Musk blindsided Tesla staff with plans to close stores

Tesla Chief Executive Officer Elon Musk caught many employees by surprise with his announcement last week that the electric-car maker would close most stores and shift to online-only sales, according to three people familiar with the matter.

Many sales personnel found out about the decision when Tesla published a public blog post Thursday

rnoon, said the people, who asked not to be identified discussing sensitive matters. One of the key people involved in implementing the online sales strategy is Sanjay Shah, who has taken on additional responsibil- ities since his arrival from Amazon last summer, the people said. He joined Tesla as senior vice president of energy operations and con- tinues to oversee that business.

Tesla declined to comment on the sales shift beyond Thursday’s blog post and a Musk email to employees later that day.

The abrupt move by Musk, 47, also shocked some investors, including Alex Chale- kian, the founder and CEO of Lake Avenue Financial in Pasadena, California. The firm, which manages more than $150 million in cli- ent assets, sold all of the Tesla stock held for advisory clients Friday.

“This was a total 180-degree turn,” Chale- kian, who owns a black Tesla Model S, said in a phone interview Monday. “Tesla had been talking a bout 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.”

The stock has dropped about 11 percent since Thursday, shaving almost $6 billion from Tesla’s market value. The shares were down 0.2 percent as of 8 a.m. Tuesday in New York, a day after closing at the lowest since Oct. 22.

Until last week, Tesla’s store strategy seemed to be one of expansion. The Palo Alto, California-based company opened 27 new retail and service centers last quar- ter, resulting in 378 locations worldwide, according to its letter to shareholders. It was the most openings for a quarter since mid-2017.

Musk described the winding down of many stores as a c ost-cut t ing move that enables Tesla to offer a long-promised $35,000 version of the Model 3 sedan, the automaker’s first mass-manufactured car.

The company said it’s able to reduce prices of all its vehicles by an average of about 6 percent by shifting sales online and trimming other expenses.

In an email to employees sent roughly three hours after Tesla published its blog post Thursday, Musk said 78 percent of Model 3 orders were placed online last year, rather than in stores. He wrote that some jobs will be transitioned to other areas of the business and “a small number of stores in high-traffic locations will remain as galleries, showcases and Tesla information centers.”

“We are not concerned,” Cathie Wood, the CEO of ARK Invest, a fund manager who remains bullish about Tesla, said Monday on Bloomberg Television. While the decision to close stores and go all-online was “abrupt,” she wasn’t as surprised as other investors.

Elon Musk