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Who benefits from closing Tesla's offline stores?

by Eva Fox November 18, 2019

Who benefits from closing Tesla's offline stores?

We are all familiar with Tesla’s policies.
Tesla planned to close most of the physical stores and make the bulk of sales through the online store, so that it would be possible to lower prices for Model 3.
Some of the stores continue to operate as galleries for viewing cars, information and service centers, but mostly Tesla is sold online.
To compensate customers for the lack of test drives when buying online, Tesla changed the return policy: you can buy a car, drive it up to 1000 miles and return it within a week with a full refund.
The company also cut sales and marketing costs - allowing Tesla to cut prices for its cars by about 6%.

It should be clarified that the stores were not closed at the same time, and in particular they are waiting for the rent expiration time.

This allows Tesla to move more smoothly to the model of online sales, while avoiding the large amount of compensation caused by the abolition of rental real estate.

Tesla closes stores in expensive areas of the city and transfers them outside of them, which saves a significant amount of money.

According to China Net, Tesla is closing offline stores in luxury shopping malls in China. To date, Tesla has already closed two Tesla experience stores in Beijing's Chaoyang Joy City and Shanghai Pudong Kerry Center. Next up is the Chengdu Taiyu Lidian store, but a notification has not yet been received.

Elon Musk also explained that some offline stores with a large sales volume will not be closed. In an earlier analysis, Tesla found that more than 70% of consumers in the US market bought Tesla through online payments, and more than 82% of consumers did not test the car before it was delivered to them.

Along with the closure of the luxury offline store, Tesla will also open the new Tesla Center, which combines the functions of sales, service and charging. Closing such expensive stores and moving to the suburbs will significantly reduce Tesla's sales value.

For example, according to the Weilai Financial Report for 2018, rents and related expenses reached 450 million yuan. The cost of rent and wages is high, so the problem of cost reduction is inevitable. After Tesla changed its sales model, new domestic manufacturers are likely to take the same path.

Read more about Tesla's sales model in our article: "Tesla Qingdao Yinchuan West Road Experience Center officially opened"

 

Tesla’s desire to make car sales as simple and convenient as possible is commendable. Also, the less a company has to spend on renting, maintaining and servicing expensive offline stores, the cheaper the cost of Tesla cars for consumers.
Eventually is primarily won by buyers who do not have to spend a lot of time and effort to visit the store and take paperwork, while getting a vehicle at the most favorable price for them.

We remind you that earlier Tesla received all the permissions to start delivery to customers Tesla Model 3 made in China. Read about this in our article: "Tesla Model 3 made in China ready to delivery. Details of the construction of Gigafactory 4 in Europe."




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