Tesla backflips on retail outlet closures, pushing up prices on EVs

Tesla has backflipped on plans to move all sales of its electric vehicles online, announcing that it has decided to keep “significantly more” retail outlets open, and pay for this by raising its car prices by around 3 per cent worldwide.

The about-face comes just eight days after the US EV maker announced plans to shut down most of its showrooms, in a move it said was necessary in order to achieve lower prices and reach a wider market.

In a statement on its website late on Sunday (US time), Tesla said that after close evaluation of “every single Tesla retail location,” it has decided to keep significantly more open than previously announced.

This included some that had been closed already “due to low throughput,” which Tesla said would now be reopened, but with a smaller crew.

“In addition, there are another 20 per cent 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,” the statement said.

Tesla doesn’t exactly explain why it has had this change of heart – although there is some speculation, based on a Wall Street Journal report, that it is largely because the EV maker could not get out of some of its retail leases.

This might be cold comfort for the company’s remaining retail staff, particularly after the unceremonious laying off 7 per cent of its full time staff and all non-critical contractors and temp staff.

It’s not a particularly comforting for investors, either, as Bloomberg has reported.

“The seemingly spontaneous yet dramatically altering strategic decisions doesn’t lend a lot of confidence,” Joe Spak, an analyst at RBC Capital Markets, wrote Monday in a note.

“It makes it seem like Tesla is making decisions on the fly and reacting to very short-term factors.”

Still, Tesla shares were largely unaffected, with the stock gaining 3 per cent on Monday to $US290 a share, maintaining its market value at more than $US50 billion, much to the chagrin of the army of “short-sellers” who are betting on the company failing.

Some analysts expect it to go much higher. Jed Dorsheimer, of Canaccord Genuity, has a $US450 a share target.

“While the reversal to keep stores open does call into question the soundness of the initial decision, we view this as the right course of action and think that test drives are still an important part of the sales process until the electric vehicle penetration rates increase meaningfully,” he told Bloomberg.

The good news for customers is that the price rises will not apply to the base $US35,000 Model 3, but only to the more expensive variants of Model 3, as well as Model S and X. And for those more expensive cars, customers have a week’s grace to place an order before prices rise, on March 18.

In its statement on Sunday, Tesla also tried to assert that the plan to conduct all sales online remained in place.

“Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes,” the statement said.

“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.”