Tesla has always followed its own unique path, and it doesn't adhere to traditional practices. The company has proven such over the years, and it's constantly adapting and implementing new approaches to streamline its processes, save money, and find further success. Now, two people with information about Tesla's future plans claim it's looking at new ways to sell its EVs in China.
According to an exclusive report published by Reuters, Tesla China as potentially aiming to shut down some of its showrooms in upscale malls and big, popular cities, such as Beijing. Activity in such locations has take a notable downturn amid COVID-19 lockdowns, spaces are small, and the rent is high.
The sources, who remain anonymous, told Reuters Tesla wants to shift some of its focus on opening stores in less expensive suburban areas. These stores would also be more convenient for many Tesla owners to visit when they need service or repairs. In order to make this happen, the US electric automaker will need to beef up its service and repair staff in China. While there's not yet proof of a connection, Tesla China's job website now has some 300 service positions available.
You may remember that Tesla planned a relatively similar retail plan shift in the US, and while it carried it out in some ways, the plan was eventually tossed out. CEO Elon Musk talked of closing many US Tesla stores, and some stores did go away. The automaker began to streamline, though the reported goal of shifting to an almost exclusive online presence didn't pan out.
With that said, when we have reports such as this from anonymous sources, it's hard to know precisely what's true, what may actually happen, and what's speculation and/or the result of internal rumors or miscommunication. At any rate, Tesla is already experiencing a massive sales surge in China related to both exports and local deliveries, so it clearly doesn't need to make any major shift. However, if the changes will better serve customers and help to cut costs, it seems it would make sense for Tesla to pursue them.
Reuters writes that Tesla sold an impressive 400,000 Model 3 and Model Y vehicles produced in China from January to August 2022. That number is up a whopping 67 percent year-over-year. About 60 percent of those EVs were sold in China, with the other 40 percent were shipped out for export.
The publication goes on to say that Tesla is China's second-largest EV brand, with BYD at the top. If the information provided by the sources proves true, it could be Tesla's goal to build out a better network for customer loyalty to ensure successful competition with its rivals going forward. However, it could also simply be a tactic to further reduce costs, which has been a top priority for Tesla in most of its strategic shifts over the years.
Currently, less than half of Tesla's stores in China don't offer service, and they're typically small and located in high-rent areas. A managing director at a consulting firm in Shanghai explained to Reuters:
"It's not necessary to open showrooms in expensive shopping malls, especially when the repair business has become lucrative."
"It makes better sense to keep only one or two showrooms downtown to keep the brand positioning but move more to suburbs.”
What do you think? Will Tesla follow through with such a plan? If so, why do you think the company is making the shift, and will it work? As always, we appreciate your input in our popular comment section.