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Tesla’s stock hurt by Model 3 pricing and store closure revelations

Tesla Inc.’s (TSLA) shares were down over 5% in morning hours on Friday, a day after the company announced its new Model 3 pricing and store closures.

Late on Thursday, Tesla said in a blog post that its standard Model 3 is now available for $35,000. The company also introduced the Model 3 Standard Range Plus, which offers more miles and speed with premium interior features, at $37,000 excluding incentives.

Tesla's stock hurt by Model 3 pricing and store closures
Image Courtesy: Tesla

However, in order to offer these prices and sustain itself financially, Tesla has decided to move its entire global sales to online only. This move, along with other cost efficiencies, will help the company lower all its vehicle prices by around 6% on average. It will also help the company get to the $35,000 Model 3 price point earlier than expected.

Tesla will close several of its stores over the coming months, while retaining a few in high-traffic locations in the form of showcases, galleries, and information centers. The company said it will invest more in the Tesla service system with the aim of providing same-day services, and guaranteed service availability in all the regions and countries it operates.

Based on a report by CNBC, Tesla said some jobs would be impacted or transferred as part of this decision. CEO Elon Musk also hinted that the company might not achieve a profit in the first quarter of 2019 but anticipates a return to profitability in the second quarter. Wall Street appears to be skeptic of the Model 3 pricing move on grounds that it could hurt margins.

Last month, Tesla announced that it was acquiring battery manufacturer Maxwell Technologies for about $218 million. The deal is expected to close by the second quarter of 2019 or shortly thereafter.

Tesla’s shares have fallen 3.8% so far this year.

 

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