Tesla reverses course on price cuts amid plans to keep most stores open

Yoni Heisler

One of the more interesting and admirable things about Tesla over the years has been the company’s clear vision and unwavering adherence to a coherent product strategy. As laid out in the first installment of Tesla’s master plan more than a decade ago, the company described in clear terms its plan to revolutionize the auto industry by using profits from pricier electric vehicles to develop and manufacture a mass market EV, a car we now know as the Model 3.

Recently, though, Tesla seems to be somewhat prone to waffling as opposed to sticking with a coherent game plan. Late last month, for example, Tesla at long last announced the long-overdue arrival of the $35,000 Model 3. The company also announced that it would be closing nearly all of its stores and that the Model S and Model X would also see some slight price reductions.

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Not even two weeks later, Tesla has had something of an about-face. Perhaps realizing that closing the majority of its stores was a short-sighted move, the company over the weekend announced that it will keep most of its stores open and that the promised price cuts for the Model S and Model X won’t be implemented.

Tesla’s updated announcement on the matter can be viewed below:

Last month, we announced that we would be winding down many of our stores and moving to online-only sales in order to pass the savings along to our customers.

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. When we recently closed 10% of sales locations, we selected stores that didn’t invite the natural foot traffic our stores have always been designed for. These are stores that we would have closed anyway, even if in-store sales made up our entire sales model. A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew. In addition, there are another 20% of locations that are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open.

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

Potential Tesla owners will have a week to place their order before prices rise, so current prices are valid until March 18th. There will be no price increase to the $35,000 Model 3. The price increases will only apply to the more expensive variants of Model 3, as well as Model S and X.

To be clear, all sales worldwide will still be done online, in that potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes. And the generous return policy of 1000 miles or 7 days, whichever comes first, should alleviate the need for most test drives. However, cars will still be available for test drives at stores at the potential Tesla owner’s request. Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately.

All in all, this seems like the right move for Tesla. Though the company noted that most orders occur through the Tesla website, that’s probably a function of eager Tesla buyers willing to pull the trigger with not so much as a test drive. If Tesla truly wants to hasten the adoption of EVs, though, it needs physical retail locations where complete strangers to the Tesla brand can learn about the company and schedule test drives.

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