February 28, 2019 / 9:58 PM / 5 months ago

CORRECTED-UPDATE 4-Tesla to close many stores as $35,000 Model 3 goes on sale

(Corrects timing in paragraph 2 to nearly three years, not nearly two years)

By Alexandria Sage

SAN FRANCISCO, Feb 28 (Reuters) - Tesla Inc said on Thursday it would offer a $35,000 version of its Model 3 sedan with a delivery time of two to four weeks, while closing many of its retail stores worldwide.

The announcement comes nearly three years after Chief Executive Elon Musk promised the car at that price to appeal to the mass market. Tesla said its sales would now be online-only around the world and it would close many stores.

“Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6 percent on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected,” Tesla said in a blog on its website.

This is the third time this year that Tesla has lowered the price on the Model 3, which recently started at $42,900. A U.S. federal tax credit began phasing out for Tesla in January, effectively raising the price of cars by $3,750.

The new $35,000 version has a top speed of 130 miles per hour (209 km per hour) and can go from zero to 60 mph in 5.6 seconds, Tesla said. For $2,000 more, Tesla offers a version with 240 miles (386 km) of range and a top speed of 140 mph.

A $35,000 Model 3 is a major shot in the arm for Tesla during a period of major challenges for the Silicon Valley company and could put to rest concerns among some analysts that demand for Tesla’s vehicles might be constrained in 2019. Besides the Model 3, Tesla is developing a new Model Y SUV for 2020 production, while beginning to build a factory in Shanghai.

Tesla stunned the automotive world after its reservations list for the promised $35,000 Model 3 ballooned to over half a million orders in 2017. Tesla no longer discloses the number of reservations, but many analysts believe those on the list are still waiting for this cheaper version.

The news comes three days after renewed tensions between Musk and U.S. Securities and Exchange Commission. The agency petitioned a judge this week to have Tesla’s CEO found in contempt of an October settlement between the parties. The SEC accuses Musk of having made material statements about production levels on Twitter without first having them vetted internally.

That settlement between Musk, Tesla and the SEC concerned Musk’s August Twitter post in which he claimed to have “funding secured” to take Tesla private at $420 per share. As part of the settlement, Musk stepped down from his chairmanship role and he and Tesla agreed to pay $20 million each in fines. On Friday, Tesla is due to repay a $920 million convertible bond. Convertible issues give bondholders the right to trade their debt for equity after shares rise over a certain price. Tesla shares are currently about $40 below the $359.87 conversion price.

Tesla had $3.7 billion in cash and cash equivalents at the end of December.

Reporting by Alexandria Sage; Additional reporting by Vibhuti Sharma in Bengaluru; Editing by Lisa Shumaker

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