Tesla: Service, Support & Operations Network | In Practise

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Tesla: Service, Support & Operations Network

Former Senior Director of Service, Support & Operations EMEA at Tesla

Why is this interview interesting?

  • The fundamentals of Tesla's vertically integrated model from customer purchase to delivery and service
  • The source of Tesla's quality issues and challenges with the Freemont production schedule
  • Service revenue opportunities and costs
  • How Tesla organize delivering and servicing a vehicle across Europe
  • The impact of Giga Berlin and Shanghai on quality issues and servicing
  • Tesla's culture and the influence of Elon.

Executive Bio

Johan Vos

Former Senior Director of Service, Support & Operations EMEA at Tesla

Johan is the Former Senior Director of Service, Support & Operations EMEA at Tesla where he was responsible for the entire service and after-sales organization in Europe. In 2016, he joined Tesla and built a team of over 1,200 FTE’s to deal with the delivery and servicing of Model S and 3’s. Johan introduced various new innovative concepts for Tesla including mobile delivery, delivery hubs, and partnering with corporate franchise networks for aftermarket servicing. Johan previously ran Service and Support in EMEA for illumina and is currently the Chief Commercial Officer at Lightyear, the new all-electric solar car. Read more

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Interview Transcript

Johan, can you start by sharing some context to when you first joined Tesla, and your responsibilities in the company?

Actually, it’s quite a fun story because, if you look at my background, I traditionally work in high-tech industries, in the medical space. I went from medical imaging, to medical therapies, to implantable devices, into next generation sequencing. Then this company Tesla approached me and said, would you be interested in joining us? Initially, looking at the company, I was like, that is automotive; that was my first response. But then when I dived deeper and saw their mission and saw the technology that they were working on, actually I started to engage with the dialogue and wanted to understand why they would approach someone like me, who has no experience in that particular part of the industry.

They were going through a change where they were recruiting new people, with a new mindset; a different mindset from those in traditional automotive. The conversations we had were all about how we could bring service, how we could bring customer experience, in the automotive world, to the end users, by not taking the traditional path. The conversations we had, I would say, were a lot of fun. We were deep-diving each other as to where we would see the other’s value and this appealed to me so much and I was very excited and jumped on board with Tesla, about four years ago now.

What was the state of the European network during that time, in 2014?

In Europe, the network was still pretty small. At that time, Tesla only had two cars on the road. It was the Roadster which was the initial electrified Lotus car and there was a small population of customers in Europe who were using it. They had also introduced the Model S which was, at that time, their first entry into the true automotive market, bringing a sedan to the market, addressing a particular population. At that time, in Europe, in many European countries, you had, on average, two or maybe three service centers, per country. They were pretty small, pretty much self-sufficient and weren’t very connected or inter-connected with each other. It was a pretty disconnected organization, but with one main purpose, which was to do the utmost for their customers. That was common across all of the service centers in Europe. They would always put the customer first and had that as a starting point. There is no better baseline to start from, than a baseline like that.

The core strategy at Tesla is to vertically integrate the model and, pretty much, own the whole process and change the experience. How did you look at reinventing the whole value chain in automotive, versus the old model?

We were, of course, competing with a huge legacy network of OEMs, who had built up their presence everywhere. Even in the smallest villages, in countries far away, you would still find a traditional OEM service center. That was all done through a network of dealerships, partnerships, outsourced. Then you had Tesla coming in, to do true vertical integration. Everything was done by Tesla. Tesla has no dealerships. If you go to a Tesla center, it’s owned by Tesla; the staff are Tesla staff. All the materials in there, the layout, it’s all created by Tesla. That created some challenges in terms of the pace at which you can scale up. Having a footprint of zero and scaling that up to where Tesla is today, requires not only huge investment, but also an organization who is ready to scale up at such a pace. I’m talking about the aftersales component, where Tesla truly has that vertical integration, across the entire company. They get in the raw materials and those raw materials end up being a car, rather than the assemblies of the traditional OEMs, where they source the parts of the car and put it together to make one car. Tesla is truly doing things from scratch.

