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Tesla performs U-turn over store closures

Car prices to rise by ‘about 3%’ after decision to move to online-only sales reversed

WT24 Desk

Tesla has reversed a decision to close all its stores and move to an online-only sales model, the company has announced, pending the results of a further review on the usefulness of physical locations, The Guardian reports.

The initial decision was made as part of a plan to reduce costs at the company, in order to fund an across-the-board immediate price reduction of 6% on Tesla’s cars. Now, however, Tesla will be increasing the price of cars by “about 3%”, erasing half the savings.

“In other words, we will only close about half as many stores, but the cost savings are therefore only about half,” the company said in a statementposted to its official blog. The only car that will not rise in price is Tesla’s cheapest product, the $35,000 (£26,279) Model 3, which the company finally made available as part of the price cut after years of promises.

“Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months,” Tesla said in its statement.

Part of that evaluation may have involved the discovery that the company’s landlords were unwilling to allow it to simply shut down stores on which it holds long-term leases.

According to financial documents found by the Wall Street Journal, the company has obligations worth $1.6bn (£1.2bn) on its retail establishments, and had not initiated discussions with any of its landlords before announcing its intention to close stores.

In Tesla’s statement, the company added: “When we recently closed 10% of sales locations, we selected stores that didn’t invite the natural foot traffic our stores have always been designed for. These are stores that we would have closed anyway, even if in-store sales made up our entire sales model. A few stores in high-visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew.

“In addition, there are another 20% of locations that are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open.”

Tesla emphasised the decision to move to online-only sales still stood, however, “in that potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes”.

The company will be sticking with some tried-and-tested elements of physical car sales: cars will still be available for test drives at stores, and the shops will also carry a small number of cars in inventory for customers who wish to drive away a Tesla immediately.

Before last week’s closures, Tesla had 378 stores and service locations worldwide, including 23 outlets in the UK and Ireland, comprising 18 stores and five service centres.

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