Elon Musk really set the fox among the chickens at the end of February when he suddenly announced Tesla would close a significant number of its stores and that, henceforth, everyone would order their cars online. Not surprisingly, the Tesla employees who currently work in those stores were somewhat taken aback to learn they might soon be out of a job. Lots of other people wondered aloud if a 100% online sales model was a realistic plan.
Elon says he likes to make quick decisions on the theory that if they turn out to be wrong, they can be easily reversed. That model has worked fairly well for him so far, if one uses the standard measure of a person’s worth, which in today’s world involves calculating the size of his or her bank account.
Other management styles exist, however. Some even advocate a moment or two of careful consideration before making major policy changes. That’s the sort of stuff they teach in B School and it is an approach that has fallen out of favor in the tech world, where running around breaking things is considered the best way forward.
On March 10, Tesla published a blog post clarifying the February announcement. It said it had reviewed the store closure policy and decided some revisions to the plan were necessary.
“[W]e have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months. When we recently closed 10% of sales locations, we selected stores that didn’t invite the natural foot traffic our stores have always been designed for. These are stores that we would have closed anyway, even if in-store sales made up our entire sales model. A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew. In addition, there are another 20% of locations that are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open.
“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.”
The blog post also addressed concerns about test drives and online ordering.
“To be clear, all sales worldwide will still be done online, in that potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes. And the generous return policy of 1000 miles or 7 days, whichever comes first, should alleviate the need for most test drives. However, cars will still be available for test drives at stores at the potential Tesla owner’s request. Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately.”
Apparently, all of that was not clear enough for some folks, so on March 27 Elon sent an email to all Tesla employees clarifying things further. According to CNBC, the email said:
“Stores with a high visitation rate and that lead to significant sales will absolutely not be closed down. It would not make any sense to do so, except in rare cases where the rent is absurdly high. Moreover, Tesla will continue to open stores throughout the world that meet the above criteria.”
With regard to online sales, Musk clarified his previous clarification. “What is meant by ‘all sales will be online’ is just that the act of purchasing a Tesla will always be done via the potential new owner’s phone or computer. This is true whether they are at home or in a store. Unlike buying from other carmakers, ordering a Tesla doesn’t require any *physical paperwork*.
“This is very different from normal expectations for buying from other carmakers and is simply meant to emphasize that ordering a Tesla is super easy and can be done in 2 minutes from your phone or laptop at Tesla.com. Ordering a Tesla is not much harder than ordering an Uber, but hardly anyone knows this!”
Robyn Denholm Weighs In
With all this backing and filling by Musk and Tesla, coupled with the latest flap with the SEC over Elon’s tweets, Robyn Denholm, the new Chair of Tesla, told Bloomberg in Australia this week, “I don’t think he poses any challenges. The company is running very well and the board itself is very engaged. We meet with him all the time.”
In the run-up to an April 4 date with a federal judge regarding Musk’s use of Twitter, Denholm said, “Twitter is part of everyday business for many executives today. From my perspective, he uses it wisely.” Let’s hope the judge feels the same way.
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