Musk talks about Tesla's business model: leading to several obvious differences

Tesla CEO Elon Musk recently held a conference call with employees, in which he expressed his views on Tesla's business model.

Elon Musk held a conference call with Tesla employees this week in which he stressed the need for Tesla to ship cars faster to solve its logistics problems, comparing it to Amazon.

Tesla is unlike other automakers in many ways. One of them is that it owns and operates all of its own stores, service centers and delivery centers, rather than doing business with third-party franchised dealers like most other automakers.

This business model leads to several notable differences, one of which is least appreciated: Tesla owns and is responsible for all of its cars until the customer takes delivery.

But that difference creates more complex logistics problems for Tesla than for other automakers, which simply sell cars to dealers who keep large inventories on their lots, and for Tesla, whose custom cars often don’t leave the factory until a delivery date is agreed with the customer.

Musk told employees this week that starting next quarter, Tesla will immediately ship the vehicles to local distribution centers so that customers can pick them up at any time, according to people who participated in the conference call.

Tesla currently spends a lot of time coordinating customer deliveries and replenishing inventory at its factory in Fremont. Musk wants a steady stream of vehicles heading to their destinations and compares the logistics situation to Amazon.

The CEO said, “If Amazon had to wait until customers were ready to pick up their orders, it would go bankrupt.”

On the other hand, this business model also leads to a financial problem, because Tesla invests all its money into manufacturing cars and does not receive payment until customers take delivery. As long as the car is built but not delivered to consumers, Tesla will be tens of thousands of dollars in the red.

Therefore, Musk has always emphasized that delivering cars to customers faster will greatly improve Tesla's financial situation.

From a macro perspective, the closer Tesla's production facilities are to customers, the shorter the shipping time will be, which is why Tesla has opened a factory in China. In addition, the company has also stated that it will open a factory in Europe.