# Executing the Shift to Direct Online Sales
In 2020, a customer could configure a Tesla, pay a deposit, and arrange delivery in under ten minutes on their phone, without ever speaking to a salesperson. No haggling. No dealer markup. No showroom. That model, once considered a fringe experiment, is now the benchmark every legacy carmaker is trying to reverse-engineer.
The problem: they cannot simply copy it. Tesla built its sales model from a blank sheet. Ford, Volkswagen, and Toyota are bolted to a century-old franchise system protected by state law. This lesson shows how to design a realistic direct-to-consumer (D2C) strategy inside those constraints.
A quick definition: a franchise dealer is an independent business that buys cars from a manufacturer (the OEM, or Original Equipment Manufacturer) and resells them to the public. The OEM does not sell to you directly.
In the United States, franchise laws in most states protect these dealers. They restrict or ban OEMs from selling new cars directly to consumers, and they prevent OEMs from opening company-owned stores that compete with existing franchisees.
Tesla had no legacy dealers, so it had no franchisees to protect. It fought state-by-state legal battles to sell directly, winning in some states and being forced into workarounds in others (for example, selling out of neighboring states or operating "galleries" where staff cannot discuss price). The result is a patchwork, but Tesla controls its pricing, its data, and its customer relationship end to end.
Legacy OEMs cannot flip a switch and do the same. Terminating dealer agreements triggers lawsuits, buyout costs, and political backlash. This is the core tension of the lesson.
Any automotive D2C strategy has to navigate three linked problems.
The regulatory floor. What you can legally do depends heavily on jurisdiction. In the US it varies by state; in the EU, rules differ by country and are shaped by competition law. Assume you cannot bypass dealers entirely in most markets without a fight.
When two of your own sales channels compete for the same customer, that is channel conflict. If your website sells a car cheaper than your dealer down the street, the dealer loses the sale and resents you. Dealers can retaliate by pushing rival brands or deprioritizing your service work.
The actual online buying experience: configuring, financing, trade-in valuation, and delivery scheduling on a screen. Doing this badly is worse than not doing it, because customers who start online and hit a dead end lose trust in the brand.
The most important structure to understand is the agency model, the main tool European OEMs have used to move toward D2C.
Here is the mechanic. Under a traditional franchise, the dealer owns the car (they buy it, hold inventory, and set the final price). Under an agency model, the OEM owns the car and sets one fixed price. The former dealer becomes an agent: they handle the test drive, the handover, and service, and they earn a flat fee or commission per transaction instead of a trading margin.
Why this matters for marketing:
Several European brands, including Mercedes-Benz and Volvo, have rolled out agency or direct models in select markets. Results have been mixed. Some markets saw smoother pricing and better data; others saw friction with dealers over fee levels and inventory control. Treat any single rollout as an experiment, not a proven template.
For a clear regulatory primer on how the EU treats car distribution and the shift in competition rules, see the European Commission's overview of motor vehicle distribution rules.
🎬 [VIDEO: "How Tesla Sells Cars Without Dealerships" — youtube.com — a short explainer on Tesla's direct sales model and the legal battles behind it]
You are not choosing "dealers or no dealers." You are choosing how much of the sale moves online and who captures the value. Sequence it.
Before any marketing decision, catalog what is permitted per market. Where direct sales are banned, agency may be the only path. Where they are allowed, you have more freedom but still face channel conflict with existing stores. This is a legal question; get counsel. Do not treat a strategy deck as legal advice.
One price, everywhere, is the foundation. If a customer can find a cheaper deal offline, your online channel becomes a browsing tool, not a sales tool. Fixed pricing is the single change that does the most to reduce conflict and build trust.
The online journey must handle the hard parts, not just the pretty configurator:
Amazon-style expectations now apply to a purchase that can exceed a year of income. Friction anywhere kills the funnelfunnelThe customer journey from awareness to purchase, typically Awareness, Interest, Consideration, Decision, Action, with prospects narrowing at each stage.View full definition →.
Reframe dealers as experience and service centers: test drives, handovers, servicing, and used-car reconditioning. Compensate them for these functions so they do not view online sales as theft. The brands that struggled with agency mostly stumbled here, on fee negotiations, not on technology.
Once you control the transaction, you can market across the full ownership lifecycle: service reminders, software upgrades, battery health for EVs, insurance, and the next purchase. This is the durable advantage. A configurator is easy to copy; a decade of first-party customer data is not.
Knowledge check
1. Why can legacy OEMs like Ford and Volkswagen not simply replicate Tesla's direct-to-consumer sales model?
2. What best explains why Tesla operates price-restricted 'galleries' in some states rather than full sales stores?
3. A carmaker considers terminating its dealer agreements to go fully direct. What is the primary reason this is not a realistic 'flip a switch' option?
4. Select ALL correct answers about the advantages Tesla gained from its direct sales model.
Select all the correct answers.
5. Select ALL correct answers that correctly describe the franchise dealer system in the US.
Select all the correct answers.
Direct online sales are not automatically better. Weigh the real costs.
Inventory risk moves to you. Under franchising, dealers absorb the cost of unsold cars sitting on lots. Take that on directly and you carry the working capitalworking capitalWorking capital is the difference between a company's current assets and current liabilities, measuring short-term liquidity and the funds available to run daily operations.View full definition → and the demand-forecasting risk. Tesla manages this with a build-to-order bias; legacy OEMs producing millions of units cannot fully match that.
Delivery logistics get harder. Someone still has to get a physical car to a physical human. Home delivery is expensive at scale. This is why "online sale, local handover" hybrids dominate real rollouts.
Dealers are not only a cost. They provide local marketing, financing relationships, trade-in liquidity, and service coverage that would be expensive to rebuild. The goal is to reprice and redirect that network, not to romanticize destroying it.
Customer segments differ. Younger, EV-oriented buyers skew comfortable buying online. Buyers of large trucks or those who value negotiation may not. Segment your rollout by product and audience rather than forcing one model on everyone.
As of 2026, no major legacy OEM has fully replicated Tesla's dealer-free model at scale in the US, and franchise laws remain the binding constraint. The realistic frontier is hybrid: fixed pricing, strong digital retailing, and an evolving dealer or agent role. Expect continued legal disputes and reversals. Any figure you hear about "percent of sales online" should be treated as an estimate that varies wildly by brand and market.