TESLA is cutting prices and closing showroom doors in a dramatic bid to remain viable.
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Most Tesla shops will close in favour of an online sales model to give the company the savings it needs to lower the starting price of its Model 3 from $42,000 (£35,492) to $35,000 (£26,400) — a six percent cut. Prices of the high-end Model S and Model X are also expected to come down.
Billionaire CEO Elon Musk said the move was the only way to “achieve the savings for this car and be financially sustainable” — a process he described as “excruciatingly difficult”. Tesla needs more sales of vehicles such as the Model 3 to survive.
A few of the 378 Tesla outlets around the world will remain open as information centres to showcase the products, but sales will now be almost exclusively internet-based. “It’s 2019,” Musk is quoted as saying. “People want to buy things online.”
Musk hopes there is sufficient demand to sell half-a-million Model 3s at the new reduced price. He has predicted a loss for Tesla in Q1 but expects a return to profit later in the year. Tesla’s share fell three percent to $309.40 in after-hours trading following the announcement.
No mention has been made of job cuts as a result of the store closures, but in January Tesla said it would cut more than 3,000 positions — seven percent of the workforce — in a separate, unconnected drive for savings.
Some customers on the list for a Model 3 have reportedly been waiting for as long as three years for their vehicles, but Tesla says those ordering now should receive delivery of their cars in June.
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|Tesla||TSLA 227.17 +3.71 +1.66%|