Exclusive-Tesla Balances Reset of Retail Strategy in China Even as Sales Boom

Exclusive-Tesla Balances Reset of Retail Strategy in China Even as Sales Boom

SHANGHAI (Reuters) – Tesla (NASDAQ:) is reassessing the way it sells electric cars in China, its second-largest market, and is considering closing some showrooms in flashy malls in cities like Beijing as traffic plummets during coronavirus restrictions, two people over knowledgeable. of plans.

The shift will put more focus on stores in lower-cost suburban locations that can also provide repairs as the company works toward Elon Musk’s goal of improving service for existing customers, many of whom have complained of long delays, they said.

As part of this push, Tesla is looking to ramp up its hiring of technicians and other employees for service functions in China, one of the people said. China job site Tesla showed more than 300 service job openings as of Thursday.

Last week on Twitter (NYSE:), Musk said, in response to a Tesla owner in Texas who complained that he was waiting a month to get his car fixed, that he had made “developing a Tesla service to make it great” a top priority.

Unlike mainstream automakers, Tesla has all of its own stores, rather than relying on dealers. It also sells its cars online. This gave more leeway to fine-tune the retail strategy that was initially modeled on Apple Stores (NASDAQ :).

Tesla did not immediately respond to a request for comment.

The US automaker sold 400,000 Chinese-made Model 3 and Model Y cars in the first eight months of the year, with 60 percent sold domestically, according to the China Passenger Car Association. This was 67% more than last year.

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One analyst said the change in Tesla’s approach in China, where it has become the second largest electric car brand after BYD, will reflect recognition of the need to build customer loyalty now that it has established its brand in the world’s largest auto market.

β€œIt is not necessary to open showrooms in expensive malls, especially when the repair business becomes profitable,” said Yale Chang, managing director of Shanghai-based consultancy Automotive Foresight.

“It’s best to keep one or two of the showrooms in the city center to maintain the brand’s position while moving more to the suburbs.”

Tesla opened its first store in central Beijing in 2013 and now has more than 200 outlets across the country displaying models and arranging test drives for potential buyers.

However, more than half of the stores do not offer maintenance because they are located in high-rent locations where space is limited. This includes Tesla’s first store in Beijing and its first store in Shanghai.

More than half of Tesla showrooms in seven of China’s largest cities, including Shenzhen and Chengdu, are now in downtown areas, according to Reuters statistics based on Tesla’s China website.

Like other companies, Tesla has seen traffic in its stores severely disrupted by China’s tough approach to containing COVID-19, which has included shutdowns of varying scope and duration, including in Shanghai where it has a factory.

Reuters was unable to determine how many urban showrooms Tesla was considering closing, how many new locations in the fast-growing suburbs could open or the cost of the shift.

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The automaker has been the target of a series of customer complaints and lawsuits in China, including a well-known case last year that saw an unhappy owner climb over a Tesla at the Shanghai Auto Show to protest the company’s handling of its complaints about brake failure. .

The incident received a lot of attention in China and prompted state media to criticize the company.

Tesla later apologized to Chinese consumers for not addressing complaints in a timely manner and pledged to review its service operations.

Tesla’s EV competitors in China have taken a mixed approach to retail distribution. Aside from self-operating stores, BYD and Xpeng (NYSE:) also rely on third-party merchants.

Nio (NYSE:), like Tesla, has a network of high-profile urban stores in China. It also invested in door-to-door delivery, sending workers, many of whom were employed from the hotel industry, to pick up cars for repair and deliver when work was done.

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