Tesla lowers model 3 price to $ 35,000


A Tesla Model 3 car is on display at a media preview at Auto China Auto Show 2018 in Beijing, China on April 25, 2018

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Tesla Model 3 car exhibited at Auto China 2018 auto show

Tesla announced that it would start selling a version of its Model 3 in the United States at a price of $ 35,000 (£ 26,400), to finally keep the promise that it made there are more than two years.

To make the price "financially viable" lower, the company said that it was moving towards an online sales model only.

The electric car manufacturer has announced the model car 3 in 2016 as an alternative to its luxury offers.

However, as recently as September, the average selling price was over $ 50,000.

The closure of physical stores will allow the company to reduce its costs by about 5%, savings that it uses to reduce prices across its entire vehicle lineup, said the Chief Executive Officer, Elon Musk.

He declined to say how many people will lose their jobs as a result of this decision, but said that this change was necessary because Tesla is using it to reach its more ambitious goal of generalizing electric cars.

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Mr Musk said that achieving a car for the mass market was Tesla's long-term goal

"Incredibly difficult"

Tesla has already announced thousands of job cuts since June, as it tries to balance its accounts after years of losses.

The strong sales of Model 3 are essential to this effort.

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More than 400,000 customers signed up for the car during its first announcement, but production problems, higher prices and other delays caused problems after its launch.

Over the past year, the company has reduced the Model 3 battery, refined its manufacturing process, and reduced costs in another way to lower the price, while preserving profit margins.

The company has managed to make a profit in the last two quarters of 2018, but anticipates a loss for the first three months of this year, said Musk.

"This has been incredibly difficult," said Musk, referring to the $ 35,000 price promise.

Analysis: Dave Lee, BBC Technology Journalist North America, San Francisco

If you've ever wondered how these huge Tesla stores in luxury malls are making money, well, they do not do it. At least they do not earn enough money to keep Tesla open if they want to be able to afford to produce the $ 35,000 car that its investors (and many customers) have been waiting desperately for since its announcement March 2016 .

The hope is that it is the car that brings a Tesla into the affordability zone for a whole new kind of customer. It's still an incredibly expensive car for almost all of us, but for a luxury electric vehicle, it's a new terrain. The Tesla brand and its increased production capabilities mean that model 3 (the cheapest) will prove to be a popular proposition.

But Tesla's confession, as he had previously said, would not make any profit this quarter, frightened investors. As has been admitted, it is necessary to fire workers and reduce their physical presence in order to keep their promise, which is worrying.

In addition to his problems with the SEC, Mr. Musk did not exactly lose the confidence of his investors, but he also did not exactly fill them.

Delivering a car for $ 35,000 – about the average cost of a new vehicle in the United States – is a "decisive lever" for Tesla's growth, said Daniel Ives, managing director of Wedbush Securities.

"Although there are still questions about logistics and deliveries … we think this strategic shift was the right choice at the right time for Tesla," he wrote in a note.

The model 3 electric car has a range of 220 km, a maximum speed of 130 mph and an acceleration from 0 to 60 km / h in 5.6 seconds.

Tesla's website said the cars ordered now would be ready for delivery in two to four weeks. However, customers whose orders are already on hold will have priority, which could delay some shipments until June, Musk said.

Mr Musk said that he was not worried that the move to online sales would put off customers.

The company already has a much smaller physical presence in the United States than most automakers, who work with dealers. The firm added that it would fully reimburse the returned cars within seven days.

The low-cost model should be able to be ordered in Europe and China in three to six months, he said.

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