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Tesla to close showrooms in favour of web

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

By Dafydd Wood / Friday, March 01, 2019

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 The showrooms originally made waves when they were first unveiled, breaking as they did with the traditional dealer model.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

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