Derek was working at home from his sales job at a Tesla store on February 28. He wanted to have a leg up on some leads in anticipation of the big announcement to come at 5 p.m.. He surmised it would be the triumphant declaration that the Tesla Model 3 sedan would finally be available for the long-promised price of $US35,000 (between $45,000 – $50,000), something Elon Musk had previously said might be impossible.
As Derek, which is not his real name, scrolled through the announcement on his computer learning as much as he could about the new car he’d soon be trying to sell, a news alert popped up: “Tesla Shifts to Online Sales Model.”
Derek, like the other half-dozen Tesla retail store employees from around the country Jalopnik spoke to for this story, asked for anonymity, citing what they described as a culture of secrecy at the company and fearing retribution. Their employment status, they said, was tenuous enough as it is. Because none of them had any clue that, as a casualty to Musk’s triumph, they would all likely lose their jobs.
Interviews by Jalopnik found the planned move away from physical stores to be poorly messaged and chaotic. Even regional managers who oversee dozens of stores were kept in the dark. Commissions were cut, slashing many salaries 50 per cent or more with no notice. Employees weren’t allowed to take paid time off out of concern everyone would use it to look for other jobs. And store managers scrambled just to keep morale from hitting rock bottom.
“The stores, even the ones that are remaining open, are totally dead and without guidance,” Derek summarized. “There was no care given to the employees here.”
And on Sunday, the situation was further thrown into chaos as Tesla dialed back its store closure plans, reportedly over leases it can’t pull out of.
It caps off a week of heightened uncertainty among the electric automaker’s employees.
On Friday, eight days after Tesla announced the store closures, several employees received updates through their store managers, via the regional managers. All store closures would be temporarily halted, which was also reported by Electrek. Plus, sales of existing inventory would resume, and a compensation plan would be put back in place, although the employees who spoke to Jalopnik heard different details on what exactly that compensation plan would be.
Electrek reported 29 stores in the U.S. and Canada had already been closed, which is what several employees also told Jalopnik, although the employees said they learned of that number through news reports.
The three employees who received this update said they weren’t told anything about the company’s long-term plans for their stores specifically or the retail operation in general. They each suspected that the pause of store closures had less to do with the Model Y small crossover launch on March 14 and more as a measure to boost sales numbers through the end of the quarter, which have reportedly “slowed considerably” in the first two months of 2019. Two of those three employees are still operating under the assumption they’ll be out of a job within a month or so.
On Sunday night, Tesla posted a short blog making much of this news official, while also announcing a 3 per cent price increase to keep the stores open — for now. When given a detailed set of questions, a Tesla spokesperson referred Jalopnik to the blog post and otherwise did not comment about the store closure process.
The constant mind-changing, poor communication, and uncertainty resulted in several employees Jalopnik spoke to confident in only one thing: they believe the company they work for either doesn’t know what it’s doing or isn’t being honest with them about it.
After the most recent blog post, another Tesla employee texted, “I really don’t know what to think at this point other than WTF.”
The shift in sales strategy to online-only came as a surprise to more than just retail employees. It surprised investors; they were told by Tesla in an SEC filing just a few weeks before that a retail presence was an important part of their sales strategy. It came as a surprise to customers; they came to stores to express their sympathies with the staff, in at least one case bringing employees coffee as a token of appreciation. It came as a surprise to the stores’ landlords, some of whom were signing new leases as recently as last month.
But the biggest shock came to the employees themselves, who had been told for years that they would be the front line to making the Model 3 the big sales breakthrough the company needed.
Now, all of sudden, they were being informed indirectly through the media that not only will they not be a part of that breakthrough, but they are incompatible with it. The only way Tesla can sell the Model 3 for such a low price, the company said, is to cut out the retail operation, putting thousands of people out of work.
