Tesla’s announcement two weeks ago that it would shut retail stores caught just about everyone, including retail store employees, by surprise.
Our cars are “too expensive for most people,” said CEO Elon Musk back in January, when 3,000 employees were let go. By closing most of its retail stores and removing more employees, Tesla said it would be able to cut 6 percent off the price of all of its vehicles. The cost savings also allowed it to introduce the $35,000 Tesla Model 3.
The start of this big change wasn’t an off-the-cuff single-tweet-style announcement from Musk either. This was a fully prepared policy with rollout and pricing changes, and with justification.
Yet within two weeks, following “close evaluation,” Tesla announced it is now keeping open “significantly more stores than previously announced.”
In an update (that I found confusingly stilted), Tesla says that between 10 and 30 percent of its stores are being closed or evaluated for closure. Tesla said 10 percent of its stores have already been closed. Another 20 percent or so are under review and may be closed, or remain open. If you can follow that, Tesla says it focuses on “natural foot traffic,” and “low throughput” stores will be shuttered. However, some of the stores that Tesla already closed will reopen with less staff. I don’t think Tesla is saying that sales are bad but foot traffic is good, although that’s sure what it seems.
Moving on to the consequences outside of retail footprints and employees, that now means Tesla’s EVs will jump up in price by an average of three percent, starting March 18th. You have one week to profit from the current low prices, which were introduced just two weeks ago.
Here’s what that might look like for the various Model 3 options, approximately:
Probably the best news here is that Tesla is not changing its new 7-day/1,000-mile (whichever is first) return policy. Tesla stores will offer test drives and will have stock on hand to sell drive-away, but sales will happen via website or app which is already the case.
A quick Matrix reference: The Oracle (while baking cookies) says no one has the ability to see past a choice they don’t understand. That would appear to have been what happened here. Pressure to cut costs led to an odd decision from someone.
However this fresh batch of chaos from Tesla was cooked up, it suggests organizational trouble. How management flipped on this issue so quickly, without really explaining whatever the rushed due diligence over the past two weeks showed, will be fun for business students to evaluate in future years.
What changed? Did Tesla realise contracts and lease agreements are expensive to break on a whim? Luckily, Tesla’s actual product, and vision, far exceed the company’s management.
Buying a vehicle from anywhere from $35,000 to beyond $90,000 is no small decision. It’s one of the biggest purchases a person will ever make.
Yet inside of two weeks, Tesla has changed pricing twice in a scramble, along with pricing and structure changes to Autopilot – removing “Enhanced Autopilot” and replacing it with Autopilot and Full Self Driving Capability (FSD). FSD changes weren’t reflected in manuals or pricing, and staff were reportedly forced to read website updates to stay on top of these issues rather than normal training methods.
It’s not a good look
The most optimistic Tesla fan, owner, or investor might be encouraged by Tesla’s strong convictions that are weakly held. At least management are able to change their minds on those convictions.
That a public company needs to make these whiplash-inducing decisions – and then reverse them – is another matter.
The next big Tesla event: March 14th unveil of the Model Y.