Tesla to raise prices after rowing back on store closures

In another sudden reversal, Tesla is increasing the price of most of its electric cars after deciding to scale back its store closure programme, which is therefore now expected to yield fewer savings.

Ten days before, the carmaker said it would close its retail stores, and transition to online-only sales, in order to bring down the price of its cars by roughly 6%.

And ten days before that, in a 10-K filing, the manufacturer had said it was planning new openings.

But in another change of heart, on Monday the company announced that instead of closing all its retail outlets it would raise the price of all Tesla models, save for that on the Model 3, by 3%.

Its intention now was to close "about half as many" stores as it had initially planned, although it stuck to its earlier decision that all sales would now need to be done online, even at its stores, where salespeople will show customers how to order cars on their phones.

"Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months," the company said in a blogpost.

Analysts at RBC Capital Markets said: “We were critical of the decision to shutter retail locations believing it created a situation where consumers had to make a big purchase decision without the ability to test-drive or experience the vehicle. While that may work for a Tesla enthusiast, we wondered if it could draw in the mass market.

“Now, to backtrack from the online only strategy to us is a sign that may indicate Tesla did not see a positive reaction to orders post the announcement”, they added.

The Canadian broker also pointed to reports that Tesla had found it difficult to get out of all its retail leases as a possible explanation for management's latest 'about face'.

“[...] we have to wonder how engaged and motivated Tesla retail employees will be in the short run after being blind-sighted by the move and even now still potentially being held in limbo

"The seemingly spontaneous yet dramatically altering strategic decisions (for a ~$50bn market cap company) doesn’t lend a lot of confidence, in our view. Rather, it makes it seem like Tesla is making decisions on the fly and reacting to very short-term factors.”