Can we walk through the whole process? If I’m in Germany or France and order a Tesla, online, what exactly is the process?

The process has changed over the years. But how it all started was to bring something new to market, which was unknown. We were entering countries where electric vehicles had never been heard of and, to a certain extent, were almost non-existent, in a commodity world. We had to convince the customers that this was the next step forward, that this was the revolution, in terms of owning and driving a car. The only way we could convince the customers is if they could touch it, feel it and experience it.

For the customers who approached Tesla and visited one of our sales locations, their main purpose was to touch and feel the car but also to do a test drive. For those who didn’t yet want to visit us, but were interested in hearing more about Tesla, we built up what we called a back-office sales center. When those customers got in contact with us, we would talk about the advantages of the car, but then we would invite the customer to come to their nearest location – which could still be hundreds of kilometers away from where that customer lived – in order to experience the car. Everything was done through experiencing and test driving the car and, I can tell you, most of the people who test drove the car got so excited about it, that they went home to start selling this adventure to their partners.

The experience was pretty much identical worldwide. You would get the customer into a car, let them have a test drive and then just follow up and, basically, be very straightforward, but close the deal. In those sales locations, it was more like an Experience Center, very often combined with a small service footprint, as well. There was only one car in the showroom and that was the Tesla Model S. In one color; in red. Of course, the customer could see what different colors were available and what different materials were available, for the interior, but they were all very limited. Five colors and five different versions of the inside and then maybe two or three different performance types. The customer would know what they were getting.

Basically, when they opted to buy the car, after the test drive, then the next process would kick in. That experience hasn’t changed that much over time. We were building more experience centers and, predominantly, we were aiming for high-class locations with the maximum footprint. So very often, you would see Tesla sitting next to an Apple Store. Those were the locations where Tesla would set up an Experience Center. Downtown, in major cities, especially where people were attracted by high-end, high-tech and high-class products. That is where we would best fit. We did not sit in the outlets that you see outside city centers, but in prime locations, in order for people to experience the new brand coming into the market and ready to get big.

Are these smaller plots that are not that expensive to build and open?

I can tell you, they were expensive, but they were expensive based on their location. Again, we were in prime locations. Prime locations where Louis Vuitton and Rolex had their stores. The square footage price for those locations was extreme. We would take extra care with the interior of those Experience Centers, which would reflect the quality and name of the brand. We put in a lot of effort to make that experience identical across the world, with high-class materials. Initially, when a company is going from start-up to scale up and expanding across the world, what typically happens is that the concept was being developed in the US and the materials were being selected in the US and the providers were selected in the US and you copy and paste into other regions. You can understand the challenge if you have US materials and, initially, you have to bring them over to Europe, in order to fit it in into our European standards, our European rules and regulations. It’s challenging, at the start. Over time, you have to adapt and make it more localized.

But with a company who was so keen on their brand, to make those changes and get those changes accepted, that’s not something that you do overnight.

What, roughly, was the conversion rate when you had someone sit in the car and drive it, to get them to actually buy it?

That was pretty high. Once you got the people into the cars, I would say that the conversion rate was probably around 40%. But to get the people to go to the Experience Centers, of course, that’s a different conversion rate. You need hundreds or thousands of leads, to start with, in order to convert to, essentially, the 10% conversion. I would say that Tesla probably had the highest conversion rate, compared to any other. But the starting point was, very often, the future customer approaching Tesla, because of certain interests.

One of the main selling methods for Tesla, still today, is that if you own a car, you go for a drive with friends or a family member, and you get excited and you tell them about the experience of the car and people want to experience it themselves. This way of selling is still the number one. Also, standing at a supercharger. Whilst you are there, you talk to other owners and exciting each other and others.

So it’s mainly word of mouth growth. There’s not a large sales and marketing spend to drive the leads at this point?

No; there is minimum sales and marketing budget. There are no advertisements. There are certain campaigns, of course, in order to retain those customers and make them feel special and part of the family. But it’s not necessarily campaigns to reach new customers.

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Tesla: Service, Support & Operations Network

July 22, 2020

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