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Last Updated : Mar 06, 2019 04:28 PM IST | Source: Moneycontrol.com

Tesla's Elon Musk surprised employees with store closing announcement

Since the information came out, Tesla's shares have fallen nearly 16 percent. The company lost $8 billion in market capitalisation

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Elon Musk is in the news again after he announced that Tesla would be shutting its stores and moving to online-only sales. It turns out that the employees were just as surprised by the news as the outsiders. Many of the sales personnel of the company found out the news after the company's blog post on February 28, Bloomberg reported.

Even investors and analysts were shocked by the announcement. After the information came out, Tesla's shares have fallen nearly 16 percent. The company lost $8 billion in market capitalisation.

'This was a total 180-degree turn. Tesla had been talking about expanding stores and all of a sudden they are closing them. To me, this signals a huge financial concern and a possible cash-flow issue for Tesla," said Alex Chalekian, founder and CEO of Lake Avenue Financial in California. Tesla had opened 27 new retail outlets just last quarter, bringing its total locations globally to 378 locations.

Tesla has already shut many of its stores, including one in Honolulu and Palm Springs, California.

In its annual report on February 19, Tesla had highlighted just the opposite, that its retail strategy is important. "Our Tesla stores and galleries are highly visible, premium outlets in major metropolitan markets, some of which combine retail sales and service. Opening a service centre in a new geographic area can increase demand. As a result, we have complemented out store strategy with sales facilities to rapidly expand our retail footprint," it said.

Musk, in his blog post, said that this is a cost cutting measure, which will help the company in releasing $35,000 version of the Model 3 sedan, Tesla's first mass-manufactured car. He wrote that some jobs will be transferred to other areas and "a small number of stores in high-traffic locations will remain as galleries, showcases and Tesla information centres".

The electric car maker's online sales strategy is being headed by Sanjay Shah, who has arrived from Amazon last year, sources told the wire agency. The company expects this move to reduce prices of its operations and all its vehicles by about 6 percent.
First Published on Mar 6, 2019 04:28 pm
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