Tesla Backtracks on Store Closures

12 March, 2019, 07:58 | Author: Erin Carter
  • Tesla Changes Its Mind Over Store Closures, Raises Prices By 3%

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

Ten days after Tesla said that it would close nearly all of its stores, the carmaker has reversed its decision and will be raising the price of its electric vehicles instead.

"As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide", Tesla said. In a blog post, the company said about half the locations it was planning to close will stay open.

The store-closing reversal shows that Tesla had second thoughts about shuttering the stores and whether buyers would make such a large purchase without a test drive.

In this June 14, 2018, file photo, Tesla CEO Elon Musk speaks at a news conference in Chicago.

Tesla said on Sunday it has "been closely evaluating every single" retail location. He said the sooner-than-expected arrival of a US$35,000 Model 3 likely reflected the need to replenish cash after paying off a US$920 million convertible bond and added that weak USA sales early this year also probably hasn't helped.

"To backtrack from the online only strategy to us is a sign that may indicate Tesla did not see a positive reaction to orders post the announcement".

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The move made no sense to begin with because Tesla had spent millions fighting in courts and state legislatures trying to change laws that prevented companies from selling vehicles at their own stores, Ramsey said.

Tesla has cut thousands of employees since the start of the year as the carmaker continues to overhaul its operations to hit profitability. Most of Tesla's leases didn't have cancellation clauses, either, leaving the company exposed to potential lawsuits.

As part of that settlement, Musk stepped down as the company's chairman and he and Tesla agreed to pay $20 million each in fines.

At the time Mr Musk had said the firm's cars were still "too expensive for most people". The return policy of 1000 miles or 7 days also remains in place. The company also revised its earlier plan to close all physical retail stores. Given The Economist Intelligence Unit is forecasting consumer price inflation of 2.2% in the U.S., this is less than a 1% increase in real terms.

Other than that, Tesla is not giving much away: accompanying the invitation is a high contrast image of the front profile of the electric SUV, which appears (rightly so) to have a higher roof than the Model 3.

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

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