Tesla not closing most of its stores after all

BY Marianne Wilson

Tesla is making a U-turn of sorts with regards to its brick-and-mortar strategy.

In a corporate blog post at the end of February, the electric car maker said it planned to wind down most of its stores and move to an online-only sales model in an effort to keep prices down while remaining financially sustainable. But in a blog post on on Sunday, Tesla said that while all sales worldwide will be done online, it has decided to keep “significantly more” stores open than previously announced. As a result, Tesla said it will need to raise prices on its costlier models by about 3% on average worldwide.

“When we recently closed 10% of sales locations, we selected stores that didn’t invite the natural foot traffic our stores have always been designed for,” the company stated in the blog. “These are stores that we would have closed anyway, even if in-store sales made up our entire sales model. A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew.”

In addition, Tesla added, another 20% of its locations are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open.

The company didn’t give a reason for its decision to reverse course. But as The Wall Street Journal noted, Tesla’s sudden store closing plans were likely to face legal challenges from landlords (a good number of Tesla stores are located in malls). The company has total lease obligations of $1.6 billion, with $1.1 billion due between this year and 2023, according to its securities filings.

Robert Taubman, CEO of Taubman Centers — which leases space to Tesla in eight of its properties — said at an investment conference last week that Tesla “is going to owe a lot of landlords a lot of money,” the Journal reported.


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