March 11 (Reuters) – Electric carmaker Tesla Inc backed off its plan to shut all of its U.S. stores in a blog post and instead will raise prices of its high-end vehicles by about 3 per cent on average, as it strives for profitability.
The company said late Sunday that it would be closing only about half as many stores than originally planned in a widely criticized move earlier this month to reduce overhead and shift its entire distribution network online.
“Over the past two weeks we have been closely assessing each Tesla retail location, and we have opted to keep significantly more stores open than previously announced,” the electric carmaker said.
“As a result Tesla will need to raise vehicle prices by about 3% on average worldwide. ”
Separately, Chief Executive Officer Musk has until the end of the day on Monday to explain why he shouldn’t be held in contempt for recent tweets which U.S. securities authorities say violated a September fraud settlement.
The case is the most recent major challenge by authorities to Musk’s direction as Tesla attempts to make good on his promises to Wall Street that it will shortly by consistently profitable and will not need more capital.
The 3 percent increase on its own top-end cars are the first hike in costs following a series of cuts over the past year aimed at offsetting a decrease in green tax credits and the impact of rising tariffs overseas.
Tesla said the worldwide price increases would apply to the more expensive versions of the Model 3, Model S and Model X, and that there will be no price increase to the $35,000 Model 3.
“The three percent price increase announcement still signifies … strong demand,” said Ivan Feinseth, an analyst with Tigress Financial Partners.
The carmaker said potential buyers can place orders until March 18 at the old rates. Currently, the Model S and Model X versions are priced starting at $79,000 and $88,000 before savings, respectively.
Shares of the business, among Wall Street’s most volatile in recent months, were roughly flat in early trading on Monday.
Cost savings from store closing will be only about half the expected amount as the business will close only half the number of stores planned, it said. A few stores in high-visibility locations which were closed due to reduced throughput would be reopened with a smaller Tesla team and would take fewer cars in inventory.
Separately, Bloomberg reported Monday that Tesla is in discussions with Chinese battery manufacturer Contemporary Amperex Technology Co Ltd on a bargain for the creation of rechargeable batteries to the Model 3.
In January, sources told Reuters that Tesla had signed a preliminary agreement with China’s Tianjin Lishen to provide batteries for its new Shanghai automobile factory.
The talks come as Tesla appears to localize battery cell creation and push ahead with the 500,000-vehicle-capacity Shanghai plant, expected to be completed in May. (Reporting by Sonam Rai and Rishika Chatterjee in Bengaluru; Editing by Patrick Graham and Bernard Orr)
The article Tesla Backtracks on Store Closures, Plans Top-End Price Rise appeared first on Motortrend.
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