An employee from a retail store in the southwest echoed his colleagues from around the country: “None of us knew this was coming.” Multiple employees told Jalopnik that their regional managers, who oversee dozens of stores, were similarly blindsided by the news. And they received little clarity in the days that followed. They learned the tidbits of information they could — a store closing here, another there — through social media, Reddit, and the few coworkers who had contacts in other stores.
In the days that followed, the stores existed in a kind of retail purgatory. The staff still had jobs, but because the news had been so widely reported, few customers.
More importantly, they were no longer getting commission for their sales, which for some employees amounted to a pay cut of 50 per cent or more. It was hardly new for Tesla to change the compensation rates on the fly — it had happened at least twice in the last few months — but to eliminate it entirely meant salespeople who had previously been making close to six figures were now looking at take-home pay closer to $70,000 a year, a pretty substantive cut when trying to support their families and pay their bills.
To add insult to injury, Tesla had offered employees a discount program at the end of 2018 that gave them the cars’ so-called self-driving package, an $8,000 value for free, plus $5,000 off any model, for a total discount of $13,000. According to Business Insider, the company also encouraged employees to trade in accrued paid time off towards the purchase of a car.
Derek told me he was one of the only employees at his store that didn’t take advantage of the offer after a fourth quarter where the store did very well and pockets were filled with compensation bonuses. Now they all have hefty car loans for expensive vehicles they’re worried about paying off without a job.
After the news broke about the closings, employees were told to keep showing up to work, chasing leads, and working for their base pay rate without commission. Unsurprisingly, employees didn’t do a lot of work. Multiple employees said that for the time being test drives were cancelled nationwide.
Derek said that at his store they were just “hanging out and talking about cars” (he added this didn’t exactly bother him as he was hoping that’s what the atmosphere would be like when he took the job). Another, who works in a Texas store, said “we’re all actively looking for jobs at this point.”
A third said the store had worked out an informal system where one or two employees manned the front of the store, just in case anyone showed up, while the others hunkered in the back watching Netflix, playing the video game Fortnite, or trawling LinkedIn for leads.
He summarized the mood by saying, “We don’t know what we should be doing.”
Tesla’s retail model of selling cars directly to customers differentiates it from the rest of the automotive industry, where dealers act as intermediaries. Tesla has long argued that this direct-sales provides a better all-around buying experience.
Many Tesla stores, known for their hyper-modern aesthetics and all-glass exteriors, are in malls or other retail locations with high foot traffic, attracting eyeballs as much as potential customers. The company also hires many of its retail staff not from the auto industry, but from luxury retail. But a Jalopnik investigation last year found the work environment at Tesla stores often resembles the very dealerships they’re trying to disrupt. The company constantly shifts sales targets, bonus structures, and work during off hours, leaving some workers miserable.
In order to defend their decision to shift sales online, Musk wrote in an email to employees the day after the news broke that 78 per cent of all Model 3 sales occur online and 82 per cent of customers bought the car without a test drive.
When asked about the 78 per cent statistic specifically, the first word out of four of the six employees’ mouths were “bullshit.” Regardless of whether they used that exact word, all of them dismissed the figure as misleading at best and outright fabricated at worst.
For months, they had been directed to have customers buy cars themselves through the Tesla website, even if they’re sitting right next to them in the store. But many buyers place an order on their phones after talking with a salesperson for hours or even making multiple visits. Others come into the store, think about it, and then buy online later. In retrospect, multiple employees now suspect this directive as a scheme to orchestrate their own obsolescence.
Due to various state-level franchise laws, Tesla cannot directly sell cars in their stores in several states, including some in the stores for the employees I spoke to. In those cases, as a matter of law, all orders must be placed online, yet another reason the 78 per cent figure is misleading. Employees can’t even fill out the online form for the customer, but must direct the customer to order the car on their phone (some do anyways, multiple employees told Jalopnik).
It’s also not clear how Tesla is counting customers who come in to the store because they want to see the very expensive car they’re about to buy but don’t go for an official test drive. Maybe they just talk to a salesperson, learn how the charging system works, and sit in the car for a bit. Or their spouse or partner does the test drive. These are all common pre-buying scenarios, the salespeople said, yet appear to be counted as “online” sales even though it’s highly unlikely the sale would have happened without an in-person store visit.
