Tesla walks back its plan to close most showrooms

Irving Hamilton
March 11, 2019

Tesla has reversed its decision to close its brick-and-mortar stores and take sales online only.

Instead, around half of the stores the carmaker planned to close will remain open and it'll increase prices on its higher-end Model 3, Model S and Model X "by about 3 percent on average worldwide", it said in a release.

Tesla announced last month that it would shutter most of its stores to cut costs so it could sell its lower-priced Model 3 for $35,000. Such a criticism could not be leveled at Tesla's now-closed store in Washington, DC, located in the city's newest and poshest downtown retail location; perhaps this store was one that suffered from "low apparent demand generation".

"As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3 per cent on average worldwide", a company's statement said.

Tesla on Sunday pulled a U-turn on its plan to close all its retail stores. After March 18 some prices will get bumped up. "Unfortunately, there's no way around it", said Tesla CEO Elon Musk in a conference call. The company will continue to offer the auto at that price point and will increase the cost of other variants of the sedan.

A copy of Tesla's blog post explaining the new store and pricing update has been provided below. These are stores that we would have closed anyway, even if in-store sales made up our entire sales model.

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The reversal shows that Tesla had second thoughts about shuttering the stores and whether buyers would make such a large purchase without a test drive.

The carmaker had claimed complete transition to online sales would allow it to slash prices by 6 percent, and that is how the company would sustain sale of the $35,000 Model 3.

In a blog post late Sunday, Elon Musk's electric-car outfit said it had made a decision to keep "significantly more" stores open than planned, and will even reopen "a few stores in high visibility locations that were closed due to low throughput...but with a smaller Tesla crew".

The blog post doesn't give a rationale for why Tesla is backpedaling.

And despite test drives being one of the biggest draw cards of the stores, the company is confident that its "1000 miles or 7 days" return policy will negate customers' need to try a very expensive vehicle before they actually buy one. 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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