The new $35,000 Model 3 will have a range of 220 miles, which is 40 miles fewer than the previous cheapest option. However, the series will also include a 240-mile range model selling at around $37,000.
Cutting costs by moving to an all online sales model
As part of this vast price-cutting exercise, Tesla announced that it was going to move the sale of its vehicles to an almost exclusively online sales practice. “It’s 2019, people just want to buy things online,” Musk delivered. He then went on to claim that it would give them a long-term advantage over other manufacturers. Obviously, online sales would inhibit customers from traditional viewings and test-drives, so to compensate for that, every buyer will have an option to return their new purchase within 7 days or after they’ve driven it up to 1,000 miles. If they choose to do so, they’ll be entitled to a full refund.
By moving all of their car sales online, the impact on the cost of each vehicle would be around 6%. This would apply to all ranges of Tesla car, the Model 3 being the lowest price-point.
Not all of Tesla’s outlets are to be closed and replaced by their brave new online venture; they plan to keep a small selection of stores open as ‘showcase galleries’ and information centres for their customers. However many of their centres they plan to keep is open to speculation, as is how many employees stand to lose their jobs when they start to make these radical changes in cutting back costs.
Can price cuts achieve Tesla’s hopeful sales targets?
Musk had previously predicted sales figures of the Tesla range to hit 1m vehicles a year, and with these new announcements, he has a feeling that demand will probably be around 500k units a year for the Model 3 alone.
Adversely, but not unexpectedly, there has been quite an impact on Tesla stock since its announcement to cut the price of its vehicles. Having Musk outline his expectations of little or no profit in the first quarter of 2019, the market has shown its nervousness already, outlined by a fall of 4% from the Tesla share price.
Undoubtedly, Tesla has made a significant impact on the automotive industry with its all-electric vehicles that offer quite incredible performance levels. If driving down the sales price for its cars is the way to boost figures for Tesla, only time will tell.
