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Tesla to Raise Prices and Reduce Store Closures in Latest Strategy Switch

Tesla has done a partial U-turn on a retail-strategy shift—unveiled less than two weeks ago—that was to involve the closure of most of its stores, in a bid to go “online only.”

In a blog post late Sunday, Elon Musk’s electric-car outfit said it had decided to keep “significantly more” stores open than planned, and will even reopen “a few stores in high visibility locations that were closed due to low throughput…but with a smaller Tesla crew.” Overall, it will only be shuttering half as many stores as it was going to.

The closure of all but a few Tesla showrooms was supposed to be a cost-cutting measure, largely to allow the company to achieve its long-promised pricing of $35,000 for the base-specification Model 3.

So, to keep more stores open, Tesla will be raising its prices by an average 3%—though not the price of the cheapest Model 3.

“In other words, we will only close about half as many stores, but the cost savings are therefore only about half,” the post read.

Tesla’s strategic swerving may have something to do with the fact that it has $1.2 billion worth of lease obligations on which it needs to make good over the coming four years, no matter how many stores it might want to close at will.

So what about that “online only” shift?

“To be clear,” Tesla’s post read, employing a phrase that usually denotes anything but clarity, “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.”

In other words, Tesla is keeping more stores open with fewer employees, and hoping customers will do the work that the extra sales staff would previously have done.

Tesla’s share price rose almost 3% in early German trading, following the publication of the blog post.