Tesla reportedly moving out of malls, a blow to shopping center owners

Tesla reportedly moving out of malls, a blow to shopping center owners

The Tesla showroom at Park Meadows Mall March 31, 2016

John Leyba | The Denver Post | Getty Images

Tesla showrooms have been a staple of many high-end shopping malls, but that could be changing.

The electric car maker is shuttering a number of stores in favor of less-expensive locations, according to a report from Electrek.

The decision would mark another shift in Telsa’s retail strategy, which has wavered in recent years. It would also be another blow to America’s mall owners, which have struggled to hang on to tenants and fill vacant storefronts.

In early 2019, Tesla Chief Executive Elon Musk said the company would be closing most of its brick-and-mortar locations and shifting its sales online. However, the company ended up reversing course and keeping a significant number of locations open.

Tesla is now said to be letting go of most of its high-rent locations in malls and shopping districts in favor of putting money toward delivery centers, Electrek reported, citing sources familiar with the plans.

The automaker is also looking to rent spaces in mall parking lots and in warehouses, according to the report. A Tesla spokesperson did not immediately respond to CNBC’s request for comment.

Tesla operates more than 170 galleries and showrooms across the U.S., according to its website, in malls including Garden State Plaza mall in Paramus, New Jersey; Scottsdale Fashion Square in Scottsdale, Arizona; and Ala Moana Center in Honolulu, Hawaii.

Mall owners such as Simon Property Group and Macerich — which count Tesla as a tenant — have seen a range of retailers move from the mall to other locations. Some of those retailers include Gap, Macy’s and Victoria’s Secret

The strategy shift has accelerated during the Covid pandemic, as businesses look to get closer to customers’ homes, cut back on rent and tap the foot traffic that comes from being closer to neighborhood centers with grocery stores and drive-thru restaurants.

Like Apple, Tesla has often been a favored tenant among landlords. Mall owners tout Tesla showrooms as accelerating visitors and boosting sales.

Representatives from Simon and Macerich didn’t immediately respond to CNBC’s request for comment.

Tesla shares were up less than 1% in premarket trading.

Read the full report from Electrek.

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