The constant fire drill that is Tesla’s business model continued for yet another day as Elon Musk has now admitted that Tesla made a mistake in announcing it would slash the prices of some of its higher-end vehicles about two weeks ago. This comes days after the company reversed course on its decision to close most of its retail stores.
Unfazed by the fact that he’s currently legally feuding with the SEC for tweets regarding business operations at Tesla, Musk again took to the social media site on Tuesday to explain that Tesla “shouldn’t have offered” lower prices on Model S and Model X vehicles. Now, Tesla is doing a full “about face” and will reinstate its normal prices for its vehicles, with the exception of the base price Model 3, on Monday.
“In retrospect, lower price shouldn’t have been offered. Was done so because come simply couldn’t afford it. Prices revert to normal on Monday,” CEO Elon Musk said in a Tweet – flexing his outstanding planning skills and unmatched business prowess – likely in response to the public’s shift in perception to the company’s products as less than aspirational status symbols.
This abrupt pricing reversal follows reports out of China according to which outraged Tesla owners were protesting the lower prices. In addition, The Daily Mail reported that angry owners had reached out to the company after purchasing Autopilot software for $5000, soon before the prices were discounted.
On February 28, Tesla stated that Autopilot would now cost just $3000, a steep cut from what consumers had originally paid. According to Musk, the price of Autopilot will also “revert to normal” on Monday. Musk also said that Tesla was still closing some stores, despite whipsawing reports of closures, freezes, and stores remaining open, over the last two weeks.
The company said in a blog days ago: “As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide. In other words, we will only close about half as many stores, but the cost savings are therefore only about half.”
Potential Tesla owners will have a week to place their order before prices rise, so current prices are valid until March 18th. There will be no price increase to the $35,000 Model 3. The price increases will only apply to the more expensive variants of Model 3, as well as Model S and X.Just days earlier, we reported that the company had frozen its previously disclosed plan of closing all of its retail stores.Some retail stores that didn’t close were told to stop booking test drives last week. And yet, last week some of them were reportedly prompted to go back to “business as usual”, despite retail employees not having access to commission and bonuses, resulting in far lower compensation.
Tesla currently owes lease obligations of $1.6 billion, with $1.1 billion due between now and 2023 the Wall Street Journal reported last week. This includes payments for store leases, galleries and real estate abroad. Robert Taubman, chief executive officer of Taubman Centers Inc., is quoted as saying at the Citi 2019 Global Property CEO conference: “Tesla is a company with a viable balance sheet that is going to owe a lot of landlords a lot of money.”
The decision to close down all of its retail stores and move to an online-only sales model surprised many of the company’s employees and investors, with some investors dumping the company’s shares as its “growth” aura was rapidly deflating. Pro-Tesla blog electrek called the business model changes a “chaotic situation”, saying it was “either turning into what feels like an extremely poorly managed, haphazard transition or it is intentionally made that way to push out employees like some are suspecting.”
Stated simply, Tesla has now gone back on all of the major business model changes it made just about two weeks ago, further exposing a company that can only be described as in the midst of anarchy.
