Tesla holds off on small price rise citing increased sales – The Driven

03/20/19

Californian electric carmaker Tesla has said it will delay an increase in prices for its Model S, Model X and premium Model 3 vehicles that it was to implement on Monday night, USA time.

In what has seemed to some to be a yoyo of decisions by the EV maker of late, it was to add an approximate 3 per cent to the prices of most of its electric vehicle lineup on Monday night not long after it recently dropped prices for the Model S and Model X by up to 33 per cent.

But instead of adding the price rise, the carmaker has now said that it will wait another two days, because sales volume was so high it was not able to process all the orders in time for the cut off.

Here’s how it happened:

Tesla’s CEO and founder Elon Musk has been promising for ages to bring out a Model 3 electric sedan at a price that would see it affordable for a much wider market, at $US35,000 ($A49,400 at today’s rates).

To bring this much anticipated vehicle to market, the carmaker had to reduce costs in a variety of ways, including cutting 7 per cent of its staff, and removing its referral program, and in “hundreds of small ways”, as Musk said at the Q4 2018 earnings call earlier this year.

On March 1, 2018, the carmaker finally came good on its promise: introducing not only the $US35,000 Standard Range Model 3, but also a $U37,000 ($A52,200 at today’s rates) Standard Range Model 3 Plus.

It’s final move was to announce it would close the majority of its stores, in an effort to direct sales online (with the promise of a 7 day return policy) – and promising this would enable it to drop prices for its other models.

This it did, following just three days later with substantial drops in price for its Model S sedan and Model X SUV offerings (including a new standard range for the Model S).

However following backlash in some quarters, Telsa then said it would not close most of its stores, but that to do this it would have to raise prices again.

The full explanation goes like this:

Last month, we announced that we would be winding down many of our stores and moving to online-only sales in order to pass the savings along to our customers.

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. 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. 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.

As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide. In other words, we will only close about half as many stores, but the cost savings are therefore only about half.

Potential Tesla owners will have a week to place their order before prices rise, so current prices are valid until March 18th. There will be no price increase to the $35,000 Model 3. The price increases will only apply to the more expensive variants of Model 3, as well as Model S and X.

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. And the generous return policy of 1000 miles or 7 days, whichever comes first, should alleviate the need for most test drives. However, cars will still be available for test drives at stores at the potential Tesla owner’s request. Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately.

Not surprising that this is hard to keep up with! Here is Tesla’s post from only a week ago:

To be clear, the prices will now increase on Wednesday night, at midnight (we are checking with Tesla whether Australians need to convert this time or it is actually midnight tonight here also).

While it may come across as confusing, if anything it shows a carmaker that is working towards – and achieving – the goals of delivering to its customers, all the while listening to feedback and disrupting the wider auto industry.

“Getting those costs down is what allows us to lower price and be financially sustainable and achieve our missions of environmental sustainability,” Musk said at the Q4 2018 earnings call.