Home Hotel industry Exclusive: Tesla weighs China retail strategy reset even as sales soar

Exclusive: Tesla weighs China retail strategy reset even as sales soar

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SHANGHAI, Sept 15 (Reuters) – Tesla is reassessing how it sells electric cars in China, its second largest market, and is considering closing some showrooms in flashy malls in cities like Beijing where traffic has plunged for the COVID restrictions, two people familiar with the plans said.

The change would put more emphasis on stores in less expensive suburbs that can also carry out repairs as the company strives to meet Elon Musk’s goal of improving service for existing customers, many of whom complained of long delays, they said.

As part of the push, Tesla is looking to hire more technicians and other personnel for service jobs in China, one of the people said. Tesla’s China recruitment website showed more than 300 service vacancies on Thursday.

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Musk said on Twitter last week, in response to a Tesla owner in Texas who complained about waiting a month to get his vehicle repaired, that he had made “Tesla service improvement for the make awesome” a top priority.

Unlike traditional automakers, Tesla has all of its own stores, rather than relying on dealerships. She also sells her cars online. This gave it more leeway to adjust a retail strategy initially modeled after Apple stores.

Tesla did not immediately respond to a request for comment.

The U.S. automaker sold 400,000 China-made Model 3 and Model Y cars in the first eight months of the year, with 60 percent sold locally, according to the China Passenger Car Association. It was 67% more than a year ago.

Tesla’s shift in approach to China, where it has become the second-largest electric vehicle brand behind BYD (002594.SZ), would reflect recognition that it needs to build customer loyalty now that it has established its brand on the market. largest car market in the world. , said an analyst.

“There is no need to open showrooms in expensive malls, especially when the repair business has become lucrative,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.

“It makes more sense to keep just one or two showrooms downtown to maintain brand positioning, but to move more to the suburbs.”

A Tesla electric vehicle drives past a level crossing in Shanghai, China March 9, 2021. REUTERS/Aly Song/File Photo

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

However, more than half of the stores do not offer maintenance services since 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’s showrooms in seven of China’s biggest cities, including Shenzhen and Chengdu, are now in city centers, according to a Reuters tally based on Tesla’s China website.

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

Reuters could not determine how many urban showrooms Tesla planned to close, how many new locations in fast-growing suburbs could be opened, or what the cost of the change would be.

The automaker has been the target of a series of customer complaints and lawsuits in China, including a high-profile case last year that saw a disgruntled owner climb over a Tesla at the auto show in China. Shanghai to protest the company’s handling of its complaints about faulty brakes. .

The incident received significant attention in China and prompted state media to criticize the company.

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

Tesla’s rivals in China have taken a mixed approach to retail distribution. Besides self-managed stores, BYD and Xpeng (9868.HK) also rely on third-party resellers.

Nio (9866.HK), like Tesla, has a high-profile urban store network in China. It also invested in door-to-door service, sending workers, many of whom were hired from the hospitality industry, to pick up cars for repair and drop them off when the work was complete.

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Reporting by Zhang Yan, Brenda Goh, additional reporting by Shanghai Newsroom; Editing by Kim Coghill

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