Tesla Pushes Cheaper Cars, Will Move Sales Online and Close Most Stores

Red Tesla
Patrick T. Fallon/Bloomberg News

Tesla said Feb. 28 it will close “many” of its stores and shift to online-only sales after announcing that its long-awaited $35,000 Model 3 is available for purchase.

The Palo Alto, Calif., electric car maker said in a blog post that a “small number” of stores would remain in busy locations, serving instead as “galleries, showcases and Tesla information centers.”

The cheapest version of the Model 3 previously sold for about $43,000 and bringing the $35,000 version to market has long been a company target.



“We’re just incredibly excited to achieve this goal,” CEO Elon Musk said on a conference call.

Tesla did not specify how many stores will be shuttered but said the closures will happen in the coming months. Selling exclusively online will, along with other “ongoing cost efficiencies,” allow Tesla to lower average car prices by about 6%, the company said.

The shift also will make Teslas easier to buy, according to Musk.

“Anyone can buy the car, anywhere in the U.S. immediately. This, I think, really, substantially opens up our ability to sell the cars,” Musk said on the call. “It’s 2019. People just want to buy things online.”

The store closures will result in layoffs, according to Musk, but he did not say how many. He said on the conference call that there was “no other way” for Tesla to offer the $35,000 Model 3 and be “financially sustainable.”

However, because of the lower-cost car announcement, Tesla will be “significantly increasing” the ranks of its service technicians, Musk said.

Tesla also said it was implementing software updates that will increase the range of its long-range, rear-wheel-drive Model 3 to 325 miles; raise the top speed of the Model 3 Performance to 162 mph and add about 5% peak power to all Model 3 cars.

Tesla’s stock fell 3.7% in after-hours trading immediately after the announcement.

On the conference call, Musk said he does not expect Tesla to be profitable in the first quarter this year because the company is “taking a lot of one-time charges” and has faced challenges getting cars to China and Europe. But profitability in the second quarter is likely, he said.

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