RE: Tesla to close showrooms in favour of web

RE: Tesla to close showrooms in favour of web

Friday 1st March

Tesla to close showrooms in favour of web

EV-maker will go online only in an effort to drive down costs



Tesla's troubles are no secret. The pioneering EV manufacturer has been beset by difficulties ever since it attempted to scale-up beyond its well-recieved Model S. From manufacturing delays, to distribution issues, to founder Elon Musk's notorious tweets on everything from Thai cave rescuers to taking the company private, there have been plenty of distractions from the job of making money.

Just last month the company announced it was laying off around 3,000 workers - seven per cent of its workforce - and though it managed to finally make a profit last year, it expects to post a loss for the first quarter of 2019 as it struggles to balance the books. While Tesla's stocks are not the most shorted in history as Musk once claimed, then, there are still many investors, analysts and spectators alike waiting for the venture to fail.

All of this comes against a backdrop of far more established manufacturers waking up to the reality of electrification and developing rival products of their own. If Tesla can't secure itself a large enough slice of the pie before the big players enter the fray, it can pretty much wave goodbye to its chances of survival. But there is light at the end of the tunnel.

With the kinks in the mass-market Model 3's production seemingly ironed out, things are looking up for the company. Lead times are now as low as four weeks, with tens of thousands of cars already in customer hands. The product is vital to Tesla's bottom line, providing as it does a greater than 20 per cent profit margin on each vehicle sold and the opportunity to trade in volumes previously unknown to Palo Alto.


One final hurdle remains, though. For years Musk has promised to make the car available for $35,000, the average cost of a new car in the US, offering a truly affordable electric option to consumers. Currently Model 3s are selling for closer to $50,000, though, and to bridge that gap something has to change.

That something is Tesla's global chain of 387 stores. The showrooms originally made waves when they were first unveiled, breaking as they did with the traditional dealer model. Now, though, they're an expensive extravagance, one that Musk reckons could save the company five per cent of its annual operating cost if closed, with sales shifting to a Polestar-style online-only model.

As for how much that saving will help sustain lower Model 3 prices, and whether it'll be enough to keep Tesla afloat in the long run, we'll have to wait and see. For now, though, the company remains in a precarious balance, teetering between profitability and problems. It's hard not to feel that Tesla's fate remains more firmly in the hands of its rivals than its own.

Author
Discussion

joe-cz4n7

Original Poster:

15 posts

34 months

Friday 1st March
quotequote all
Definitely glad that I took a job with Porsche over Tesla now....

Numeric

465 posts

90 months

Friday 1st March
quotequote all
I remember many years ago Daewoo shouting about how they had no dealers - but then had showrooms that acted exactly as dealers and I have to imagine that is what Tesla has found itself with - and they are expensive beasts to run. So I do understand the rationale - the only problem is I have never yet seen, despite endless efforts by manufacturers, a model that works better than having somewhere for the customer to see the vehicle and discuss the price.

I wouldn't buy a sofa online without seeing it first, yet alone a car - but I am old and almost certainly not the ideal for the model here.

British Beef

1,156 posts

104 months

Friday 1st March
quotequote all

In principal, great idea to save money for Tesla.

BUT, dealers also service and repair, who is tasked with that now?

Good luck taking a Tesla into a local Quickfux and asking them to diagnose a faulty battery pack, or electric motor packed in.

Dr G

13,536 posts

181 months

Friday 1st March
quotequote all
Jalopnik article explains in more detail:

https://jalopnik.com/the-35-000-tesla-model-3-is-f...

Dealers closing.

Investing more in service centres.

35k car is now available to order.

J4CKO

26,630 posts

139 months

Friday 1st March
quotequote all
That is a sweet spot they are hitting, enough range, decent looking, plenty fast enough and doesn't have loads of stuff you dont need. Its the next step up from a Leaf and has a dash of sexiness, that the Leaf, however good doesnt have.

If they can get that over here and it not cost the same in pounds as dollars they are onto a winner, factor in the tax and fuel savings that would be a very cheap car to own and run. No wonder they cant make them fast enough.
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st4

1,359 posts

72 months

Friday 1st March
quotequote all
British Beef said:
In principal, great idea to save money for Tesla.

BUT, dealers also service and repair, who is tasked with that now?

Good luck taking a Tesla into a local Quickfux and asking them to diagnose a faulty battery pack, or electric motor packed in.
This. And people still like to see cars. I think they are making a mistake and dealerships are needed for repairs/warranty work. A good dealership network is essential for a car maker to really thrive.

Biggles111

394 posts

202 months

Friday 1st March
quotequote all
The real PH worthy news here is the overnight drop in the UK price of the S and X. There is a lot of discussion going on between owners as to whether this is real or if someone at Tesla forgot to include VAT, but on the face of it an S 100D ludicrous performance can be had as a custom order for £84,150 (plus cost of autopilot etc) as a custom order, when yesterday it was a £120k+ car.



People have been querying the pricing this morning and have been told it is real; as a result a number of orders have been placed.

If I didn't already own a 100D I'd be placing a deposit! Impact on residuals is not ideal, but if it gets more people into the cars (and if it is honoured by Tesla) it is a good thing long term.



