Tesla raises prices by 3 percent, reopens some stores, might close others

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Written by Chris Duckett, Contributor

Tesla has partially reversed course on its series of store closures flagged at the start of the month, but it will come at a cost to consumers.

The only specific contained in Tesla's latest missive is a 3 percent increase to the price of Model S and X vehicles, and "more expensive variants" of its Model 3.

The price of the recently launched $35,000 Model 3 will stay as is.

At the start of March, Tesla said it would be closing almost all of its showrooms, and shifting sales to online only. The company also introduced a new returns policy that would give new owners a seven-day or 1,000-mile window to return a car.

However, Tesla has now begun to back away from the full implementation of its scheme, with "significantly more stores" to remain open.

Also: Build less, license more: Tesla needs to be an ARM, not a half-baked Apple

"When we recently closed 10 percent 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," the company said.

"A few stores in high-visibility locations that were closed due to low throughput will be reopened, but with a smaller Tesla crew."

Tesla said it will look at a further 20 percent of its stores over the coming month to determine whether they will remain.

"Some will be closed and some will remain open," it said.

The car maker said that in the end, around half of its stores will close, with the 3 percent price increase needed to cover the costs of the remaining stores' footprint. The increase will take effect on March 18.

Online will remain as the company's sole sales channel, but stores will still have vehicles available for test driving.

"Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately," the company said.

Tesla CEO Elon Musk previously said the use of online sales would see job losses in the marketing and sales divisions.

The company has been lowering the price of its vehicles in its advertising though the use of deducting fuel savings from the overall price. The practice has drawn criticism in Germany, with the nation's Wettbewerbszentrale, or The Centre for Protection against Unfair Competition, last week hitting out against the automotive company.

The Wettbewerbszentrale, which is able to initiate legal action, said Tesla needed to change its pricing because its estimates were not precise enough to be used in ads.

In October last year, a settlement between the US Securities and Exchange Commission (SEC), Telsa, and Musk was approved. The dispute arose after Musk tweeted that he was taking the company private at a price of $420 a share, which the SEC considered false and misleading, and looked to sue Musk for securities fraud.

Under the settlement, Musk had to pay $20 million, and Tesla handed over another $20 million. Musk was able to stay on as CEO, but could not be chair of the company for three years.

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