Tesla is finally following through on its pledge to sell its Model 3 electric cars at the standard price of $35,000, but says it’s shutting down on-the-spot showroom sales to remain “financially sustainable” at the lower price point. Going forward, worldwide sales will shift to online only, the company says.
Many of Tesla’s stores will be shut down over the next few months, the company said on its website. A small number of stores in high-traffic locations will remain open as galleries, showcases and information centers, but would-be buyers will have to go online to close the deal.
Tesla touted the ease of online sales:
“You can now buy a Tesla in North America via your phone in about 1 minute, and that capability will soon be extended worldwide. We are also making it much easier to try out and return a Tesla, so that a test drive prior to purchase isn’t needed. You can now return a car within 7 days or 1,000 miles for a full refund. Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free.”
In a conference call with reporters, Tesla CEO Elon Musk said reducing overhead would boost the company’s long-term financial stability. “Ultimately this will be a very strong competitive strength for Tesla,” he said.
The announcement came after Musk built up the mystery surrounding today’s 2 p.m. PT announcement. Some speculated that Tesla would lift the curtain on its Model Y crossover SUV, or provide a surprise sneak peek at the all-electric pickup truck that Musk said would be “something quite unique.”
Instead, the announcement made good on Musk’s years-old promise that the Model 3 would be offered at the “affordable” base price of $35,000. Up to this point, Tesla had been selling only versions with longer range, steeper price tags and bigger profit margins.
The standard Model 3 will have 220 miles of range, a top speed of 130 mph and the ability to go from zero to 60 mph in 5.6 seconds. There’ll also be a Model 3 Standard Range Plus that offers a 240-mile range, 140 mph top speed and zero-to-60 mph acceleration in 5.3 seconds, with a price tag of $37,000 before incentives.
Tesla said the shift to online-only sales, plus “other ongoing cost efficiencies,” will open the way for reducing vehicle prices by an average of about 6 percent, “allowing us to achieve the $35,000 Model 3 price point earlier than we expected.”
Hitting the $35,000 price point should boost Tesla’s sales, but the move could also raise questions about the company’s profit margin. Musk acknowledged that Tesla is likely to report a loss for the first quarter of 2019, after turning a profit in the third and fourth quarters of 2018.
“Given that there is a lot happening in Q1, and we are taking a lot of one-time charges — there are a lot of challenges getting cars to China and Europe — we do not expect to be profitable.” Musk said. “We do think that profitability in Q2 is likely.”
Tesla has also had to deal with a controversy sparked by Musk’s tweets about Model 3 production rates, which sparked renewed legal action from the Securities and Exchange Commission.
Due to this week’s rush of developments, Tesla’s share price has taken a series of twists and turns — including an after-hours dip that came in the wake of today’s announcement.