Tesla Motors, Inc.'s Retail Expansion Is Ambitious

By Markets Fool.com

Tesla store. Image source: Tesla Motors.

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"If you're in any midsize metro area, you'll be able to buy a car and get your car serviced," Tesla Motors (NASDAQ: TSLA) CEO Elon Musk said at the company's unveiling of its Model 3 earlier this year. The comment was made moments before the CEO took the wraps off the $35,000 vehicle that solicited 373,000 deposit-backed reservations in only 15 days. In preparation for the vehicle's launch in 2017, which will mark Tesla's move from vehicles starting at around $70,000 to a more affordable $35,000 model, the company is pushing aggressively to expand its retail and service footprint.

Amid the company's rapid expansion of stores and service centers, Tesla's latest store opening in San Francisco sets a new standard for the company's locations in the U.S., and it reaffirms Tesla's commitment lay the foundation for a higher-volume vehicle.

Tesla's 65,000-square-foot flagship store

If Tesla's newest store is any indication of how serious the company is about its retail plans, new store locations won't be half-hearted investments.

The company unveiled a new store in San Francisco this week located along the Van Ness corridor. The new store is in an "iconic, 65,000-square-foot building," Tesla said in the statement to The Motley Fool. It's the company's largest in North America. "The iconic space, size, and ideal location of Tesla San Francisco is a testament to the strength of the market and our dedication to our Bay Area home."

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More from Tesla to the Fool: "When it came to finding the best location in San Francisco, we looked for locations that offered us the square footage and visibility. Tesla Van Ness provides tons of space for future growth while providing a busy, visible location, easily accessible to SF owners and those traveling from other parts of the Bay Area."

In addition to serving as a showroom and a sales location, Tesla's newest store is also for servicing customer vehicles and delivering vehicles to customers.

Of course, Tesla's stores in other markets likely won't all rival this new San Francisco location. California is Tesla's best market for its vehicles by a long shot, so it's new store openings in the market are likely a higher priority. Still, the new store demonstrates the company's ongoing commitment to invest aggressively ahead of Model 3.

Doubling its locations

Just as the company is doubling down on its production goals, now aiming to boost production from about 50,000 vehicles in 2015 to an annual build rate of 500,000 vehicles in 2018, or two years earlier than initially planned, Tesla's targets for expanding its retail and service footprint are unsurprisingly ambitious.

Asterisk indicates approximate Tesla management estimate. Data source: Tesla quarterly shareholder letters, Model 3 unveiling presentation, and statement from Tesla. Chart source: author.

Tesla now has 260 total service and retail locations across the globe, up from 215 in March. But the company aims to have just under 300 locations by the end of the year and a whopping 441 by the end of 2017 -- more than doubling its store and service store count since the Model 3 unveil in March.

A rapid expansion of its stores and service locations is just one area the company is laying the groundwork for higher production as it gets ready to bring Model 3 to market. Among other aspects of its business the company is expanding, Tesla is notably preparing to begin cell production for Model 3 batteries at its new Gigafactory in about 8 months and plans to increase its Superchargers from 4,175 today to 7,100 by the end of next year.

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Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.