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Tesla drastically expands its service network as Model 3 deliveries start

  • As Tesla prepares for a surge in the number of vehicles it will have on the road, the company is dramatically expanding its service network.
  • If the automaker has a clean launch for the Model 3, the increased servicing efforts will support the growing base of Tesla owners.
  • However, if the Model 3 rollout includes glitches or problems with the new cars, Tesla's service operation will be tested.

As Elon Musk's Tesla prepares for a surge in the number of vehicles it will have on the road around the world, the company is dramatically expanding its service network.

The goal: Be prepared to quickly help more Tesla owners as the company deals with the challenge of growing beyond being a niche automaker.

The worldwide expansion in service will include:

  • 100 new service centers (currently 150 in operation);
  • 350 new mobile service vans;
  • 1,400 additional service workers.

Historically, Tesla's service business has not received much attention from investors.

Why?

First, with about a quarter-million Tesla vehicles on the road worldwide, the service operation is dealing with a much smaller base than established automakers.

Second, the money Tesla generates from servicing vehicles is still relatively small. Last year, Tesla listed $467 million in revenue for services and other activity such as selling certified pre-owned models.

So why should investors care about Tesla's service expansion plan? Largely because it's key to how the automaker handles a dramatic increase in the number of vehicles on the road. The company's target of building a half-million vehicles in 2018 means the total number of Tesla models on the road worldwide could more than double in a short period of time.

If the automaker has a clean launch for the Model 3, the increased servicing efforts will support the growing base of Tesla owners but go largely unnoticed by investors.

However, if the Model 3 rollout includes glitches or problems with the new cars, Tesla's service operation will be tested. Its ability to repair cars quickly will help catch potential problems before they blow up into the kind of issues that hurt a brand's reputation.

Tesla said the new service centers and service vans will be based where the company expects to see the greatest density of Tesla owners. As part of picking those locations, Tesla said it has analyzed the addresses of Model 3 reservation holders to determine the most demand for service centers.

(Correction: This story was revised to say Tesla's expanded service will result in an additional 1,400 service workers.)