Tesla hits Model 3 price goal; announces plan to close all stores

Tesla, the Palo Alto headquartered electric vehicle manufacturer, has announced it is now able to meet its goal of selling the new Model 3 car for $35,000 - finally delivering on a price promise given to American consumers more than two years ago.

In making the announcement today though the company also stated that in order to sustain that price point it will need to shutter all of its physical locations – display rooms and sales rooms – and make all future sales online only. And that potentially exacerbates the already difficult purchase process for drivers throughout much of the US.

“We are incredibly excited to announce that the standard Model 3, with 220 miles of range, a top speed of 130 mph and 0-60 mph acceleration of 5.6 seconds is now available at $35,000!”, the company announced via a written release.

“Although lower in cost, it is built to achieve the same perfect 5-star safety rating as the longer-ranged version, which has the lowest probability of injury of any car ever tested by the U.S. Government.”

“To achieve these prices while remaining financially sustainable,” the statement continued, “Tesla is shifting sales worldwide to online only. You can now buy a Tesla in North America via your phone in about 1 minute, and that capability will soon be extended worldwide.”

Although this might seem like good news for California drivers, in many states the concern remains as to how they might legally purchase the vehicle. Oklahoma, for example is one of 16 states that do not allow car manufacturers to sell their products directly to customers. Rather, car sales must be made via a local dealership instead, a sales model Tesla rejects.

Traditional car dealers make very little money from selling new cars. “The vast majority of their income comes from service,” Bruce Becker, president of the Electric Vehicle Club of Connecticut told Yahoo Finance. Indeed in 2015 a National Automobile Dealers Association spokesperson told The New York Times that dealers make three times the profit from service as they do from selling new cars.

For an electric car though there is no engine to service. Nor a transmission. An electric car will never need spark plugs, tune-ups, oil changes or emission checks. It’s that potential loss of revenue that has traditional dealerships fighting an intense rearguard action. Thus far that fight has successfully limited Tesla’s sales opportunities to just half of America’s states.

Currently nine states limit Tesla to just one or two sales locations per state, and 16 states disallow direct sales altogether – particularly those states across the center of the country - Oklahoma, Kansas, Arkansas and Texas to name just four.

In Oklahoma a bill to overturn those rules, S.B.1560, was introduced in February 2018. The bill’s analysis suggested the change would deliver estimated tax revenue increases of $20million in Fiscal Year 2019 and $40million in Fiscal Year 2020, but as testament to the power of the dealership lobby the bill died in committee without ever making it to the Senate floor.

When asked how Midwestern drivers could thus legally directly purchase the new model, a company spokesperson declined to comment.

The standard Model 3 will have a range of 220 miles, a top speed of 130 mph and 0-60mph acceleration of 5.6 seconds and will cost $35,000.

The Model 3 Plus will offer a 240 mile range, a top speed of 140 mph, 0-60 mph acceleration of 5.3 seconds and will include premium interior features at a cost of $37,000.

Tesla's website suggests cars ordered today would be ready for delivery in two to four weeks. However, pre-existing orders will be given priority, which may delay other deliveries until May or June, the spokesperson confirmed. Some 400,000 orders have been placed since the model was first announced in early 2016.

To counter concerns raised by the disappearance of physical locations, Tesla also announced an enhanced returns policy. Customers will now be able to return a car within 7 days or 1,000 miles of delivery and still receive a full refund.

The shift to online sales and the shuttering of sales and display locations will inevitably result in job losses. Tesla cut 9% of its workforce in June, 2018 and announced another 7% cut just last month. The company declined to quantify how many jobs will be lost by this latest move.

Up 1% on the day, Tesla shares fell back 3% in after-hours trading.