(Yicai Global) Aug 3 -- Tesla plans to cut the number of its experience stores in China's first-tier cities and will instead build more typical 4S stores to improve display and after-sales service, as other carmakers are imitating the US firm in opening showrooms in shopping malls, a people familiar with the matter said.

Tesla intends to halve its experience stores in Shanghai to about 10 from 19 and build one to two 4S store-like outlets in each of the city’s districts, the person said.

“There are several reasons behind the plan,” the source said. “The first is to lower rental costs. Tesla is also famous enough in China now and no longer needs the high traffic of malls to access potential customers.

“With the increase in sales, Tesla’s after-sales service capacity is somewhat lacking, so building more after-sales centers is needed to maintain the system.”

Though the new outlets are similar to conventional 4S stores -- outlets for sales, service, spare parts and surveys -- Tesla will sell vehicles directly, which means they are all managed by Tesla, not dealers.

“Most of the sites on which Tesla plans to build new stores are near traditional automobile business areas,” the person said, adding that “these 4S store-like outlets will have two parts. The front showroom will be used for vehicle experience and sales, while areas at the back are used for maintenance and repair.”

But they will not deliver vehicles. The delivery center in Shanghai's Waigaoqiao, for example, will still be responsible for deliveries, finance, registrations and owner training. This will also be true in other cities. 

Centralized delivery can not only reduce costs, but also facilitate the management of service process and quality, the source added. 

Emerging Chinese new energy vehicle startups and the smart electric vehicle marques of conventional automakers are all scrambling for space in retail settings, while Tesla is set to scale back such experience stores. 

A nearly 500-square-meter flagship experience center in Beijing's Salitun costs Xpeng Motors about CNY10 million (USD1.5 million) a year, according to media reports. While a 3,000 sqm space in Beijing's Wangfujing business district costs Nio annual rent of between CNY70 million and CNY80 million (USD10.8 million and USD12.4 million). 

Tesla's sales strategies vary based on the different market levels in China, an insider at Tesla China told Yicai Global. In third- and fourth-tier cities, Tesla's preferred choice is still shopping malls, and this will be a dynamic process. 

Editors: Liao Shumin, Tom Litting