Tesla Motors will be keeping its stores open and increasing prices. Average vehicle buyers may still spend 59% of their time researching online, but Tesla has announced that the electric automaker won’t be converting its sales 100% online as Elon Musk said two weeks ago but will be keeping many of its stores open and raising prices on average by 3%.
The price increase will include Tesla’s Model S luxury sedan, Model X crossover, and higher priced variants of the Model 3. The standard $35,000 Model 3, Tesla’s current entry-level model, will be excluded from the price hike.
It hasn’t been determined if the price increase will affect Tesla’s upcoming small SUV, the Model Y. Model Y is expected to be priced slightly higher than the Model 3 and it’s speculated the vehicle will share the same electric powertrains and options as the sedan.
The 3% price hike may not sound like much, but the dollar amount is significant because of the vehicles’ pricing. For instance, the Model S is priced at $80,200 including a $1,200 destination charge, but excluding potential federal or state electric vehicle tax credits.
The basic-trim Model S comes with a driving range of 270 miles and a top speed of 140 mph. That’s a 0-60 mph time of 4.2 seconds. The 3% price jump would increase the price of the Model S by $2,400.
The performance-trim Model S, with an optional Ludicrous Mode power upgrade that costs $15,000, has a $105,950 price tag including the destination charge. For this vehicle, the 3% jump would increase the price by $3,170.
The price hike may be due to the increase in steel prices since the Trump Administration began imposing steel tariffs.
Approximately 50% of the world’s steel is used for buildings and infrastructure including the 12-foot spaced beams in pier-and-beam foundations.
In fact, the U.S. steel tariffs could potentially put thousands of jobs at risk, which is why hundreds of companies have been excused from the tariffs. Among those excused from the tariffs is Ford Motor Company.
“[The tariffs] could result in an increase in domestic commodity prices, harming the competitiveness of American manufacturers,” said Ford in a statement.
But the tariffs aren’t the only potential reason for the Tesla price hike. Musk says Tesla stores were closing in an effort to trim costs. Now that most of the company’s stores are remaining open, Tesla is supplementing those costs with a price increase.
The shift in gears came after Tesla staffers argued that closing stores would cause the company to lose more in sales and profit than it would pick up by firing staff and getting out of leases.
“As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide,” Tesla said in a statement. “In other words, we will only close about half as many stores, but the cost savings are therefore only about half.”