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Tesla makes a swift U-turn: Stores are here to stay after all

Tesla surprised the world last month when it announced it would be shutting down all of its stores to opt for an online sales model - a first for car firms.

10-30% of stores will be shut down Prices of all models, save for the Model 3, will see a 3% price increase All sales and transactions will still be done online

Following last month’s announcement that Tesla was to shut down all of its stores to move to an online-only retail experience, it has now changed gears and direction, going back on its decision – for the most part.

Tesla hits the brakes 

According to the company’s official blog, they will now only shut down 10-30% of their stores, to facilitate a proposed price cut to their Tesla Models.

“When we recently closed 10% of sales locations, we selected stores that didn’t invite the natural foot traffic our stores have always been designed for,” the blog post said. “These are stores that we would have closed anyway, even if in-store sales made up our entire sales model. A few stores in high visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew. In addition, there are another 20% of locations that are under review, and depending on their effectiveness over the next few months, some will be closed and some will remain open.”

To offer this compromise, Tesla will have to “raise vehicle prices by about 3% on average worldwide.” Basically, the company will only close about half as many stores, but “the cost savings are therefore only about half.”

One of Tesla’s original goals had been to drop the price of its base Model 3 to $35,000, heralding a more affordable wave of state-of-the-art electric vehicles (EVs). Therefore, as for the Model 3 series is concerned, the 3% price increase will not affect the base model, but its higher-end counterparts. The Model S and X will also receive the bump in price.

A further compromise concerns Tesla’s decision to stick to its hybridized online sales model. Despite owning showrooms where customers browse vehicles, the ultimate purchase and transaction is conducted online. Current prices will remain in place until March 18th.

“To be clear, all sales worldwide will still be done online, in that potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes,” the post said.

Last-minute save

In retrospect, it makes sense for Tesla to change its mind now. There was a lukewarm response to the store closure announcement in the first place, with everyone from investors to experts and analysts decrying the move. Their stock value took a beating as well, plummeting 7.93% between February 28th and March 1st, from $319.88 to $249.50, directly in wake of the announcement.

To mitigate going purely online, Tesla had stated that it was offering a 7 day or 1,000-mile test drive window for a full refund. As AMEinfo and many other publications noted at the time, asking customers to be willing to go through the refund process just to attempt a test drive is quite too much.

“The 7-day return policy is nice, but nobody wants to arrange a $100,000 loan just to test drive a [Tesla] P100D,” news site Electrek quipped.

Now, the electric automaker will have to navigate the mess it has created for itself. Thankfully, the limited damage that was done by the controversial announcement could still be rectified.