Tesla's recent decision to close all of their physical stores and focus only on selling their vehicles online might be a better choice than many originally judged it to be.
“I think every business has its challenges, but they’ve done a pretty good job overall, I wouldn’t be betting against them,” CEO of Carvana Ernie Garcia, said recently on CNBC. “I think when you buy a new car, questions are different, but the return policy is enormously powerful like it is on the used side. A customer knows they can return it.”
Tesla's stock went up just over 1% toward the end of trading.
The company's move to online sales has been received with different reactions by investors. Some investors believe the closing retail stores will help reduce costs while others fear this will result in Tesla seeing an overall sales loss.
Bernstein analyst Toni Sacconaghi said, “The move to direct sales is bold, though we are comforted that 70%+ of Tesla buyers in 2018 did not test drive prior to purchase. That said, we do believe that salespeople have been important in up-selling Tesla customers, as well as selling Tesla solar products.”
Tesla's recent change will end with some layoffs and some employees have stated they still haven't been informed about what changes Tesla may have for them.
The company has been attempting to convince several US states to approve of sales of the electric vehicles. Some states still ban any direct sales from car manufacturer to consumer. These laws are on the books because there was one a time where the government wanted to prevent any automakers from competing directly with one another within the consumer marketplace.
Carvana's CEO also stated they aren't worried about competing with Tesla since their company is completely focused on used vehicles. He also expects that Tesla's move to online sales could also bring more consumers to online vehicle sales.
“Tesla has an incredible megaphone,” he said.
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