Watch CBSN Live

Tesla hits reverse on plan to shutter most of its showrooms

MoneyWatch: Tesla raising some car prices
MoneyWatch: Tesla raising some car prices 01:31
  • Tesla has opted against closing most of its showrooms, as it had recently announced 
  • To help defray the costs, the electric car maker will raise the price of some vehicles by 3 percent
  • The price change will apply to its more expensive Model 3s, Model S and X vehicles, but not the lower-priced Model 3

Reversing a recent decision, Tesla will keep many of its showrooms open and instead raise the price of most of its electric vehicles in a move to help defray the cost.

Tesla said last month after announcing a price cut for its flagship Model 3 car that it would shutter most stores in a bid to cut costs and shift more of its sales online. The $35,000 base Model 3 will still be available, but the company is raising prices by 3 percent on all other models. Before the $35,000 Model 3 was available, the cheapest Tesla started at $42,900.

Tesla disclosed Monday in a government filing that it had shuttered 10 percent of its retail locations, but it is now reevaluating each of its stores. Some of those stores that have closed may now reopen with a smaller crew. Another 20 percent are being evaluated.

The company gave no numbers, but said it would close only about half the stores that it had intended to. Tesla has 378 stores and service centers worldwide and about 100 stores in the U.S. If the company closes 30 percent of the stores that would equal about 110.

Gartner analyst Michael Ramsey called the move "startling" and said it undermines the credibility of Musk and Tesla's management.

"How else can you view it except to see it as a remarkable example of lack of foresight or planning?" Ramsey asked. "It's almost as if the decision was announced and made without any analysis of what the outcome would be."

On Feb. 28, the company said shifting to online sales would allow it to lower all vehicle prices by an average of 6 percent, including its higher-end Model S and Model X. At the time, Musk also walked back the company's guidance that it would be profitable in all future quarters, saying it would post a loss in the first quarter of this year.

All Tesla sales will still be conducted online, and the showrooms will remain to show clients how to order a Tesla on their phone. The stores will keep a small inventory on hand for people who want to drive away immediately.

A Tesla spokesman declined comment Monday beyond the company's statement.

Tesla shares edged up less than 1 percent.  

Whistleblower complaint 

Separately, a New York attorney on Monday announced that Tesla's former chief of security has filed a whistleblower complaint with the U.S. Securities and Exchange Commission. Attorney Andrew Meissner said in a statement that Sean Gouthro provided information about Musk's Aug. 7 tweet that he had the financing to take the company private at $420 per share.

As it turned out, Musk didn't have the funding secured. The SEC filed a securities fraud complaint, and Musk and Tesla agreed to each pay $20 million and to governance changes including a Twitter monitor for Musk.

The SEC submission says the go-private plan was discussed internally at Tesla many days before Musk's tweet "and that many were suspect of the purported deal's legitimacy," Meissner's statement said.

Tesla also announced Monday that it has purchased car-hauling trucks and trailers from a California company in a stock deal worth about $14.2 million. Tesla paid for the purchase with about 50,000 previously authorized shares. Tesla wants to increase its vehicle transportation capacity and cut delivery times.

Musk in contempt?

Musk's lawyers face a Monday deadline to file a legal brief explaining to a New York federal judge why he shouldn't be held in contempt of court for an inaccurate Feb. 19 tweet that could have influenced the company's stock price.

On Feb. 19, the tech entrepreneur tweeted that Tesla would produce around 500,000 vehicles this year -- a tweet that wasn't blessed by the person in charge of monitoring Musk's Twitter account as required by the fraud settlement. The tweet was later corrected.

The judge has ordered Musk to file a brief by Monday explaining why he isn't in contempt for violating the court-approved settlement.

The store-closing reversal shows that Tesla had second thoughts about shuttering the stores and whether buyers would make such a large purchase without a test drive. 

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.