Tesla is raising prices after backtracking on store closures

Posted at 9:41 PM, Mar 12, 2019

Tesla will raise the price of its vehicles after going back on a recent decision to close most of its stores.

The electric car maker said in a statement late Sunday that prices for most models worldwide would go up by about 3% after it decided to “keep significantly more stores open than previously announced.”

Tesla had said less than two weeks ago that it would begin shutting most of its stores in a cost-cutting move designed to help reduce the price of its bestselling vehicle, the Model 3, to as low as $35,000.

As part of the plan, customers will instead have to buy Tesla vehicles online or by phone rather than in person at one of its hundreds of retail outlets.

Tesla still plans to sell the most basic version of the Model 3 for $35,000 even though the car is “excruciatingly difficult” to make at that price, according to CEO Elon Musk.

The 3% price increases announced Sunday will apply to the more expensive editions of the Model 3, as well as the Model S sedan and Model X crossover. The higher prices will take effect on March 18.

Tesla has 378 stores and service centers worldwide. The company didn’t specify on Sunday how many of these it still planned to close or in which markets. It said it will now “only close about half as many stores” as previously planned. Some of the stores that have already closed will be reopened with fewer staff members.

Fates of many stores undecided

Tesla didn’t provide a reason for the U-turn other than saying it followed a two-week evaluation of all the company’s retail locations. The company added that it will “continue to evaluate” its store network over the next several months.

“Depending on their effectiveness over the next few months, some will be closed and some will remain open,” the statement said.

Tesla is still sticking with its plan for all orders for its vehicles to take place online — even in its brick-and-mortar outlets.

“Potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes,” the company said. Stores will also have cars available for test drives and “a small number of cars in inventory for customers who wish to drive away with a Tesla immediately,” it added.

Tesla’s announcement of original plan to close its stores prompted a sell-off in the company’s stock. Some analysts said it could make it harder for Tesla to compete with automakers that still use brick-and-mortar dealerships to sell cars.

Barclays analyst Brian Johnson said it would also be difficult to achieve the cost savings needed to lower the price of the Model 3 through store closures alone.

Musk has promised a $35,000 price tag for the Model 3 since the car was first unveiled in 2016.

The company has already lowered prices for the Model 3 a number of times. In February, it said it would let go of 7% of its workforce in order to cut costs.

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