In an surprise move coinciding with the launch of a $35,000 version of the Model 3 sedan, Tesla Inc. announced it will close all but a few of its approximately 80 U.S. retail centers. The storefronts serve as stand-ins for dealerships for the electric-vehicle maker, which has eschewed the franchised dealership model. Tesla now plans to sell and deliver vehicles through a fully online process.
“To achieve these prices while remaining financially sustainable, Tesla is shifting sales worldwide to online only,” executives said in a statement. “You can now buy a Tesla in North America via your phone in about one minute, and that capability will soon be extended worldwide.”
A handful of stores in “high-traffic” locations will remain as “galleries, showcases, and Tesla information centers,” they added.
The closures are part of a cost-cutting effort that also includes a 7% workforce reduction. In a conference call with reporters, Musk said meeting the $35,000 price point was “excruciatingly difficult”; Tesla’s second-least expensive model costs $42,900.
On a conference call that included Business Insider’s Matthew DeBord, the journalist asked Musk whether the new strategy could be derailed by opposition from the U.S. dealer body, which has fought to enforce state franchise laws.
“This is 2019. People want to buy things online,” Musk said, adding that resistance from dealers is an “unconstitutional” violation of interstate commerce rules.
“Good luck with that,” Musk added.
In response, National Automobile Dealers Association spokesman Jared Allen told Auto Dealer Today the organization is not opposed to online sales.
“We still believe that the franchised dealer model is by far the best way to sell, distribute, and service new vehicles. Go online right now and you’ll see that there is hardly a franchised dealer in the country that isn’t offering online sales and financing through their websites,” Allen said. “But the reality is that the vast majority of consumers want to do some combination of both online and traditional shopping for new vehicles. Those are our customers, and we’re going to continue meeting their expectations and catering to their needs.”