Tesla is putting an emphasis on Service needs after reportedly closing a flashy showroom in a luxury shopping mall in China. The move points toward the company’s potential strategy to trim costs by not renewing leases at pricey showroom locations, and instead opening new, dual-purpose locations in less expensive areas that can perform sales and service.
Tesla has officially closed its showroom location in China’s Parkview Green Mall, the company confirmed to Reuters on Wednesday. The location, which has offered customers an opportunity to observe Tesla’s all-electric vehicles and energy products, first opened in 2013 and was renovated and expanded in 2018.
However, the costly leases for these showrooms and a lack of foot traffic since the beginning of the COVID-19 pandemic have helped Tesla ultimately decide to not renew its lease. A staff member at the mall confirmed Tesla would be vacating the retail location, which will make way for BAPE, a luxury streetwear brand, also known as A Bathing Ape.
Tesla has 200+ retail locations in China, a number that has supported the company’s expanding presence in the country. Tesla started producing vehicles in China in late 2019 at its Gigafactory Shanghai manufacturing plant. While it is one of the most popular automakers in the country, there are plenty of worthy competitors, like Nio, Xpeng, and others, which have dented the automaker’s success in China.
Cutting costs at the expensive and luxury locations will help shift Tesla’s strategy to focusing on opening new stores in locations that are not as costly to maintain. The new locations could also serve dually as a Service center, which is a part of the automotive business Tesla has struggled with for years. An increase in Service locations is needed as Tesla continues to sell more cars and demand for EVs across the board increases.
Tesla recently cut costs of the China-built Model 3 and Model Y to be more competitive with automakers in the country. The company sold over 318,000 vehicles in the first three quarters, a 55 percent increase from the same period in 2021.