Tesla's Abrupt Reversal on Store Closures Raises Questions about Decision-Making

Photo Credit: JENS SCHLUETER/EPA-EFE/Shutterstock
March 11, 2019
Updated 1mo ago

By Chloe Aiello

Tesla's announcement Sunday that it had reversed a decision to shutter a majority of its brick-and-mortar stores may have lifted the company's stock price on Monday, but it also raised some eyebrows.

The company said in a blog post it would keep many of its stores open and instead raise prices on its more expensive vehicles. The decision, however, won't affect the new $35,000 price point on Tesla's ($TSLA)Model 3.

While Tesla shares closed 2.4 percent higher on Monday, Teslarati's Christian Prenzler, who has been following the story, told Cheddar the update is likely raising some questions with investors.

"Two weeks ago, they were getting pitched the idea that 'stores are quite useless and the future is all digital so why would we need brick and mortar stores?' Now they wake to news from Tesla that ... stores are still necessary to produce sales, have test drives and really create a great customer experience for people," he said.

Prenzler theorized Tesla's backpedaling might has less to do with store traffic and sales than it does other things, like leasing, for example.

"Are leases unable to be closed early? Are some stores up for renewal soon? I think there's a lot of factors that Tesla needs to look at before making this final decision, and that might have been what they failed to do two weeks ago when they announced this initial change," Prenzler said.

Tesla also apparently forgot to inform its employees it planned to shutter retail locations. Automotive News reported that Tesla employees found out at the same time as the media that the company would be shuttering most of its stores.

Prenzler said the chaotic rollout is just "becoming quite typical" for Tesla these days.

"It's pretty unclear when these decisions are being made within the company, but it seems most people would tell their employees before telling the media and the public and really give them some warning and options and help them understand what's going on in the company," he said.

Setbacks within the company haven't stopped the rollout of its new Model Y, which it plans to unveil March 14. The company hasn't announced when the SUV will go on sale.

For full interview click here.