Tesla adds European dealerships, reversing online-only sales strategy

Tesla expanded the number of stores and service centers it operates in Europe by a third last year in preparation for selling the new Model Y compact crossover.

The showroom expansion is a reversal of the electric vehicle maker’s 2019 plan to shift to online sales only.

Tesla opened 40 new outlets in Europe last year, for a total of 161 in the region, the company said. A majority offer both sales and service functions, it added.

The expansion of the company-owned network represents a U-turn from a plan to close most stores except for a handful in prominent locations and move to online sales. The move was spurred by a need to save costs in order to launch a $35,000 version of the Model 3.

Tesla affirmed its promise to start production of the Model Y at its new factory in Berlin in July this year.

Tesla was one of the few makers of electric cars to see European sales decline in the first 11 months of 2020, losing 18 percent to 69,495 according the European Electric Car Report published by analyst Matthias Schmidt.

Tesla finished strongly in December, especially in the UK, where the Model 3 was the best-selling car for the month, with 5,798 registrations. 

The Model 3 is likely to finish second behind the Renault Zoe in European EV sales for 2020, as deliveries were constrained by uneven supply. The Model 3 accounted for 88 percent of all Teslas told in Europe through November, data from Schmidt showed.

The start of production at Tesla’s Berlin plant will increase supply, as well as adding a fourth vehicle to its lineup, with the Model Y joining the Model 3, the Model X and the Model S.   

That expansion means the company will have to behave more like a traditional automaker in terms of its sales strategy, Steve Young, managing director of automotive retail analyst firm ICDP, told Automotive News Europe. 

A larger physical network will allow customers to test-drive models and benchmark them against rivals, Young said. “As the product offers grows, they can no longer rely on getting brand awareness through word of mouth and buyers looking them out,” he added.

An online-only operation was never realistic, Young said. “Closing all the physical sales outlets was a flight of fancy, though it probably pushed the stock a few dollars upwards,” he said.

Tesla differs from more established rivals in that owns and operates all of its own sales and service centers. Traditional automakers continue to rely on the franchise model for most sales, although some are starting to move to a Tesla-style direct sales model to better prepare for increased online sales activity.