Tesla Abandons Last Week's Decision to Close Stores, Will Increase Prices Instead

The overall cost of a vehicle across Tesla's lineup could increase by as much as $3,570 by March 18.

S3studio—Getty Images

Tesla has walked back its decision to close its retail stores and galleries, a move which the company said would enable it to decrease vehicle pricing by 6 percent. As a result, Tesla has announced that it will once again adjust its pricing to reflect the additional costs of running retail operations.

Tesla says that since its announcement two weeks ago, it has closed 10 percent of its sales locations, specifically targeting locations that didn't invite "natural foot traffic," some of which were destined for closure even if a company-wide restructuring wasn't ordered. The automaker will continue to evaluate another 20 percent of its locations for effectiveness and will close the ones it deems necessary.

In total, this means Tesla will take back its original decision to close the majority of its retail stores and instead close between 10 and 30 percent of its current portfolio. The six percent price reduction in vehicle cost was intended to be made up by closing its stores and, however, it appears to no longer be sustainable.

To keep the lights on, Tesla notes that it will need to raise prices on all Models, with the exception of the low-margin Model 3's $35,000 Standard Range variant. All other cars across the automaker's order books are slated to go up in price beginning March 18 by 3 percent. 

  • Model 3: Cost increase of $1,110-$1,740
  • Model S: Cost increase of $2,370-$3,420
  • Model X: Cost increase of $2,640-$3,570

It's not clear if Tesla will increase just the base price of the vehicles, or if certain options will be subject to the price hike as well.

Tesla recently adjusted its Autopilot menu, decreasing the pricing for new owners by killing off its "Enhanced Autopilot" branding and dropping the cost for its Advanced Driver Assistance System to $3,000. Autopilot now includes basic driver aides like lane-keeping assist and adaptive cruise control, moving many of the vehicle's key technological advances to "Full Self-Driving," an option which costs an additional $5,000 on top of the cost of Autopilot.

Existing owners complained of recent, lower pricing, claiming that software now costs less to new owners than the price they paid. Tesla announced that it would be including a retrofitting model in the software licensing, granting some existing owners with an upgrade to Autopilot of Full Self-Driving. Again, some owners were upset that their vehicles would not be upgraded, sparking further complaints and more price reductions for the software.

Tesla clarifies that all sales will still be done online. Customers who visit a store will be guided through the ordering process on their own mobile devices. Retail stores will also carry a small number of inventory for buyers looking to drive away that day. As per the norm, drivers will be able to schedule test drives at the retail location.