Model X vehicles built before March 2018. The cars had touchscreen failures that could cause several safety-related features to not appear on the screen while driving. The recall is expected to begin March 30, according to the National Highway Traffic Safety Administration.With just 133 service centers, that could theoretically mean each would have to handle over 1,000 vehicles. Requests to Tesla for comment went unanswered, but the recall requires a repair done at a service center.”In 2021, our data shows that Tesla planned to open about 52 new service centers worldwide,” said Martin French, U.S. managing director for Berylls Strategy Advisors. “Tesla plans to increase their sales to 750,000 vehicles this year so that’s a 50% increase, but their plan to increase their service centers is only 11%, so that is a disproportionate rate to sales. If recalls grow in the future, it’ll become increasingly difficult to handle those recalls.”Tesla’s lack of service centers is a “real choke point,” said Mike Ramsey, vice president and analyst for automotive and smart mobility at Gartner Inc.  Most EVs don’t require a lot of repairs, and many repairs and maintenance can be done remotely, Ramsey said. But not having enough service centers is a “major disadvantage” for Tesla if it is to increase sales, he said.”You have to have either really refined remote repairs or more service centers as you grow,” Ramsey said.Beyond sheer numbers, the fact that legacy automakers pay dealers for performing recall and warranty repairs means dealers make money fixing your car, Ramsey said.“Dealers get a lot of guff, but one advantage consumers have with an independent dealer base is they’re incentivized to really fix the car and do it right,” Ramsey said.Stockholm syndrome?Tesla is handling this latest recall in phases, said Sam Abuelsamid, principal analyst of E-Mobility for Guidehouse Insights in Detroit. Cars that are most likely to have problems go first on the list to get new chips installed in the touchscreen’s computer. Tesla, which told regulators that the recalled touchscreens were expected to last only five to six years, far less than the average life span of cars on U.S. roads, will replace the memory chips for free at its service centers.Tesla used the “cheapest chips they could get away with” on the affected cars, Abuelsamid said. Tesla knows for each car how many cycles the semiconductor chip’s memory has gone through, he said. So Tesla will prioritize the cars with the most cycles on them, “because they’re the ones most likely to fail. If someone doesn’t want to wait, they can pay $1,500 to get upgraded to version two,” Abuelsamid said.Tesla pushed back against the NHTSA’s request for a recall, Abuelsamid said, urging instead that owners pay for the upgraded new computer because this recall will end up costing Tesla $150 million to $200 million.“You would think that they would worry about customer loyalty,” Abuelsamid said. “But once they get your money, they don’t seem to care so much. They give over-the-air software upgrades and fun stuff like the ability to watch Netflix on your screen, but when it comes to hardware, not so much. You have this cult of personality around Elon Musk where customers will put up with whatever Tesla does and return for more, a bit of Stockholm syndrome.”Loyal to TeslaBut Bret Schnitzer of Brighton is thoroughly happy with his Tesla and the service he’s received over the eight years he’s owned it.Schnitzer’s black 2013 Model S is his daily car with more than 180,000 miles on it. Over the years, the car has been to the Tesla service center several times, though many repairs were done by the mobile units coming to him. He uses a local mechanic to install new tires, he said. “I have lots of experience with the service centers,” Schnitzer said. “I’ve been to the Clarkston one and the Toledo one. Initially, I had to flat-bed it to Cleveland. The service center has never been a problem for me. They give me a loaner.”He said Tesla service techs told him he could either pay $1,500 for an entire new compute,  or they would replace the chip in the existing one for free. He plans to keep the car, so he bought the new computer, he said. In December, his wife gave up her 2009 Honda Civic Si sedan to buy a 2020 Tesla Model 3 in red. He said it would be hard for him to switch out of a Tesla to another automaker, even one with more service options.”I’ve had pretty good experience with Tesla on service,” Schnitzer said. “I like the company.”Similarly, last year, Bobby Afrasiabi bought a 2015 Model S sedan in black with about 51,000 miles on it from his business partner for $33,000. He was leery at first despite living in Long Beach, California, where many people drive Tesla cars and there are 15 Tesla service centers and ample charging stations. “I used to look at Tesla drivers as a cult and call it the iPhone on wheels,” Afrasiabi said. “So it was a slow introduction for me. I just wanted to use the car pool lane when I bought it, and I thought I’d sell it when I move out of state.”But earlier this year, Afrasiabi did move to Atlanta, and he paid $1,100 to ship his Tesla with him. Part of his loyalty to the brand is because of how Tesla serviced him.“Two months ago, they came and towed it themselves and took it to the service center. Not only did they fix the screen, but they fixed it for free,” Afrasiabi said. “I also had a crack in my rim and they found it and fixed the rim without mentioning it. They didn’t charge me anything.”The repair took about a week because the screen was out of stock, he said. But when he got the car back, the keys had stopped working. Not to worry, Afrasiabi said: Tesla made new keys for him at no cost.”I just love it now and I want to keep it. It’s an awesome car to drive,” Afrasiabi said. “I’m a reluctant Tesla cult member.”’Back in a Caddy’But on Tesla’s forum page, some Model S sedan owners rant about a lack of communication from the company in terms of the status of the vehicles they ordered, and inadequate service.One said he loved the way the car drove, but, “I’m very disappointed in the nickel and dime crap from a trillion dollar company. Even this forum is like a skeleton….anyone ever see a forum this spartan? Cadillac is making EV now….maybe I’ll be back in a Caddy in a few years. Customer service is EVERYTHING….or NEARLY everything,” wrote Mark2018S on March 3.Cadillac will launch the Lyriq two-row all-electric SUV next year. The brand has many more EVs planned including an ultra-luxury hand-built car called the Celestiq.Afrasiabi said he would consider a Ford Mustang Mach-E or Cadillac Lyriq in the distance future, but for now, “I would rather stay with who has the experience,” meaning Tesla.He acknowledges that GM has made the Chevrolet Bolt EV since 2016, but three months ago, Chevrolet recalled more than 68,000 Bolt EVs worldwide due to fire risk in the battery, he said.