Tesla drops Model 3 prices and moves to an online sales model

4 March 2019

Tesla CEO Elon Musk has announced it is to cut the price of its Model 3 electric vehicle (EV), although to do so it will move to a primarily online dealership model.

The vehicle price has dropped by $9,000 (€7,936) to align with Musk’s vision of affordable EVs, the lowest priced model now costing $35,000 (€30,867). To achieve this price cut while not deeply affecting the company’s already precarious finances, Tesla will move to an online dealership model. This means closing physical locations, which limits opportunities for customer test drives.

′It’s 2019, people just want to buy things online,’ Musk is quoted as saying at the announcement of the new online model. He also suggested that the move would give the company a ′fundamental long-term competitive advantage’ over other carmakers.

On a call with journalists to discuss the lower-priced Model 3, Musk said that Tesla does not ′expect to be profitable’ in the first quarter of 2019 due to ′a lot of one-time charges’, as well as the delays to deliveries caused by shipping its first Model 3s to Europe and China.

Pushing down prices of its cars has been seen as essential in order to reach the level of sales that Musk has targeted over the years. However, the price cut has caused the company’s share price to fall 4%. The carmaker risks the ire of customers who have already invested in the Model 3, while the move to an online sales platform will see the business cut a number of jobs and make its vehicles less accessible to those who find online ordering difficult and/or want to see a physical example of the car before deciding on a purchase.

′Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6% on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected,’ Tesla said in a statement. ′Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centres.’

Tesla has said that buyers can return their vehicles if they are not satisfied, as long as this is within seven days or up to 1,000 miles driven – a move designed to pacify those who would prefer a test drive before making a large purchase.

The new $35,000 Model 3 will have a range of 220 miles, compared with the 260 miles of the previous cheapest version. The company has also announced a version with a 240-mile range for $37,000 (€32,625).

In a series of tweets, Musk’s preferred announcement platform, the CEO suggested that the carmaker will launch its Model Y SUV later this month. This would give the business an opening into a growing global market. Musk suggested that the Model Y would cost around 10% more than the Model 3, although further details will be made available at launch.