Tesla Says Never Mind: It Raises Prices and Keeps Most Stores


Just days after saying that it would close most of its stores, Tesla is making an abrupt U-turn.

In a message posted on its blog just before midnight Sunday, the electric-car maker said it had decided to retain many of the locations it had shut down or was planning to close. And it said it would raise most of its vehicle prices about 3 percent worldwide, just weeks after cutting prices.

“Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months,” the company said in the blog post. The price increases, it said, are necessary to make up for the loss of savings that was anticipated from the store closings.

The flip-flops are the latest sign of turmoil surrounding the company and its chief executive, Elon Musk.

“This reversal is bizarre and indicates a lack of actual planning in the earlier announcement,” said Mike Ramsey, a Gartner analyst. “Their retail stores still serve a real need.”

Until last month, Tesla had been rushing to expand its network of showrooms and mall galleries, which display its cars but take no customer orders.

On Feb. 28, Mr. Musk told reporters in a conference call that Tesla would start offering a long-awaited version of its Model 3 sedan with a starting price of $35,000. Previously, the least expensive Model 3 cost $43,000 before tax incentives.

Mr. Musk said closing its stores would allow Tesla to cut costs enough to make the Model 3 profitable at the lower price. But he would not elaborate on those calculations, and he said Tesla would lose money in the first quarter, contrary to previous forecasts.

As part of the cost cutting, he said, Tesla would henceforth take orders only online. Tesla affirmed the online approach in its announcement Sunday night, saying its stores would serve as a way to introduce potential buyers to Tesla vehicles, provide a test drive on request — another reversal from its earlier announcement — and show how to make a purchase.

“Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately,” it added.

In a recent email to employees, Mr. Musk said 78 percent of Model 3 orders were already placed online. Buyers can get full refunds if they return cars within seven days and have driven them less than 1,000 miles.

Tesla has been in retreat in recent months, scrambling to shore up flagging investor confidence. Along with layoffs of 7 percent of its work force in January, the news of store closings appeared to underline the challenges for a newcomer breaking into an old-line manufacturing industry. The company has struggled to make a few thousand cars in a week — a feat that established automakers can do in a day.

Asked to elaborate on the company’s latest moves, a Tesla spokesman declined to comment.

The weeks of tension have taken a toll on Tesla shares. On Monday they rose 2.4 percent, closing at $290.92, but they are down 9 percent since Mr. Musk said the company would be unprofitable in the first quarter.

The twists on the marketing front have coincided with renewed upheaval surrounding Mr. Musk himself.

Less than a month ago, Tesla’s general counsel quit a day after Mr. Musk said on Twitter that the company expected to sell 500,000 cars this year, an increase of 100,000 from the estimate it made public in January.

The Securities and Exchange Commission contended that the tweet violated an agreement it had reached with Tesla in September to settle a securities-fraud case, and it asked a federal court to hold Mr. Musk in contempt. Under the settlement, the company was to “put in place additional controls and procedures” to oversee Mr. Musk’s communications.

In a response filed with the court on Monday, Mr. Musk’s lawyers argued that there were no grounds for a contempt citation. They said that the Tesla chief “correctly used his discretion” to determine that nothing in his Twitter post was material and that “under no fair reading of the materiality standard” did the post alter the information available to investors.

The response also said that a contempt citation “would raise serious First Amendment issues” and that the S.E.C.’s request represented “unprecedented overreach.”

Even with its financial and regulatory challenges, the company is moving ahead on new initiatives.

On Thursday, Mr. Musk is scheduled to unveil the Model Y, a sport utility vehicle that Tesla is counting on to fuel further growth. David Whiston, a Morningstar analyst, said the big question for Tesla’s business prospects was when the Model Y would be available for sale. “Thursday is just for show,” he said.

And in a move meant to address its logistical challenges in delivering cars to customers, Tesla said in a filing with the S.E.C. on Monday that it had purchased trucks and car-hauling trailers from a California company in exchange for stock worth $13.8 million. In November, Mr. Musk said on Twitter that Tesla had bought “some trucking companies,” but provided no details.

Mr. Musk has portrayed the Model 3 as a mass-market offering crucial to Tesla’s future. In the last three months of 2018, Tesla opened 27 sales and service locations to keep up with rising demand. Over all, the company had more than 100 stores and showrooms in the United States, and others overseas.

In its announcement Sunday night, Tesla said it had already closed 10 percent of its locations. Those stores did not have “natural foot traffic,” it said, though some will reopen with a smaller staff. The company said an additional 20 percent were under review for potential closing in the coming months.

The automaker also said the $35,000 version of the Model 3 would not be affected by the price increases. They will apply to the higher-end Model X and Model S — cars on which Tesla only recently had been dropping prices — as well as for more expensive versions of the Model 3.

The company said customers would have a week to place orders at current prices.

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