“I am a Cadillac guy and I’ve owned a lot of Cadillacs in my life,” Afrasiabi said. “But Cadillac would have to do this for a few years before I would give them a chance. I have someone now who has experience.”But Cooper, the Model 3 owner from DeWitt, is open to considering other brands despite being happy with his car, which he intends to keep for 10 years.“I’m not saying, ‘Hey I bought a Tesla and I’ll be a Tesla owner all my life,’ ” Cooper said. “My gut says Tesla was first to market and was ahead of the others in a lot of areas too. But next time I look at a car, I won’t just be looking at a Tesla, I will look at other brands.”Tesla faces a more imminent challenge from the Mustang Mach-E, which has started to woo customers from Tesla, wrote analyst Adam Jonas at Morgan Stanley, in a research note.In February, Ford sold 3,739 Mach-E SUVs in the U.S. during its first full month of sales. Ford has Elon Musk’s attention, too. In a March 4 tweet, Musk wrote: “Tesla & Ford are the only American carmakers not to have gone bankrupt out of 1000’s of car startups. Prototypes are easy, production is hard & being cash flow positive is excruciating.”Musk is alluding to GM and then-Chrysler filing for federal bankruptcy protection in 2009, whereas Ford did not. Ford CEO Jim Farley retweeted Musk saying only, “Respect.”Beyond the Mach-E’s appeal to some Tesla enthusiasts, Ford also has a dealer network of 3,012 stores in the United States. More than 2,100 of them sell the Mach-E, said Ford spokesman Said Deep.When combining desirable product with vast service, Tesla is going to need to up its service offering to compete in the longer term, possibly partnering with a large dealership group to help with big recalls, said Ivan Drury, senior manager, Insights at ‎Edmunds.com.“When you get Model 3 territory and it’s your primary vehicle and you run into major repair issues, you will see major loyalty issues with consumers,” Drury said. “Automakers are very curious to see how this plays out. Tesla fought this for a long time and tried to ignore it because they knew it would be an issue.”’A lot of halo’Tesla may already be seeing the issue. In the J.D. Power 2021 Customer Service Index Study, Tesla’s customer service indexed score for last year was 850 out 1,000 points, according to J.D. Power’s Chris Sutton, vice president of automotive retail. The average premium brand scored 870.Facility and service initiation, meaning the ease of getting an appointment and timely greeting on arrival, were the main complaints. But the battery-electric vehicle service experience in general is poor for most brands, Sutton said, noting that Tesla’s 850 is far better than the EV industry average across all brands of 778.Also, most premium brands have about 350 dealerships, Sutton said. So while Tesla’s 133 service centers is lean and strained especially when faced with a big recall, compared with the average premium brand, “it’s not outrageously out of whack,” he said.”But compared to the Detroit Three and their muscle of dealers, they would be able to handle a recall of that level much easier,” Sutton said. Sutton cautions against the idea that GM and Ford might capture a certain percentage of Tesla’s business because they offer a bigger network for service.”Some of that is true, but for some Tesla customers it may be, ‘I’m going to buy a Tesla or a Mercedes Benz,’ not necessarily an EV-to-EV decision,” Sutton said. “For Tesla’s brand there’s a lot of halo there – it’s, ‘I’m gonna buy a Tesla or nothing,’ that’s what our data suggests, but I don’t know if it’ll always be that way.”Barra vs. Farley vs. MuskGM CEO Mary Barra is counting on GM’s service network of 4,071 dealerships across its four brands to help win over Tesla customers as GM plans for all its light-duty vehicles to be zero emissions by 2035. This summer, GM will bring to market the new 2022 Bolt EUV and a redesigned 2022 Bolt EV five-door hatchback. Chevy has about 3,000 U.S. dealerships and about 1,300 sell the Bolt EV, but as more EVs come into Chevy’s portfolio, that number will go up, Chevrolet executives have said.“We see our dealers as a huge asset to the company,” Barra said during GM’s fourth-quarter earnings call. “They’re responsible for partnering with us to deliver industry-leading sales and service. As the industry transforms, as the customer expects different things, both retail and fleet … we are working with our dealers and they’re transforming as well. For competitive reasons, I’m not sharing all of the specific changes and transformation activities that we’re doing. But they’re pretty substantial.”A GM spokesman declined to offer more specifics on dealership transformations, but referenced what Cadillac did with its dealer network. The luxury brand recently trimmed about 270 dealers, leaving about 600 in the United States, as it shifts the brand to sell only EVs by the end of the decade. Cadillac gave the 270 dealers buyout packages if they did not want to invest in the infrastructure to sell EVs.But looking at the Lyriq and the Celestiq along with Ford’s Mach-E, there’s going to be “really, really good products and Tesla will respond for sure,” said Berylls’ French.”Tesla always has a plan to fight back,” French said. “So Mary Barra versus Jim Farley versus Elon Musk – it’s going to be a lot of fun for the consumer.”


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