According to the news report by MarketWatch, electric car maker Tesla Inc. announced on Thursday that it was finally launching a version of the Model 3 for $35,000. However, the company’s stocks fell in trading after the Chief Executive Officer Elon Musk also stated that Tesla was most probably going to face losses in the first quarter of 2019.
The company’s stocks ended the regular trading day with a gain of 1.6% to $319.88 per share. However, after Musk’s announcement, the company’s share dropped by 3.3% in after-hours trading.
In its announcement, Tesla stated that its cheaper version of the Model 3 would have a driving range that would be shorter than the current – more expensive – versions, and would also sport new interiors. According to the company’s website, this version of the electric sedan will be available in the United States in as little as 2 weeks.
According to Tesla, after tax credits as well as gas savings, the Model 3 will actually end up costing $24,450.
Tesla’s blog announcement states that the lower cost Model 3 will have the same 5-star safety rating as its longer-ranged version. However, to keep the pricing financially sustainable, Tesla will be shifting all its sales across the globe online. The company also states that now, in North America, the car can be bought online, and this facility will soon be available across the world.
This move, in addition to other cost cutting measures that Tesla has taken, will allow the company to reduce all its vehicles’ prices by an average of about 6%.
The company states that in the next few months, it will be closing down most of its brick and mortar stores, and will keep only a few open in high-traffic locations. However, these stores will be more like galleries that display Tesla’s products and will act as information centers for the company.
The company will also increase investing in its service system, with a target of achieving same-day service. It is hoping to create a service system where the service will come to the customer rather than the customer coming to the service.
The company has also changed its test-driving policy. Instead of test driving a car before purchase, Tesla is offering a 7-day or 1,000-mile return service. This means that a customer can return the car within 7 days or 1,000 miles and get a full refund.
According to Kelley Blue Book’s analyst Karl Brauer, the new online ordering system as well as the lowered prices will significantly increase the Model 3’s appeal. Brauer feels that the biggest challenge the company will now face will be to meet demand and keep up production volumes and also balance on-time service requirements for a quickly expanding customer base.
The analyst feels that if Tesla is able to do so, then the company will successfully transition from its current status as a boutique car maker that has a niche audience to a mainstream auto maker.
According to Wedbush analysts, the announcement of a cheaper Model 3 version has actually come earlier than expected. They feel that this could be a game changer for both Tesla as well as Musk, and that the market views this as a major step forward for them.
They also state that while there are a lot of details that need to be worked out, such as logistics and delivery, and profit margins related to this model, overall, strategically this is the right move that Tesla has made – at the right time. However, for the next 6 to 9 months, they believe the company will still have to prove its worth, and this will be reflected in its stocks.