Tesla is closing some of its high-rent retail stores and replacing them with larger, more cost-effective “Tesla Centers” as part of a broader strategy to tighten belts while capturing a wider swathe of China’s auto consumers.

Why it matters: Tesla is consolidating its sales showrooms and service centers, and shifting to areas with lower rent in an effort to boost its bottom line as well as grow its presence in less saturated consumer markets.

  • The American electric car giant last month opened an official account on Kuaishou, a Chinese short-video platform known for its influence in the vast market encapsulating China’s lower-tier cities and rural areas. It has around 3,600 followers with 34 posts, including a teaser video of its upcoming driving courses in northern Heilongjiang province.

Details: Tesla is deliberately allowing leases on some of its retail outlets known as “Tesla Stores” to expire, especially those located in popular, high-rent shopping centers in first- and second-tier cities, Chinese media reported citing a person familiar with the matter.

  • A Tesla showroom in a high-end shopping center run by Kerry Properties in Shanghai’s Pudong district has closed. Another location in a Joy City mall in the Chaoyang district of Beijing has been replaced by a Lynk & Co showroom.
  • Meanwhile, Tesla is planning to open bigger locations called “Tesla Centers” that will offer sales, delivery, and maintenance, with charging facilities nearby.
  • Operational costs for a Tesla Center is close to that of the higher-rent Tesla Stores—around RMB 400,000 ($57,000) on average per month—but it incorporates after-sale service centers, which the company had been operating separately at a cost of RMB 300,000 per month each, according to the report.
  • Tesla did not respond to a request for comment when contacted by TechNode on Tuesday.

Context: Tesla is not the only EV maker that is shifting its sales strategy to win an uphill battle in a challenging auto market.

  • During an earnings call in September, Tesla rival Nio unveiled plans to open 200 “Nio Spaces,” a smaller and more capital-efficient sales office compared to its “Nio House” clubhouse-style flagships.
  • China’s auto sales weakened 0.6% year on year to 2.28 million cars in October, while new energy vehicles, including fully electric cars, plug-in hybrid EVs, and fuel cell EVs, fell for a fourth consecutive month, plummeting 45.6% from the same period a year ago, according to figures from China Association of Automobile Manufacturers.

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Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen

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