Tesla backtracks on decision to close stores, raising prices instead

Wednesday, 13 Mar, 2019

Chief Executive Elon Musk said late last month that Tesla would close most of its retail locations as it transitions to an online-only ordering platform, slashing a large portion of its sales staff in the process.

As part of its move to shift all sales online and other ongoing cost efficiencies, Tesla slashed the prices of its Model 3, Model S, and Model X vehicles by about 6% on average.

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.

But in a blog post on on Sunday, Tesla said that while all sales worldwide will be done online, it has made a decision to keep "significantly more" stores open than previously announced.

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 total, this means Tesla will take back its original decision to close the majority of its retail stores and instead close between 10 and 30 percent of its current portfolio.

To make up for this, Tesla will raise the prices of its high-end vehicles by about 3 percent on average, as it strives for profitability.

Everything you need to know about Tesla's onboard computer system called Autopilot, and the company's plans for a self-driving vehicle. Tesla will offer vehicles for test drives at its stores at the buyer's request, and there will be a small number of cars in inventory for those who want to drive off in their new auto the same day.

Even though Tesla sales worldwide are moving online, potential customers will still be able to book a test drive through one of the stores.

Tesla also announced Monday that it has purchased car-hauling trucks and trailers from a California company in a stock deal worth about $14.2 million.

Tesla cut the prices in response to falling tax incentives for its cars, after the company reached the cap on the credits last summer.

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

Tesla's acquisition of Central Valley Transport's trucks will help the company optimize the delivery of its vehicles.

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 said it will look at a further 20 percent of its stores over the coming month to determine whether they will remain.

Shares of the company, among Wall Street's most volatile in recent months, were roughly flat in early trading on Monday.