When even the pro-Tesla crowd at electrek begins to describe the company's sales strategy transition as "chaotic", you know there's real problems afoot for Elon Musk and his merry band of world changers. This happened following reports that Tesla was "freezing current store closures" less than two weeks after telling the public that it would close most of its retail locations in a move to try and cut costs.
Employees are being told that Tesla is freezing both store closures and layoffs "until at least the end of the month". Tesla has reportedly already closed 29 stores between the U.S. and Canada, following the February 28 announcement. Sales management at the company reportedly held a conference call with regional management last Friday, indicating to them that the company was stopping short on any more closures or layoffs until the end of the month.
Some retail stores that didn't close were told to stop booking test drives last week. On Friday, some of them were prompted to go back to "business as usual", despite retail employees not having access to commission and bonuses, resulting in far lower compensation. Many employees are "walking away" due to the pay cut and some suspect that Tesla is suspending the transition period for store closures simply to push out employees, in order to avoid paying them severance.
Tesla currently owes lease obligations of $1.6 billion, with $1.1 billion due between now and 2023, the Wall Street Journal reported earlier. This includes payments for store leases, galleries and real estate abroad. Robert Taubman, chief executive officer of Taubman Centers Inc., is quoted as saying at the Citi 2019 Global Property CEO conference: "Tesla is a company with a viable balance sheet that is going to owe a lot of landlords a lot of money.”
The decision to close down all of its retail stores and move to an online-only sales model surprised many of the company's employees and investors. For instance, we pointed out one investor who sold his shares in the company as a result of being blindsided by the news.
“This was a total 180-degree turn. Tesla had been talking about expanding stores, and all of a sudden they are closing them. To me, this signals a huge financial concern and a possible cash-flow issue for Tesla,” former investor in Tesla, Alex Chalekian, said.
It pains me to say this, since I really love the company, but we have sold our position in #Tesla for our advisory clients. I believe that the decision to close retail stores is a bad one and points to the weakness in sales and financial strength of the company. $TSLA— Alex Chalekian (@AlexChalekian) March 1, 2019
Members of the media were equally as stunned.
This is not an adjustment to strategy. This is a total reversal. They had a retail plan 2 months ago and concluded they had to tear the whole thing up and come up with a radical new plan. What does that say about the company? @elonmusk @tesla https://t.co/3k04m0pW5i— Neal Boudette (@nealboudette) March 1, 2019
Tesla was "negotiating and signing leases" as recently as last month, according to executives at Taubman and Macerich.
It's estimated that a "few hundred" employees have already been laid off with severance. The remaining ones have viewed this freeze as an "opportunity to prove themselves" - so it's probably a good time to avoid a trip into your local Tesla showroom, in order to avoid the "hard sell" that Tesla hated so much about the traditional dealer model to begin with.
For now, we'll just leave you with electrek's take:
This is a chaotic situation for retail employees who are left in the dark for the most part.
It’s either turning into what feels like an extremely poorly managed, haphazard transition or it is intentionally made that way to push out employees like some are suspecting.
It is hard to say which is worse. Probably the latter, which would reek of corporate greed and would be disappointing to see from Tesla.