American electric car manufacturer Tesla will increase the prices on certain models by 3% to avoid closing a majority of its physical retail outlets, reversing an announcement made earlier this month.
Chief executive officer Elon Musk wrote of the reversal in a memo to employees of the company, although he did also warn that ‘half as many’ stores as previously announced would still be closed. Tesla has stated the price increase on vehicles will not affect the standard version of the new Model 3.
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The car manufacturer has been undergoing cost cutting exercises to ensure the affordability of the Model 3, to be retailed at $35,000 (£26,400). However, ‘variants’ of the Model 3, plus the Model S and the Model X, will see price increases.
Tesla has 378 stores and service locations worldwide but has not been specific about which ones will close. The company has already closed 10% of sales locations that weren’t generating sufficient footfall, and those will remain shuttered. However, several high-visibility locations that it closed will reopen “with a smaller Tesla crew.”
Stores currently act as a physical portal to the online sales platform, where employees assist customers in making orders on the company website. As a means of minimising test drive facilities, Tesla offers returns before 1,000 miles of mileage or seven days of ownership.
According to the memo, the price rise in vehicles will take place on March 18. As well as facilitating online orders stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately.
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By GlobalDataAccording to Musk, the 10% of stores closed failed the ‘Sherlock Holmes test’: “Meaning, most of these stores are in such difficult or obscure locations, only Sherlock Holmes could find them! Even if selling through stores were our only means of sales, we would still have closed them down.”
This month Musk also predicted demand to sell about 500,000 Model 3 vehicles annually at the starting price of $35,000. As recently as September, the average selling price of a Model 3 exceeded $50,000.
