Tesla shifts to online-only sales to cut car prices

Tesla is closing all of its stores in a cost-cutting measure, so it can lower the starting price of its Model 3 to $35,000 (£26,400).

The electric car company announced the Model 3 car in 2016 as an alternative to its luxury offerings.

However, as recently as September, the average selling price exceeded $50,000.

Closing physical stores will allow the firm to cut costs by about 5%, savings it is using to reduce prices across its line-up of vehicles, chief executive Elon Musk said.

He declined to say how many stores would close, or how many people will lose their jobs as a result of the move but said making the change was necessary as Tesla works toward its bigger goal of making electric cars mainstream.

Musk said that a shift to selling online only was essential to make it financially viable to lower the current starting price of $42,900.

He said: “This is the only way to achieve the savings for this car and be financially sustainable. It is excruciatingly difficult to make this car for $35,000 and be financially sustainable.”

Tesla currently has 378 stores and service locations worldwide.

Musk has been striving to lower the price of Tesla’s Model 3 in order to appeal to more consumers and generate the sales the Silicon Valley company needs to survive.

Although he said going online only was a difficult decision, Musk said it was the right thing to that.

“It’s 2019,” he said. “People want to buy things online.”

The store closures will come on top of a decision to cut 3,150 jobs or about 7% of Tesla’s workforce, announced in January.

Despite the measures, Musk said Tesla will lose money in the current quarter ending in March, backpedalling from a statement he made last October when he pledged the company would remain profitable from that point on.

However, Musk said it’s likely Tesla will bounce back with a profit during the April-June period.

tesTesla’s share fell 3% in after-hours trading to $309.40.