Tesla Introduces $35,000 Model 3, Cuts Model S and X Prices ー With One Tradeoff

Photo Credit: David Zalubowski/AP/Shutterstock
February 28, 2019

By Hope King

Elon Musk's dream of achieving a $35,000 mass-market electric vehicle was finally realized Thursday.

Tesla announced the option to buy a standard Model 3 starting at $35,000 in the U.S. before any incentives but also disclosed it would move all sales to online globally.

As a result, the company said it would have to close "many" of its stores over the next few months, leaving open a small number in high-traffic areas to serve as showrooms.

But by consolidating retail operations (on top of other cuts) the company says it will also be able to lower costs of the Model S and X vehicles by 6 percent. The current starting price for the Model S sedan before incentives is $79,000 online (for Long Range the starting price is now $83,000, previously $96,000) and the Model X SUV starts at $88,000, previously $96,000.

"I wish there was some other way to do it," Musk said on a call with reporters. "It's a binary way."

When asked by Cheddar how many jobs the company expected to cut, Musk replied: "That's not today's topic."

At the same time Tesla cuts its retail operations the company said it would increase headcount in its servicing business "with the goal of same-day, if not same-hour, service, and with most service done by us coming to you, rather than you coming to us."

Tesla has already had a rough start to 2019. Although the company reached another profitable quarter at the end of last year, it announced a 7 percent job cut in mid-January and lost its veteran CFO as well as Consumer Reports' positive recommendation on the Model 3. Shares of Tesla are down about 4 percent year-to-date, and Musk is again under scrutiny for his Twitter behavior ー with the SEC asking a judge to hold Musk in contempt of court for violating his settlement last year.

A $35,000 Model 3 has always been the company's main goal, but as Tesla has struggled to lower costs, it's been seen as the potential saving grace for Tesla. Musk has continually said a mass market electric vehicle in that price range would help the company achieve sustained profitability and its mission to power the world with clean energy.

The Model 3 is currently the best-selling electric car in the U.S. Musk said it's possible that international orders could start in three to six months. The new standard version will have a 220 mile range on a single charge with a top speed of 130 mph.

Story updated at 10:02 PM ET to reflect previous cost of Model S and X before price cuts, and updated headline.