Tesla, once synonymous with high demand and long waitlists, now finds itself grappling with an unexpected problem: finding customers for its cars. For the first time, the company's share of the US electric vehicle (EV) market has dipped below 50%, a stark contrast to its previous dominance. This shift poses significant challenges for Tesla's sales team, which is struggling to adapt to a changing market landscape, according to Business Insider. The publication interviewed 14 current and former members of Tesla’s sales team to understand what’s been going wrong and how Tesla should adapt.
Over the past two years, Tesla has implemented a series of initiatives to boost sales, like offering discounts, reorganizing its sales teams, and bouncing between providing commissions to salespeople and threatening them with PIPs. Despite these efforts, Tesla's sales figures continue to decline, reflecting weak consumer interest in EVs and mounting competition from other automakers. The challenge is compounded by negative publicity surrounding CEO Elon Musk and a lack of traditional advertising strategies.
Historically, Tesla's sales approach has been unconventional. The company eschews the dealership model in favor of direct-to-consumer sales, keeping inventory off-site and maintaining a no-haggle pricing policy. Tesla's showrooms serve more as educational spaces than typical sales venues, and the company has relied heavily on online sales. The underlying philosophy has been that the product should sell itself, with sales “advisors” acting as guides rather than traditional salespeople.
However, this strategy has begun to falter. With no new models released in recent years and only minor updates to existing vehicles, Tesla's once-captive audience is dwindling. The absence of fresh products has led to a surplus in production, outpacing demand. As a result, Tesla's sales team has been unable to rely on the product's appeal alone to drive sales.
Recognizing the need for a change, Tesla started hiring sales staff with traditional automotive and sales experience in 2022. This shift was intended to bring a "hunter" mentality to the sales team, moving away from the previous model of passive advising. However, Tesla's approach to compensation has been inconsistent. While traditional dealerships often offer commissions as a significant incentive, Tesla's experiment with commissions—ranging from $25 to $100 per vehicle—proved insufficient. The compensation structure, often contingent on meeting regional sales targets, left many employees (unsurprisingly) dissatisfied and unmotivated.
Further complicating matters, Tesla's sales targets have been erratic, with frequent changes creating uncertainty and frustration among staff. Performance reviews and daily sales goals have been inconsistent, leading to unrealistic expectations and a demoralized workforce. The company also mandated in-person demonstrations of its Full Self-Driving (FSD) software, a feature that not all customers are interested in, adding another layer of complexity to the sales process.
Tesla's recent attempts to boost sales include offering price discounts, which, while attracting some initial interest, ultimately led potential customers to hesitate, expecting further price drops. This strategy has not alleviated the issue of overproduction.
As Tesla navigates this challenging period, the company faces the critical task of transitioning from serving early adopters to appealing to a broader market. This will likely require a more aggressive sales and marketing approach, alongside addressing the aging lineup of vehicles. While CEO Elon Musk has hinted at a new, more affordable Tesla model potentially arriving in 2025, the current lack of new products leaves Tesla's salespeople and managers waiting for something to reignite customer interest.
