Shanghai Tesla (NASDAQ:TSLA) is rethinking how it sells electric cars in China, which is its second-largest market, and is considering closing some showrooms in fancy malls in cities like Beijing, where traffic dropped when COVID restrictions were put in place. This is according to two people who know about the plans.
They said that the change would put more focus on stores in less expensive suburban areas that can also do repairs. This would help the company meet Elon Musk’s goal of improving service for current customers, many of whom have complained about long wait times.
As part of this push, one of the people said, Tesla wants to hire more technicians and other people for service jobs in China. As of Thursday, Tesla’s China recruitment website listed more than 300 service job openings.
Related: Tesla shortens delivery times in China for the Model 3, Model Y, and Model Y.
Musk said last week on Twitter (NYSE:TWTR), in response to a Tesla owner in Texas who said he had been waiting a month to get his car fixed, that he had made “improving Tesla service to make it awesome” a top priority.
Tesla, unlike most other car companies, owns all of its stores and doesn’t use dealers. It also sells cars on the Internet. That has given it more room to change a strategy for selling things in stores that was originally based on Apple (NASDAQ:AAPL) stores.
When asked for a comment, Tesla didn’t answer right away.
The China Passenger Car Association says that the U.S. automaker sold 400,000 Model 3 and Model Y cars made in China in the first eight months of the year. Of these, 60% were sold in China. That’s 67% more than the same time last year.
One analyst said that Tesla’s change in strategy in China, where it has become the second-largest electric vehicle brand after BYD, would show that it has realised it needs to build customer loyalty now that it has established its brand in the world’s largest car market.
“It’s not necessary to open showrooms in expensive shopping malls, especially since the repair business has become profitable,” said Yale Zhang, managing director of the Shanghai-based consulting firm Automotive Foresight.
“It makes more sense to keep only one or two showrooms downtown and move more to the suburbs if you want to keep your brand’s position.”
Tesla opened its first store in 2013 in the centre of Beijing. It now has more than 200 stores all over the country where people can look at models and take test drives.
But more than half of the stores don’t have maintenance services because they are in high-rent areas with limited space. That includes the first Tesla stores in both Beijing and Shanghai.
Based on Tesla’s China website, Reuters found that more than half of the showrooms in seven of China’s biggest cities, like Shenzhen and Chengdu, are now in downtown areas.
China’s strict approach to stopping COVID-19 has led to lockdowns of different lengths and sizes, including in Shanghai, where Tesla has a factory. This has caused a lot of trouble for Tesla and other businesses.
Reuters couldn’t figure out how many showrooms Tesla was thinking of closing in cities, how many new ones could be opened in fast-growing suburbs, or how much this change would cost.
The car company has been the subject of a number of customer complaints and lawsuits in China. One well-known case happened last year, when an angry owner climbed on top of her Tesla at the Shanghai auto show to protest how the company handled her complaints about broken brakes.
The incident got a lot of attention in China, and state media criticised the company because of it.
Related: Phantom braking is causing a group to sue Tesla.
Later, Tesla apologised to Chinese customers for not responding to their complaints quickly and promised to look at how its service operations work.
EVs that compete with Tesla in China have taken different approaches to selling their cars in stores. BYD and Xpeng (NYSE:XPEV) also use dealers who aren’t part of their own company.
Nio (NYSE:NIO), like Tesla, has a chain of well-known stores in China’s cities. It has also put money into door-to-door service, sending out workers, many of whom came from the hotel business, to pick up cars for repairs and drop them back off when they are done.