AndrewEH1

4,367 posts

92 months

Friday 1st March
quotequote all
joe-cz4n7 said:
Definitely glad that I took a job with Porsche over Tesla now....
Was close to taking a job at the Edinburgh show room, shat it (mainly because I thought the next 2-3 years of Tesla would be 'interesting' and was going to look again once the Model 3 had fully launched)

Bullet dodged perhaps.

mstrbkr

6,942 posts

137 months

Friday 1st March
quotequote all
st4 said:
This. And people still like to see cars. I think they are making a mistake and dealerships are needed for repairs/warranty work. A good dealership network is essential for a car maker to really thrive.
They will still have service centres for repairs, something this PH article doesn't point out.

200Plus Club

5,273 posts

217 months

Friday 1st March
quotequote all
Went in a tesla S recently and was very impressed. Superb bit of kit. It also has the secret "cowbell " mode which was hilarious.
Realistically if I still needed a commuter car daily I'd love one.

dapprman

754 posts

206 months

Friday 1st March
quotequote all
Be interesting to see if this actuality works or if it will be more creative accountancy. Tesla made a gross sales profit in Q2 and Q3 last year (I assume Q4 as I'm looking at results for 31/12/2018), however they still made an operating loss, though down to $388 million from $1632 million the previous year. Cutting out the dealerships will help reduce cost (especially those expensive location boutiques), but dropping the price of the main produce by over 20% is going to hurt hard.

Doofus

8,646 posts

112 months

Friday 1st March
quotequote all
I'm not in the market for a Tesla, but I do worry that it's just a house of cards.

R500K

155 posts

73 months

Friday 1st March
quotequote all
British Beef said:
In principal, great idea to save money for Tesla.

BUT, dealers also service and repair, who is tasked with that now?

Good luck taking a Tesla into a local Quickfux and asking them to diagnose a faulty battery pack, or electric motor packed in.
Tesla has a different operating model, there is no servicing done at 'dealers', you need to go to a service centre

ntiz

539 posts

75 months

Friday 1st March
quotequote all
I dropped my car off at one of there service centres yesterday it works well small tidy front office. 5 desks that orocessed your car in and out taking you through what has been done etc.

It is a good way of doing it much easier than setting up a dealership.

Though not sure I would have bought one if I hadn’t been able to drive it and ask a million questions as it is such a new idea for many.

Thinking about it I didn’t actually drive one at a dealership I got invited to a driving event near were I live maybe that is the future mobile driving events then order online. With service centres.

emperorburger

23 posts

5 months

Friday 1st March
quotequote all
After hours share price dropped post announcement and with almost immediate availability on the $35k M3, they must have exhausted demand for the premium models. With the $920M bond repayment due and I can only imagine wafer thin margins on the $35k M3, things are not looking great for Elon in my opinion.

A last Hail Mary perhaps....

Mackofthejungle

813 posts

134 months

Friday 1st March
quotequote all
I don't get it... Where do I go to buy a Tesla? A website? Really? I just wouldn't..

Good luck to them, but I think they'd fair better if they joined up with an actual car dealer network. Arnold Clark Tesla. "Yep she's a real beauty sir, lovely sporty feel, no we only have them in white" etc.. Perfect.

The Surveyor

6,425 posts

176 months

Friday 1st March
quotequote all
Biggles111 said:
The real PH worthy news here is the overnight drop in the UK price of the S and X. There is a lot of discussion going on between owners as to whether this is real or if someone at Tesla forgot to include VAT, but on the face of it an S 100D ludicrous performance can be had as a custom order for £84,150 (plus cost of autopilot etc) as a custom order, when yesterday it was a £120k+ car.



People have been querying the pricing this morning and have been told it is real; as a result a number of orders have been placed.

If I didn't already own a 100D I'd be placing a deposit! Impact on residuals is not ideal, but if it gets more people into the cars (and if it is honoured by Tesla) it is a good thing long term.


How happy would you be if you had just bought a new 100D last week and it's now instantly worth £40k less today.

I fear this and the closure of dealerships is the start of the end for Tesla.

The Moose

17,310 posts

148 months

Friday 1st March
quotequote all
I wonder how distance selling rules will play into this.

phil4

399 posts

177 months

Friday 1st March
quotequote all
The Surveyor said:
How happy would you be if you had just bought a new 100D last week and it's now instantly worth £40k less today.

I fear this and the closure of dealerships is the start of the end for Tesla.
https://www.tesla.com/en_GB/new/5YJSB7E4XKF298715

Why'd you pay £134,000 for that.. now you can do a similar custom order for a lot less.

Biggles111

394 posts

202 months

Friday 1st March
quotequote all
phil4 said:
The Surveyor said:
How happy would you be if you had just bought a new 100D last week and it's now instantly worth £40k less today.

I fear this and the closure of dealerships is the start of the end for Tesla.
https://www.tesla.com/en_GB/new/5YJSB7E4XKF298715

Why'd you pay £134,000 for that.. now you can do a similar custom order for a lot less.
Exactly. Existing owners are not exactly rewarded for our past custom, and likewise existing stock will need a reprice. Maybe future FSD could be rolled out to those who have already bought, to avoid losing all loyalty. At the same time - if Tesla want to build volume beyond early adopters then the price point needed to come down. Pricing the performance models at this new level could get a lot of new people in to the cars. 0-60 in 2.5 s for well under £100k is hard to beat...

Edited by Biggles111 on Friday 1st March 13:37