Netease Technologies News, March 6, according to foreign media reports, according to three people familiar with the situation, Tesla CEO Elon Musk announced last week that he would suddenly close most stores and sell cars online, which surprised many employees.
People familiar with the matter said that many salespeople did not know about the decision until Tesla published a blog post last Thursday afternoon. The move also caught some investors off guard, with Barclays Bank analysts lowering Teslas target price Tuesday.
Teslas share price has fallen 16% since Thursday and its market value has shrunk by $8 billion.
Musks sudden move shocked Alex Chalekian, founder and CEO of Lake Pasadena Avenue Finance in California. The company manages more than $150 million in customer assets. Last Friday it sold all Tesla shares held by its customers.
Its a 180-degree turn, Chalkian, who owns a black Tesla Model S, said in a telephone interview Monday. Tesla has been talking about expanding the store, and suddenly it closed. In my opinion, this shows that Tesla is facing huge financial problems.
Until last week, Teslas strategy of opening stores seemed to be expanding. Tesla opened 27 new retail and service centers last quarter, bringing its global total to 378 stores. This is the quarter with the largest number of stores since mid-2017.
Tesla also hinted at the importance of physical retail strategy in her annual earnings report on February 19. Our Tesla stores and showrooms in major cities are very visible, and some of them effectively combine retail sales and services, Tesla said in a regulatory filing. Opening service centers in new geographic areas can increase demand. Therefore, we complement our strategy of opening stores by equipping sales facilities and personnel in service centers, so as to expand our retail business more quickly. Nine days later, Musk suddenly announced a switch to online sales.
Tesla has closed several stores, one in Honolululu International Market and the other in El Paso Garden near Palm Springs, California. Calls to these stores now turn to Tesla Call Centers in Las Vegas and Fremont.
Amazon in Automotive Industry
One of the key players involved in implementing Teslas online sales strategy is Sanjay Shah, who has been senior vice president of energy operations since joining Tesla last summer from Amazon. com Inc., and continues to be responsible for the business, people familiar with the matter said.
Brian Johnson, an analyst at Barclays, said: Most of the reasons for bullishing Tesla are that Tesla will be the next Apple to sell a lot of electric cars at high prices and profits. But these reasons have been negatively affected by the closure of stores. The bullish reason will not turn to Tesla as Amazon in the automotive industry. He believes Tesla is more likely to need cash after paying off $920 million in convertible bonds last week because of poor car sales in the U.S. market at the beginning of this year.
Musk said closing its stores was a cost-cutting move that enabled Tesla to offer its long-promised $35,000 low-cost model. The company says it can reduce the price of all cars by an average of about 6% by selling online and cutting other costs.
About three hours after Tesla posted his blog on Thursday, Musk sent an e-mail to employees. He said in an e-mail that 78% of Model3 orders last year were online and offline, not in physical stores. Some jobs will be transferred to other areas of business, he wrote. A few stores in busy areas will still be showrooms and Tesla information centers.
Were not worried, Cathie Wood, chief executive of ARKInvest, a New York investment company, said Monday. The company is still bullish on Tesla. Although the decision to close the store and sell online was sudden, Wood was not as surprised as other investors.
We feel better because Tesla is still competing with other low-cost automakers, but at some point Tesla will be priced below them, Wood said.
But other investors say their doubts about sales strategies, coupled with the CEOs unexpected tweets about launching a new model, make the situation more complicated.
Within days of Teslas announcement of a low-cost version of Model 3, Musk tweeted that Tesla would launch the Model Y crossover on March 14, followed by a pickup later this year.
Chalkian said Sundays tweet confirmed his decision to sell Tesla shares again.
ModelY may affect sales of Model 3, he said. Everything is happening now, and I dont know if people will compete for a deposit for ModelY as they do for Model3. But Tesla is using customer deposits to raise money. I think Tesla is just procrastinating. (Han Bing)
Source: Responsible Editor of Netease Science and Technology Report: Wang Fengzhi_NT2541