11 March, 2019

Tesla performs U-turn by keeping half of dealerships open

Tesla is to increase the prices of certain models of electric vehicles (EVs) and will scale back its dealership closure programme.

The 3% price rise will not apply to the Model 3, which was the subject of much fanfare earlier in March with CEO Elon Musk announcing a $9,000 (€7,936) price drop. At the same time, the company announced that it was moving to an online sales model that would see its physical stores close.

The company will only close around half of its physical sites, of which it has 378, making half the cost savings it needed to initiate the price drop on the Model 3. Therefore, the price rises on its Model S and Model X will help keep finances balanced.

Tesla has not commented on which stores it will save. It was originally expected that around 3,000 jobs were at risk.

‘Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months,’ the company said.

The store closures would also have allowed the company to cut prices across all its models by an average of 6%. Model X and Model S variants can already cost up to €100,000 in top line trim.

Tesla is still planning to conduct its sales online and said that rather than dealerships selling cars directly, they would work as hubs, with customers shown how to order a vehicle on their phone. The company says this process will take ‘minutes’.

Some stores that have been closed in ‘high visibility locations’ will be reopened, albeit with smaller numbers of staff. Stores will hold fewer cars for those customers who want to drive away with a new vehicle immediately.

There will still be a policy of ‘no test drives’ the company added, with its returns policy covering a vehicle up to 1,000 miles and for seven days.

Pushing down prices of its cars has been seen as essential to reach the level of sales that Musk has targeted over the years. However, when announced, the price cut caused the company’s share price to fall by 4%.

The new $35,000 Model 3 will have a range of 220 miles, compared with 260 miles for the previous cheapest version. The company has also announced a version with a 240-mile range for $37,000 (€32,625).