Tesla to close showrooms in favour of web

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 The showrooms originally made waves when they were first unveiled, breaking as they did with the traditional dealer model.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.

P.H. O'meter

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Comments (189) Join the discussion on the forum

  • joe-cz4n7 01 Mar 2019

    Definitely glad that I took a job with Porsche over Tesla now....

  • Numeric 01 Mar 2019

    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 01 Mar 2019

    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 01 Mar 2019

    Jalopnik article explains in more detail:


    Dealers closing.

    Investing more in service centres.

    35k car is now available to order.

  • J4CKO 01 Mar 2019

    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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