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Tesla’s U-turn: Car prices rising as half of stores to remain open

In an about-face, Tesla will be closing only half its stores, but it will be raising prices of its vehicles as it continues to try to cut costs.
The $35,000 price on the cheapest Model 3 — promised in 2016 but reached only a couple of weeks ago — will not change, the electric-vehicle maker said in a blog post Sunday.
“As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3 percent on average worldwide,” Tesla said. “In other words, we will only close about half as many stores, but the cost savings are therefore only about half.”
Potential Tesla buyers have a week to place their orders before prices go up March 18 on the more expensive models of the Model 3, plus the Model S and X.
Analyst Garrett Nelson of CFRA Research said Monday the price increases are probably “confusing to the marketplace.”
The Palo Alto-based company is making changes galore — including laying off 7 percent of its workforce — as it manufactures its Model 3 sedan, which is considered its first entry into the mass market. Its other vehicles, the Model S sedan and X crossover, are luxury vehicles with price tags to match. Including incentives and gas savings, the price of the Model S starts at $67,250, and the Model X at $76,450. Tesla also is scheduled to unveil a new vehicle, the Model Y, on Thursday in Los Angeles.
The automaker said it had been closely evaluating its stores since announcing in February that it would be closing them and switching to online-only sales.
In a memo to employees by Tesla Chief Executive Elon Musk, Tesla said some of the 10 percent of stores the company has closed so far did not pass the Sherlock Holmes test. “Meaning, most of these stores are in such difficult or obscure locations, only Sherlock Holmes could find them!” he said.
“We think it reflects pushback they were getting from property owners where the stores were located,” Nelson said, adding that the company may have found “it’s not that easy” to get out of lease agreements.
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Tesla will continue to review 20 percent of its stores to determine which ones to shutter and which ones to keep open. Sales transactions will continue to be done online only, and the stores will serve to showcase the vehicles for the company, which does not advertise. The stores will also offer test drives and a limited amount of vehicles for customers to drive away immediately.

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