Tesla to Shutter Bricks-and-Mortar Dealerships in Favour of E-Commerce

April Davis By April Davis | 04 Mar 2019

After sales of Tesla’s much-anticipated Model 3 slumped and investor confidence in the brand slipped, the business has announced plans to sell its cars online to reduce the sizeable overheads of its physical store network.

According to an announcement, Tesla is planning to close the majority of its stores over the “next few months”, while also laying off a portion of its retail employees. This is to make way for a proposed new business model where its cars will be sold primarily online. In a call to reporters in the US late last week, CEO Elon Musk said online customers would have the opportunity to buy their car online and then return it up to a week later. Although, he is reportedly “confident” that returns would be minimal.

Musk has said its e-commerce push will help the business reduce its operating costs and avoid any local politics that have prevented it from opening physical locations in the past. For instance, Tesla has been unable to open dealerships in Connecticut and New Mexico in the past due to red tape from local governments.

Tesla did note, however, that it would keep a number of stores in “high-traffic locations” open as “galleries and Tesla information centres”, stating that there would also be some “headcount reduction”. The car manufacturer has not specified how many people would lose their jobs as the company shifts to online. “It’s a hard decision but I think it’s the right decision for the future,” Musk said. Five Australian Tesla stores are expected to be impacted in the coming months.

The company explained the process for purchasing a Tesla car online in a recent blog post, stating “you can now buy a Tesla in North America via your phone in about one minute”. According to the post, the business is looking to expand that capability “worldwide” in the future. Citing its refund policy, which will make up for the fact that many shoppers will not be able to take their chosen vehicle for a test drive before making a purchase, the post said “you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free.”

The cars can be returned within seven days or before the vehicle reaches a mileage of 1,000 miles for shoppers to get their money back.

Musk said that while its bricks-and-mortar locations will be reduced, Tesla will be “significantly” increasing the number of service centres it operates to keep up with growing consumer demand. Through these service centres, Tesla offers a mobile service to customers that can book a Tesla-branded repair van through the business’s mobile app. In the call to the media, Musk said the company’s service team will be reporting directly to him and will be striving to provide a same-day service to Tesla owners.

This news comes after a rough few months for Tesla. Despite stabilising finances, Tesla has been operating on very tight margins, with lower-than-expected sales of its new Model 3 vehicle causing shares to plummet by eight percent late last week. Musk told reporters that he doesn’t believe Tesla will turn a profit in the first quarter of 2019.

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