In what appears to be its third business model shift over the course of just under two weeks (closing stores, freezing stores, now keeping them open), Tesla has now abruptly decided to keep "keep significantly more stores open than previously announced", according to a new blog posted on the company's website.
"Last month, we announced that we would be winding down many of our stores and moving to online-only sales in order to pass the savings along to our customers," the blog piece leads off, seemingly ignoring the fact that last month was 12 days ago.
"Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months," the piece continues.
Tesla says that it wound up closing 10% of its sales locations and that these locations were stores that "didn't invite the natural foot traffic our stores have always been designed for". It then goes on to say that they were stores that "would have closed anyway". Tesla says an additional 20% of stores remain under review for potential action.
But wait, there's more.
After slashing prices on its cars three times over the last couple of months - the latest cuts coming just 12 days ago and inciting protests in China - the company has now announced that will be raising prices on its models. From the company's blog:
As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide. In other words, we will only close about half as many stores, but the cost savings are therefore only about half.
Potential Tesla owners will have a week to place their order before prices rise, so current prices are valid until March 18th. There will be no price increase to the $35,000 Model 3. The price increases will only apply to the more expensive variants of Model 3, as well as Model S and X.
Just two days ago we reported that the company had frozen its previously disclosed plan of closing all of its retail stores.
Some retail stores that didn't close were told to stop booking test drives last week. And yet, last week some of them were reportedly prompted to go back to "business as usual", despite retail employees not having access to commission and bonuses, resulting in far lower compensation.
Tesla currently owes lease obligations of $1.6 billion, with $1.1 billion due between now and 2023 the Wall Street Journal reported last week. 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, with some investors dumping the company's shares as its "growth" aura was rapidly deflating. Pro-Tesla blog electrek called the business model changes a "chaotic situation", saying it was "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."
Is it possible that the company (or rather Elon Musk) not only blindsided its own employees by its announcement of store closures, but also that it blindsided itself? Given the WSJ report from last week that Tesla would still be on the hook for many of its lease obligations regardless of if they close stores, this business model shift feels like a famous Elon Musk "shoot first, ask questions later" situation. At least this one didn't result in retail store tents.