Tesla’s decision to move its sales completely online is a “leap of faith” that may not necessarily pay off, former Ford CEO Mark Fields suggested on Friday.
While the electric automaker has a “very sustainable brand,” it has to figure out how to churn out cheaper Model 3s while trying to become profitable, he said on CNBC’s “Closing Bell.”
“It all comes down to the consumer, because without incentives, that is going to impact the business model,” Fields said. “By eliminating their stores, are consumers going to want to buy a vehicle like they buy a Crock-Pot on Amazon?”
Last week, Tesla announced it is shifting its sales to online only. It will require the company to reduce headcount in sales and should help cut some operating expenses. In a blog post Tesla emphasized that shifting sales to online only would enable it to sell its Model 3 vehicles for the long-awaited base model price of $35,000.
The company has had to keep prices high enough to recoup its massive investments and turn a profit but at the same time keep them low enough to compete with the larger automakers. CEO Elon Musk once seemed confident Tesla would turn a profit in the first quarter of this year — but now he’s predicting a loss.
The move to online sales is part of the automaker’s strategy to bring down costs. However, customers are used to seeing and touching a vehicle, said Fields, who served as Ford’s chief executive from 2014 to 2017.
“It is the second-biggest purchase that they make in their life, after their house, and will they want to do that just online, not physically seeing or test-driving the vehicle? That’s a leap of faith.”
— CNBC’s Lora Kolodny and Robert Ferris contributed to this report.
Source : CNBC