Tesla Reverses Course on Store Closures, Raises Prices to Compensate

Gladys Abbott
March 12, 2019

Elon Musk is backtracking from a jarring change in Tesla Inc.'s retailing strategy, keeping numerous company's stores open and raising the prices of its electric cars as a result.

In the first weekend of March, Tesla owners staged protests outside Tesla stores and Superchargers in some parts of Asia after the company had announced the massive price cuts, meaning that existing customers for some models in some counties have paid by up to 40 percent more for their Teslas before the price reduction.

The electric automaker revealed late Sunday that it has made a decision to close about half as many stores as it had targeted and "keep significantly more stores open than previously announced".

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.

To help fund the reconceived retail operation, Tesla said it will raise the prices of its Model S, Model X and pricier versions of its Model 3 by an average of 3 percent, starting on March 18.

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A few stores in high-visibility locations that were closed because of low throughput would be reopened with a smaller Tesla crew and would carry fewer cars in inventory.

At the time Mr Musk had said the firm's cars were still "too expensive for most people".

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Tesla has been making efforts to cut costs.

Tesla is still sticking with its plan for all orders for its vehicles to take place online - even in its brick-and-mortar outlets.

A Tesla spokesman declined comment Monday beyond the company's statement. The tweets initiated an investigation into whether Musk sent the tweets to inflate Tesla's stock price. The 7-day/1,000 mile test drive policy will still apply as well, though test drives will still be available in stores.

Shares of Tesla Inc. edged up less than one per cent in Monday trading to US$291.

In announcing the move on February 28, CEO Elon Musk said it was necessary to cut costs in order to profitably sell the mass-market version of the Model 3 sedan for $35,000. As a result of that decision, the company says it will have to increases prices on most of its models.

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.

The blog post doesn't give a rationale for why Tesla is backpedaling.

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