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file/2017-04-01/1490997620_1283ccca13/1490997620_1283ccca13 Tesla’s Handicap Now Looks Like an Advantage - Barron's
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Tesla’s Handicap Now Looks Like an Advantage

As General Motors rolls out the Chevy Bolt, dealers can’t seem to agree on how to price the electric vehicle.

It’s looking like a good thing that Tesla doesn’t have a traditional dealer network.
It’s looking like a good thing that Tesla doesn’t have a traditional dealer network. Photo: Spencer Platt/Getty Images

Car dealers have widely different assumptions of how to price the Chevrolet Bolt, the electric vehicle from General Motors. And their uncertainty highlights an important advantage for Tesla – when you control your distribution, you also have more control over pricing.

For years, Tesla’s lack of a dealer network seemed like a disadvantage, particularly given that the dealers were powerful political players that could keep Tesla out of certain states. But now it looks like Tesla’s do-it-yourself strategy has some important advantages. The company only has to please customers, not its distributors. And it has more control over pricing.

Auto Week checked on two dealerships in California that are five miles away from each other and found that one was charging $4,439 more than the other for the Chevy Bolt.

Some California dealerships were promoting particularly large discounts, but there were deals in other states too (the car has been rolled out to seven states so far). Nationally, consumers were paying $1,400 below sticker price in January, but that rose to $2,200 in February, according to TrueCar. As of last year, GM had announced the car would cost $37,495 before accounting for a tax break the government gives for electric vehicles. But with the discounts and federal and state tax benefits, some California buyers can pay less than $25,000, according to Auto Week.

And yet, in some rural areas, the cars are selling for above asking price, Auto Week notes.

As far as profits, the pricing disparities are not a big deal for GM. They’re not offering cash-back incentives, so the price cuts come out of the dealer’s end.

But the widely divergent pricing decisions, and the fact that dealers want to sell their highest-margin gasoline vehicles, means that GM dealers won’t always have a strong incentive to push the Bolt. That gives Tesla an advantage once its starts to roll out its competitively priced Model 3 later this year.

The Model 3 is expected to cost $35,000 before incentives. Already more than 400,000 people have put down $1,000 to reserve one.

Big Picture: Pricing on the Chevy Bolt has been all over the place, which could be an advantage for Tesla.

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