Tesla to close stores to reduce costs for $35,000 Model 3

FILE - In this Feb. 9, 2019, file photograph, buyers look over a Model 3 in a Tesla store in Cherry Creek Mall in Denver. Tesla is shifting all of its sales from stores to the internet, saying the move is needed to cut costs so it can sell the mass-market Model 3 for a starting price of $35,000. The Palo Alto, California, company announced the change Thursday, Feb. 28. (AP Photo/David Zalubowski, File)

SAN FRANCISCO (AP) — Tesla will only sell its electric cars online as it accelerates its cost cutting so it can realize its long-running goal of selling a mass-market sedan for $35,000.
The change announced Thursday will allow the Silicon Valley automaker to begin selling its Model 3 for $35,000 — a price point that Tesla CEO Elon Musk has been striving to reach in order to appeal to more consumers and generate the sales the company needs to survive.
The cheapest Model 3 that could be ordered before Thursday started at $42,900.
To save money, Tesla will close many of its stores, but leave some open as galleries or “information centers” in high-traffic areas. Musk declined to specify how many stores will be closed or how many employees will be laid off.
The company has 378 stores and service locations worldwide.
“This is the only way to achieve the savings for this car and be financially sustainable,” Musk told reporters during a conference call. “It is excruciatingly difficult to make this car for $35,000 and be financially sustainable.”
The online sales shift will enable Tesla to lower all vehicle prices by 6 percent, on average, including its higher-end Model S and Model X.
All other major automakers rely on vast dealer networks, but Musk co-founded Tesla in 2003 in an effort to shake up the industry, starting with a focus entirely on a fleet of cars powered by electricity instead of gasoline.
Although he said going online-only was a difficult decision, Musk believes it’s the right one.
“It’s 2019,” he said. “People want to buy things online.”
That is particularly true of younger, technologically fluent consumers who already are accustomed to buying almost everything at Amazon and having it delivered to them quickly, said Karl Brauer, executive publisher of Kelley Blue Book.