The retailer association points out that India’s complex market dynamics calls for a ‘phygital’ model—not a purely D2C approach.
29 Mar 2025 | 1283 Views | By Darshan Nakhwa & Kiran Murali, and Prerna Lidhoo
Tesla has redefined the global automotive landscape with its advanced electric vehicles, innovative technology, and a direct-to-consumer (D2C) sales model that eliminates the need for traditional dealerships. This strategy has been successful in developed markets such as the U.S., China, and Europe, where digital infrastructure and consumer behaviour facilitate direct ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
Tesla has redefined the global automotive landscape with its advanced electric vehicles, innovative technology, and a direct-to-consumer (D2C) sales model that eliminates the need for traditional dealerships. This strategy has been successful in developed markets such as the U.S., China, and Europe, where digital infrastructure and consumer behaviour facilitate direct online sales.
However, as Tesla seeks to establish presence in India, the key question is – can a purely D2C model work in this market? At least, the dealers don’t seem to think so. CS Vigneshwar, President of the Federation of Automobile Dealers Associations (FADA), believes India’s unique challenges—geographic diversity, regulatory complexity, customer service expectations, and financing patterns— demand the presence of a robust and responsive dealership network to ensure success.
“Buying a car isn’t like shopping for a gadget,” said Vigneshwar. “Consumers want to feel the car—how the engine hums, how the gear shifts, how the doors close. It’s a tactile, sensory experience that simply can’t be replicated online.” He also emphasised the emotional and family-oriented nature of car buying in India.
“A car is a major investment for most families. It’s common for the entire family— parents, spouse, kids—to visit the dealership, test the car, and discuss its features together before making a decision. This personal interaction is a big part of the buying journey, and it’s something only a physical dealership can offer,” he explained. He points out that Tesla’s direct-to-consumer sales model may have found success in developed markets, but India presents a very different landscape, adding that dealerships play a crucial role in establishing customer trust and delivering localised services.
“India is a country of immense cultural and regional diversity. Each state has its financial habits, cultural preferences, and unique sales cycles. For example, Kerala sees a surge in car sales during Onam, while Tamil Nadu follows a different seasonal trend,” Vigneshwar explained. “Local dealerships are best equipped to understand and respond to these regional nuances with tailored sales and marketing strategies.”
He further emphasised that dealers are not just points of sale. They are long-term relationship builders. “From helping customers before the pm,..murchase to providing after-sales support, dealers create lasting trust. This relationship is too intricate to replicate through a direct model. Without this connection, OEMs risk losing insight into regional buying behaviour and customer expectations.
After-Sales Support and Operational Challenges
Vigneshwar emphasises that strong after-sales service and the availability of spare parts are crucial for establishing a brand’s reputation and fostering customer loyalty. A lack of focus in this area can significantly harm brand perception—Ola Electric serves as a notable example. Dealers make significant investments in their networks to ensure dependable sales, service, and parts availability, even in remote areas. This plays a vital role in enhancing customer satisfaction, he said.
In a vast country like India, a well-functioning service ecosystem is only possible with the support of dealer partners. It’s not practical for OEMs to independently set up service centres in every corner, he pointed out. Even though routine service may be required only once a year, unforeseen issues such as accidents or mechanical failures often demand prompt local support, which is challenging to achieve in a D2C setup.
Besides service, dealers also act as facilitators of financing and insurance—both of which are crucial in the Indian market. Operating a dealership in India involves navigating 20 to 30 regulatory compliances per outlet, a task that local dealers are well-equipped to manage. However, for automakers pursuing a direct-to-consumer model, this responsibility falls entirely on them—adding layers of operational complexity. “Just consider the case of Ola,” said Vigneshwar.
Ola Electric entered the market with a fully online sales model, aiming to deliver a seamless, digital-first customer experience. However, the strategy soon encountered significant challenges—leading the company to open physical experience centers across the country. While these centres function similarly to dealerships, they lack the personal engagement and relationship-building that traditional dealers offer. Notably, all of Ola’s outlets remain company-owned. “Ola’s struggles with customer service have had a ripple effect on the broader EV sector in India,” Vigneshwar said.
Inventory management is another area where traditional dealerships offer a clear advantage. Dealers assume the responsibility for inventory costs and manage supply chain logistics, allowing OEMs to focus on manufacturing. In a direct-to-consumer model, automakers must manage their own warehousing, logistics, and distribution, which adds significant operational complexity and increases overall expenses. “Having an automaker run its dealership operations is far more costly than relying on local dealer partners,” Vigneshwar noted.
Learning From Mercedes Benz India’s D2C Model
Even though Mercedes-Benz India has adopted a directto- consumer (D2C) sales model, it hasn’t wholly bypassed the traditional dealership ecosystem. Dealer partners continue to play a crucial role in its operations. Under this model, called the “Retail of the Future,” Mercedes-Benz retains ownership of the vehicle stock, sets pricing centrally, and sells directly to customers. However, dealers act as franchise partners, providing essential services like product demonstrations, test drives, deliveries, aftersales support, and customer engagement at the local level.
This hybrid approach ensures customers benefit from transparent pricing and a seamless digital experience, while still having access to personalised, in-person interactions through trusted local partners. It also allows Mercedes to maintain a consistent brand presence and service quality across regions— something that’s critical in a diverse market like India. So, while Mercedes uses a D2C framework on paper, in practice, it continues to leverage the infrastructure, expertise, and local insights of its dealer network—striking a balance between innovation and market practicality.
Mercedes’ experience is relevant for Tesla, Vigneswar said, pointing to the likely pricing of the EVs. Tesla’s vehicles are expected to start at around Rs 35 lakh, placing them firmly above the mainstream car market. “At this price point, Tesla won’t be competing with mass-market players like Tata Motors or Mahindra & Mahindra, where vehicle prices typically top out around ₹30 lakh,” Vigneshwar noted. “Instead, they’ll target customers of premium brands such as Mercedes-Benz, BMW, BYD, Audi, and Volvo.” Luxury vehicles currently make up just over 1.5% of the total passenger car sales in India.
And within this space, most luxury carmakers rely on established dealership networks to drive sales and service. Even ultra-luxury brands like Ferrari and Lamborghini operate through a network of dealer partners. The only exception is Mercedes-Benz, which has adopted a D2C model but still involves dealers in a franchise-style support role. “If Tesla tries to go fully direct without building a strong dealer partner network, they may find it difficult to scale and sustain operations in the Indian market,” Vigneshwar warned.
BYD, Tesla’s direct electric car competitor globally, also sells through a dealership model in India. The Chinese car maker reported robust sales growth last year. In 2025, it plans to sharpen its focus on tier-2 markets to drive sales. The company has expanded its dealership network in the country to 40 touchpoints from 27 earlier. While several automakers have ventured into online sales, digital platforms continue to play a supporting role, rather than replacing traditional dealerships