(Yicai Global) -- Tesla is reportedly closing down some of its China direct sales stores and scrapping commission for sales reps as the electric carmaker looks to streamline its business model across the globe.
Two outlets in Shanghai have already started making the changes, China's state-backed International Financial news reported yesterday. As of the second quarter, staff at remaining dealerships will receive only a basic salary.
The California-based firm will partner Ant Financial Service Group and use its Alipay app for car purchases, a source close to the firm said. The company already accepts Alipay through its online store, and the payments platform will also set up a function for buying Teslas within its mobile app, he added.
Tesla Chief Executive Elon Musk announced late last month that the firm would be closing the majority of its stores while reserving a few as exhibition halls or information centers. But many had believed the changes would not affect China, the world's largest EV market but a real pain point for Tesla as it looks to battle a swarm of local rivals, including recently listed Nio, BYD and BAIC BJEV.
Tesla's revenue in China, its second-biggest market behind the United States, slumped 13.3 percent last year to USD1.76 billion as trade tension between the two countries weighed in on its earnings.
The move will cut the average price of all models by 6 percent and help Tesla achieve its goal of selling Model 3s at USD35,000 sooner than anticipated, firm said.
Rather than selling via independently owned dealerships, as is typical in the automotive industry, Tesla runs its own direct sales outlets. While the model offers greater control over point of sale environments, it seems the higher costs are finally catching up to the EV titan.
Editor: James Boynton