American electric car manufacturer Tesla is to shutter retail stores in an attempt to sell its new Model 3 at the promised $35,000 (£26,450) price.
Moving to an online only sales model was estimated by the company to save 5% of its overhead costs. In a media briefing chief executive officer Elon Musk refused to confirm the number of stores that would close or their locations.
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Musk also predicted demand to sell about 500,000 Model 3 vehicles annually at the starting price of $35,000. As recently as September, the average selling price of a Model 3 exceeded $50,000.
Scott Gairns, Sophus3 managing director, said: “Tesla’s announcement that they are closing most of their retail outlets will force the whole industry to accelerate the move to online car sales and is yet another example of where the industry is following behind other sectors such as finance, retail and electronics.
“With a target of a 900% increase in EV sales over the coming 3 years across the industry, most other car brands will have to follow Tesla to remain competitive.”
The store closures will come on top of a decision to cut 3,150 jobs, or about 7% of Tesla’s workforce, announced in January. Sophus3 estimates that EV sales are currently costing five times more to generate online for OEMs than conventional engine cars.
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By GlobalDataIn the call to reporters, Musk stated that making these final price cuts has been “excruciating,” and there will be no future price reductions to the Model 3. He also declined to answer a question about the base model’s profitability.
Tesla has been locked into longstanding disputes in the US, challenging individual state laws requiring vehicles to be sold by an independent dealership.
Last October Tesla stated it saw wider mass-market opportunities for its Model 3, based on customers’ willingness to trade in more downmarket vehicles when reserving the sedan.
The company said in its quarterly statement that “more than half” of the cars traded in by customers who reserved a Model 3 had a retail value below $35,000 when new, signalling an appetite for pricier vehicle segments on part of prospective Tesla drivers.
