Market Overview

Tesla Reverses Course On Store Closures, Price Cuts

Tesla Reverses Course On Store Closures, Price Cuts

After announcing plans to close its physical stores and slash vehicle prices by 6 percent at the end of February, Tesla Inc (NASDAQ: TSLA) has changed course again.  

On Sunday, the electric carmaker announced it would keep more stores open than originally planned — and compensate for the cost by raising vehicle prices.

“Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months,” Tesla said in a blog post. 

The automaker said it is reviewing 20 percent of locations and will close some over the next few months depending on their effectiveness. 

Additionally, of the 10 percent of sites Tesla recently shuttered due poor foot traffic, the company will reopen a few in high-visibility locations. Most of those targets would have been closed regardless of the online sales strategy, the company said. 

Despite their continued existence, the sites will serve only as showrooms. Tesla will take all sales online, although it said some stores will carry inventory for immediate delivery. While test drives will remain available, management will honor its previously announced return policy of seven days or 1,000 miles.

The Wall Street Journal reported Friday that Tesla has lease obligations of $1.6 billion for its stores, meaning the company could face lawsuits triggered by broken leases. 

The survival of Tesla stores comes at a cost.

“As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3 percent on average worldwide,” the firm said in the release. “In other words, we will only close about half as many stores, but the cost savings are therefore only about half.”

Prospective buyers of the Model S, Model X and more expensive Model 3 can claim the current prices until March 18. The base Model 3 will remain at $35,000.

Tesla shares were up 0.86 percent at $286.58 at the time of publication Monday. 

Related Links:

Analysts React To SEC Action Against Elon Musk

Tesla And Consumer Reports: A History

Photo courtesy of Tesla. 

Posted-In: automotive Electric Vehicle EV The Wall Street JournalNews Media Best of Benzinga


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