Tesla changes plans and will keep more stores open

Tesla backtracks on store closings price hikes

Enlarge Image Elon Musk Getty Images

Musk blindsided many sales personnel at the company with the store closings, and some investors and analysts feared the cost-cutting measures sent troubling signals about the state of the company's sales and cash position.

Those who have been waiting for the long-promised $35,000 Model 3 will be glad to hear that the entry-level model will not see a price increase. As a result of keeping more stores open, Tesla is going to raise vehicle prices by about 3 percent across the globe.

On Feb. 28, the company said shifting totally to online sales would allow it to lower all vehicle prices by 6 percent, on average, including its higher-end Model S and Model X.

Less than two weeks after announcing that he was closing the company's retail stores and letting go the sales staff, it was time for an about turn.

"A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew".

The renewed public battle between Tesla's chief executive and the top US securities regulator adds pressure on Musk, the public face of Tesla, who is struggling to make the company profitable after cutting the price of its Model 3 sedan to $35,000.

Tesla has backflipped on plans to move all sales of its electric vehicles online, announcing that it has made a decision to keep "significantly more" retail outlets open, and pay for this by raising its auto prices by around 3 per cent worldwide.

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. The company said that the 10% of stores it had recently closed weren't performing and would've been closed anyway.

Tesla said it's backtracking on plans to close most of its stores and hike prices for its costlier vehicle models.

Tesla says that all sales worldwide will still be done online.

Some stores will keep a small inventory of cars on hand so purchasers can drive away in a new vehicle immediately. The Model S and Model X also will be made more expensive, and buyers will have a week to place orders before prices rise.

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

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

It's not clear if Tesla will increase just the base price of the vehicles, or if certain options will be subject to the price hike as well. However, cars will still be available for test drives at stores at the potential Tesla owner's request.

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