Tesla to shutter most retail locations, slashes price on Model 3

Tesla slashes prices on Model 3

On Feb. 28, Tesla made the unexpected announcement that it will be shuttering most of its retail stores in the near future. Tesla CEO Elon Musk attributed the company’s pivot to e-commerce as a move to optimize profitability and avoid regional licensing issues. Musk also noted that a few of the carmaker’s busiest stores will remain open to serve as “galleries, showcases and Tesla information centers.”

Musk confirmed that as a result of the closures, the company will be letting some staff members go, but he did not get into specifics. He also revealed that the company will be opening more service centers to compensate for the increased number of Tesla automobiles on the road.

Musk also explained that he’ll be spearheading an effort to improve the company’s mobile repair division so that all Tesla owners can receive same-day, and even same-hour service via the Tesla branded mobile app.

The Tesla Model 3 is Now $35,000

In tandem with the announcement that it will be winding down its presence in the retail space, the company also revealed that it will be reducing the price of its most popular car. Now, consumers can purchase the Standard Edition of Tesla’s Model 3 for $35,000. To get a Tesla at that price point, consumers will need to purchase a Model 3 in black, with 18-inch wheels and sans the controversial Autopilot program.

The Standard Range Plus Model 3, which can go 20 miles further and 10 miles faster than the regular version, has had its price cut down to $37,000. Previously, the least expensive version of Tesla’s bestselling electric car was $43,000.

To placate consumers who may be wary about buying a car they cannot test drive, Tesla is offering an unusual money back guarantee. After getting their vehicle delivered, a process that Tesla estimates will take between two and four weeks, owners can then drive their cars for 7 days or 1,000 miles and still return it for a full refund.

While offering that kind of guarantee would be a risk for any carmaker, the fact that Tesla tops the Consumer Reports satisfaction survey suggests it is a calculated one.

A Rocky Future for Tesla?

Factoring in the move to online ordering and the closure of its retail stores, Elon Musk has a mixed outlook for 2019. Though the company sold more cars than Mercedes-Benz last year and enjoyed two profitable quarters, Musk is forecasting an unprofitable Q1 2019. But he also expects Tesla to sell around 600,000 cars this year and return to profitability in Q2.

However, the company’s continued success is far from assured. If the carmaker encounters the production problems that plagued them through 2018, its price cuts may end up backfiring with scores of new owners becoming increasingly irritated at car delivery delays. Moreover, while Tesla currently dominates the electric car market, it will be facing increased competition soon.

Both Nissan and Hyundai have announced plans to release new electric vehicles with a starting price of $35,000 this year. And because they have not been as successful at penetrating the EV market as Tesla, they will still be able to offer a $7,500 EV tax credit to consumers.

Even with Tesla’s reputation for satisfaction, that price gap will be a challenge to overcome. Plus, consumers will be able to test drive Nissan and Hyundai’s new offerings.

Although Tesla has undeniably revolutionized the automotive sector, the company may meet the same fate as many innovators; inevitably being beaten by a competitor with a cheaper and better mousetrap.