One of the employees who expressed doubt over the statistics said he couldn’t believe Tesla published the numbers, because they’re so obviously untrue to him. He added that he would “love to see whatever numbers they have construed to make it even look like it’s like that, because that’s wild.”
Of course, nobody likes to be confronted with statistics that their jobs are disposable. But one employee, after pointing out all the possible methodological flaws in that 78 per cent figure, made one more point: let’s say it’s accurate, he granted, and 78 per cent of sales really do occur entirely online with little to no interaction with a sales staff member. Why would you voluntarily give up 22 per cent of sales?
All the employees I spoke to had the same story to tell about how the last week has unfolded, how their company’s boss told reporters their jobs were going to be eliminated before, seemingly, almost anyone else, and how that decision affected their work environment.
But what they didn’t agree on was their interpretation of these events. What does it mean for Tesla? What does it say about the company they work for?
This seemed to depend almost entirely on what their opinion of Tesla and Musk was before the announcement. Tesla — and Musk — are notorious for fostering a culture of fanaticism about the brand — and the man — unheard of in most retail environments. Whether or not these employees bought into that before last week seemed to predetermine how they would react.
There were the employees who have a more traditional view of employment, that you do what is best for yourself, your family, and your co-workers, because the company won’t. To them, the events of the last several days only prove their point. They expressed bewilderment at the “kool-aid drinkers” or the “die-hards” who are still fiercely loyal to Tesla and Musk.
And then there were the “kool-aid drinkers” themselves, to echo a term nearly every employee I spoke to used at least once. Another employee, who is the oldest person at his store but has only worked there for a few months, enjoys working with his co-workers but always found the vibe of the place perplexing with its Musk worship. He described his prevailing emotion at the time I talked to him on Thursday as pity for the young, college-age co-workers who bought what Musk was selling, in every imaginable sense.
One of them, he said, argued with him in the days that followed the announcement that “it makes fiscal sense” for Tesla to close their stores, to fire them all. “It makes sense for the company to do this.”
“He’s like, ‘it’s bad for me but it’s good for the company, it’s good for the mission.’ Dude, no! Like, it’s your job, you idiot.” He further assured me that this mindset, which he described as being “brainwashed to be like Company Over Self,” is “not uncommon.”
One of the other employees I spoke to began the interview by saying he wasn’t a kool-aid drinker, but by the end admitted he probably was.
Even though he knows he will likely lose his job in the coming days or weeks, he doesn’t feel lied to or taken advantage of. (In a text message after some employees received updates on Friday, he expressed optimism his particular store in the Texas area would remain open indefinitely, even though he received no official or unofficial assurances to that effect.)
He further urged me to look at the big picture, that Tesla is “well on its way to accomplishing its mission,” which its website says is “to accelerate the world’s transition to sustainable energy.” He told me he believes that Porsche or Audi or General Motors wouldn’t be looking to electrify as much of their fleets as they are, wouldn’t be talking about electrification much at all, if not for Tesla.
At one point, he went on a bit of a tangent and said he always personally believed “Elon” — they all refer to him by his first name — has always wanted to close all his stores. “I’m sure in his perfect world, people would just love the cars and buy it online and it gets built in the factory automated by robots and then gets delivered to your door autonomously, eliminating as many people as possible.”
To be clear, he’s talking about himself in here, his own job getting automated away. Yet, this salesman talked about the scenario with a degree of unmistakable reverence. He doesn’t think selling cars online will work as Musk hopes, but he sounded almost glad Musk wants to try.
“It’s a cool company,” he said, “It’s a cool company to be a part of.”
I thanked him for speaking to me and asked him if there’s anything else I should know for this story, if there was anything he thought was important but we hadn’t touched on yet.
“I just ask,” he added, “that ya’ll go easy on Tesla.”