Tesla to raise prices and keep more stores open

Darnell Taylor
March 12, 2019

Less than two weeks after Tesla said that it would cut all vehicle prices by an average of 6 percent and shift sales on online only, the electric vehicle (EV) maker is backpedaling on the stores closure plan and is lifting auto prices by 3 percent, except for the $35,000 Model 3. Tesla on Monday announced an average 3 percent hike in prices for its cars and reversed the decision to close all its physical stores.

It has now confirmed in a statement released yesterday that it will be keeping "significantly more stores open than previously announced". It has decided after that evaluation that it will keep "significantly more" stores open than it had planned.

Despite the about-face, the company claims it is still moving to an online-only sales model, with store staff instructing buyers how to purchase their new vehicle online. Additionally, a week from now, there will be price increases on all of its vehicles with the exception of the standard range Model 3.

The abrupt move earlier this month by CEO Elon Musk, contrasting with an expanding network of retail spaces, sparked concern about Tesla's finances.

Some previously-closed stores will be reopened, but with fewer workers. 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.

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The internal e-mail Musk sent on Sunday may help calm those who remained at Tesla after lay-offs in January, and ongoing job cuts after that. As a result, Tesla has announced that it will once again adjust its pricing to reflect the additional costs of running retail operations.

Musk's lawyers face a Monday deadline to file a legal brief explaining to a NY federal judge why he shouldn't be held in contempt of court for an inaccurate February 19 tweet that could have influenced the company's stock price. It also contradicts its intention to give up test drives because of the existing 1,000 miles or 7 days return policy.

According to Tesla's blog, the preference for conducting sales online will continue and said buyers in stores would be trained to order a Tesla on phone, which is a rapid process.

The company said it would await the results of a further review on the usefulness of physical locations, and only cut the original price of the vehicle be "about 3%". So that makes models S, 3, X and Y.

At the time, Musk also walked back the company's guidance that it would be profitable in all future quarters, saying it would post a loss in the first quarter of this year.

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