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Tesla Decides to Abandon It Physical stores

2019-03-12 10:12 Tuesday


Last week, Tesla announced that it would close most of its brick-and-mortar stores and opt to online sales, which Tesla thinks is the future of auto sales. Tesla's CEO, Elon Musk, admitted that online sales would lower the company's operating expenses and thus customer can buy cars at a lower price, which will also help to stimulate sales volume and maintain profitability.

 Tesla Decides to Abandon It Physical stores

In an email to Tesla employees, CEO Elon Musk said that 78% of all orders for its Model 3 were placed online rather than in a store across 2018, and 82% of customers bought their Model 3 without ever having taken a test drive.

Because of the announcement, Barclays cut its price target on Tesla from $210 to $192. "Much of the bull narrative has rested on Tesla being the next Apple, selling high-volume EVs at premium price point and at high gross margins, in part aided by a unique branded retail experience," Brian Johnson, a Barclays analyst, wrote in a report.

"Our studies show consumers want to do more of the car-buying process online," said Michelle Krebs, analyst with Cox Automotive. But she claimed that doesn't mean they're ready to complete such a major purchase completely online.

Tesla currently has 378 stores and service centers worldwide, and many of these stores will remain open as service centers. That is crucial for Tesla, which has struggled to provide timely service to its customers.

Even Musk has said improving service will be among the top priorities for the company this year. He suggested the closing of stores is a way of diverting more resources into improving the service. And he also said Tesla is working to do more work at customers' homes and offices, rather than having them bring cars into the service centers.

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