Tesla will raise prices and backtrack on closing most of its stores

Tesla Inc. said it plans to raise average vehicle prices by about 3 percent globally after reversing a decision to shut down most of its stores.

The move comes days after Tesla’s announcement that it will sell cars online only to help save costs. In a turnabout from the store-closing decision that caught staff and investors off guard, the company has since decided to keep “significantly” more locations open, according to a blog post.

The abrupt decision by Chief Executive Officer Elon Musk to wind down stores after years of expanding Tesla’s network of retail spaces sparked concern about the company’s finances. Musk described the winding down of many stores as a cost-cutting move that would enable Tesla to offer a long-promised $35,000 version of the Model 3 sedan, the automaker’s first mass-market vehicle.

Barclays analyst Brian Johnson cut his price target to $192 from $210 on March 5 as a result of concerns over Tesla’s ability to sell electric cars at high volumes with strong margins, in part helped by a unique retail experience. Tesla stores are usually found close to city centers in popular locations, rather than alongside out-of-town dealerships.

Potential Tesla car buyers will have a week to place orders before prices rise for the Model S and X, the company said Monday. There won’t be a price increase to the $35,000 version of the Model 3, though costlier variants will be made more expensive.

Until recently, Tesla’s store strategy seemed to be one of expansion. The Palo Alto, California-based company opened 27 new retail and service centers last quarter, boosting its total to 378 locations worldwide, according to its latest letter to shareholders. It was the most openings for a quarter since mid-2017.

Tesla also suggested a brick-and-mortar retail strategy was important in its annual report filed Feb. 19, just nine days before Musk announced the pivot to online sales.

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