Tesla Inc is to only sell its electric cars online as it accelerates its cost cutting so it can realize its long-running goal of selling a mass-market sedan for US$35,000.
The change announced on Thursday would allow the Silicon Valley automaker to begin selling its Model 3 for US$35,000 — a price point that Tesla CEO Elon Musk has been striving to reach in order to appeal to more consumers and generate the sales the company needs to survive.
The cheapest Model 3 that could be ordered before Thursday started at US$42,900.
Photo: AP
To save money, Tesla is to close many of its stores, but leave some open as galleries or “information centers” in high-traffic areas.
The company has 378 stores and service locations worldwide.
“This is the only way to achieve the savings for this car and be financially sustainable,” Musk told reporters in a conference call. “It is excruciatingly difficult to make this car for US$35,000 and be financially sustainable.”
The online sales shift would enable Tesla to lower all vehicle prices by 6 percent on average, including its higher-end Model S and Model X.
Although going online-only was a difficult decision, Musk said that he believes it is the right one.
“It’s 2019,” he said. “People want to buy things online.”
Although he said that he did not know for certain, Musk predicted there is enough pent-up demand to sell about 500,000 Model 3s annually at the starting price of US$35,000.
However, buyers would have to wait far longer than they do when shopping on Amazon.com Inc.
A US consumer who places an order for the Model 3 at its new lower price would likely get it by the end of June before a tax credit for electric vehicles is scheduled to be reduced, Musk said.
The store closures would come on top of a decision to cut 3,150 jobs, or about 7 percent of Tesla’s workforce, announced earlier this year.
Despite the austerity measures, Musk told reporters that Tesla would lose money in the current quarter ending this month, backpedaling a statement he made in October last year, when he pledged the company would remain profitable from that point on.
However, Musk said that it was “likely” Tesla would bounce back with a profit in the April-to-June period.
Tesla’s stock fell 3 percent in extended trading after the news came out.
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