Tesla CEO Elon Musk still has a lot of explaining to do as to why he suddenly decided Tesla Inc. would hike the sales price of its electric cars while slowing down the pace of store closings. His memo to staff attempting to explain this about-face remains unsatisfactory.
The sudden reversal is adding to investor concerns Musk lacks a cohesive strategy for transforming itself into a major international automaker.
It was only last week Musk caused a furor by announcing Tesla will close all its showrooms and will only take orders for its cars online or on mobile phones. Before this stunning announcement, which would have laid off more than 1,000 employees, Tesla revealed a price cut for its Model 3 in a new effort to get the standard model's price down to $35,000.
In an email to Tesla employees Sunday, Musk said the company is reversing course and will shift its sales plans yet again. He said Tesla will raise prices by about 3 percent on most of its electric cars after March 18. The company will also keep more stores open than it had planned.
In an apparent concession to the outcry over the showroom closings, Musk said some showrooms will re-open with fewer employees. On the other hand, showrooms in hard-to-find locations will remain shut.
Tesla also published a blog post-Sunday explaining these details to shareholders and the general public.
Musk's e-mail to employees is enlightening. In it, he said Tesla is making an adjustment to its plans "and will, at least for the next several months, retain more stores than previously announced. For the most part, the roughly 10% of Tesla sales locations we closed recently don't pass the Sherlock Holmes test."
This means most of these stores "are in such difficult or obscure locations, only Sherlock Holmes could find them!"
Musk said there are another 20% of locations that are under review. But depending on their effectiveness over the next few months, "some will be closed and some will remain open."
And because it has to significantly keep more stores open, "Tesla will need to raise vehicle prices by about 3% or so on average worldwide." Customers will still get the full price cut through March 18. The Model S sedan will start at $69,750 with the Model X SUV starting at $78,950.
"All things considered, this seems like a reasonable compromise between current and future customers," wrote Musk. "We will only close about half as many stores, but the cost savings are therefore only about half."
Musk, however, emphasized all sales worldwide will still be done online. He clarified that potential Tesla owners coming into stores will simply be shown how to order a Tesla on their phone in a few minutes.
