Can Tesla's direct sales model be proven superior to the '4S dealership model' through first principles?

Okay, let's talk about this.

To think about this using "first principles," we need to strip away all complex business models and historical baggage, and return to the most primitive, fundamental question: What is the core objective of an automaker?

The answer is simple: Build good cars, then efficiently sell them to users, provide services, and ultimately achieve profitability.

Alright, with this core in mind, let's break down the two models.

First, let's look at the traditional "4S Store Model"

Imagine it as a project with multiple layers of subcontracting.

1. Overly Long Chain: Automaker (Party A) → 4S Store (General Contractor) → You (End-User). See, there's an extra link in the middle. Based on the most basic principles of physics, energy is lost with each transfer. The same applies in business: every additional link in the chain increases costs and communication friction. 4S stores have to build luxurious showrooms, support a large team of sales and service staff, stock a large inventory of cars, and still make a profit themselves. Who ultimately pays for these costs? They are inevitably added to the car's price, borne by you.

2. Misaligned Goals: This is the most critical issue.

   • Your Goal: Buy the most suitable car for yourself at the best possible price, and avoid being ripped off in subsequent maintenance and repairs.
   • Automaker's Goal: Enhance brand image, sell more cars, and get direct feedback from users to improve products.
   • 4S Store's Goal: Maximize single-store profit.

   As you can see, the goals of the three parties are not entirely aligned. Where does a 4S store's profit primarily come from? Car sales margins, mandatory insurance, loan rebates, and most importantly—after-sales maintenance and repair. This leads to a fundamental conflict: if a car is of exceptionally good quality and rarely breaks down, how will the 4S store's service department make money? Therefore, 4S stores have insufficient incentive to promote models with low maintenance needs and high reliability (like electric vehicles, which have no engine or gearbox, and very few maintenance items). They are more motivated to recommend various "original parts" and "deep cleaning" packages, because these are the main sources of profit.

From a first principles perspective, the "middleman" role of the 4S store, while increasing costs, also creates a deviation in goals, making the entire "build-sell-service" system less efficient.

Now, let's look at Tesla's "Direct Sales Model"

Tesla's approach is a return to first principles thinking. Elon Musk probably thought at the time: "Why should I find an agent to sell my cars? Can't I sell directly to customers myself?"

1. Shortest Chain: Tesla → You. This is the most direct and efficient path. Without a middleman, theoretically, those costs can be saved, either by passing the savings to consumers (lower car prices) or by investing in R&D (building better cars).

2. Perfectly Aligned Goals:

   • Tesla's goals and your goals are fundamentally aligned. It wants you to enjoy buying and using the car, then recommend it to friends and family, building word-of-mouth. This is because its profit comes from the product itself and brand value, not by "skimming" from after-sales maintenance.
   • Transparent Pricing: Nationwide unified pricing, ordered online. You don't have to battle with sales staff or worry about being "tricked." The experience brought by this certainty is invaluable. The time and energy saved also represent an increase in efficiency.
   • Consistent Experience: Whether you're at a Tesla store in Beijing or Chengdu, what you see, hear, and experience is the same. The brand image is firmly controlled by Tesla itself and won't be damaged by poor service from a particular 4S store.
   • Direct Information Flow: Any complaints or suggestions you have can be directly fed back to Tesla headquarters via the app or customer service. This information flow is extremely valuable, helping the automaker iterate products and software at the fastest speed. In the 4S store model, your voice might only reach the store manager and stop there.

Conclusion

Therefore, from a first principles perspective, the direct sales model is theoretically "superior." This is because it eliminates a non-core "middleman" link that causes conflicts of interest, maximizing the efficiency of the entire system (cost efficiency, communication efficiency, service efficiency).

It's like this: if you want the freshest vegetables, do you pick them directly from the farmer's field (direct sales), or do you buy them from a supermarket with layered wholesale and markups (4S store model)? The answer is self-evident.

Of course, the 4S store model had its historical rationale in the era of internal combustion engine vehicles, for example, by alleviating the financial and management pressure on automakers to establish sales networks and service points nationwide. However, in today's world, with such developed internet and highly efficient logistics and information flow, the superiority of the direct sales model becomes increasingly prominent. It aligns more with the business trend of "returning to basics."