Tesla Plans Price Hikes To Keep Struggling Stores Open

Tesla Store Los Angeles

In a February 28 blog post on the Tesla website, it was stated that the electric-automaker would close most of its 378 stores worldwide. There will be no price increase to the US$35,000 Model 3.

Less than a fortnight ago the electric auto maker said it was taking sales nearly entirely online in a move it said would reduce the cost of selling a vehicle by up to 6pc and help lower the cost of its cheapest auto, the Model 3, down to $35,000 (£26,700).

Less than two weeks after it announced it would be closing the majority of its retail locations, Tesla has made a blog post revisiting that decision. As a result, Tesla said it will need to raise prices on its costlier models by about 3% on average worldwide. It added that the future of another 20% of locations will be under review in the next few months.

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

In a statement on Sunday, the vehicle maker said potential buyers can place orders until March 18 at the old prices.

"There will be a pause on store closing and my suspicion is that the performance of the Vancouver stores are above average for Tesla sales and they may all stay open", he said. Tesla has now announced that it is going back on those plans. It has 378 stores and service centers worldwide and about 100 stores in the U.S. If the company closes 30 percent of the stores that would equal about 110.

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All Tesla sales will still be conducted online, and the showrooms will remain to show clients how to order a Tesla on their phone.

Tesla's PR notes that all vehicles sales will still be conducted online, though it also states that a small number of vehicles will be on-hand for immediate purchase. He said Musk plays a very active role in the company board's decision making.

Tesla has cut thousands of employees since the start of the year as the carmaker continues to overhaul its operations to hit profitability.

The company has already lowered prices for the Model 3 a number of times.

Tesla is still sticking with its plan for all orders for its vehicles to take place online - even in its brick-and-mortar outlets. However, cars will still be available for test drives at stores at the potential Tesla owner's request.

Still, Tesla shares were largely unaffected, with the stock gaining 3 per cent on Monday to $US290 a share, maintaining its market value at more than $US50 billion, much to the chagrin of the army of "short-sellers" who are betting on the company failing.

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