Coverage: Tesla reverses course, will keep more stores open

Tesla Inc. rolled back plans to close stores on Monday and will raise prices on some of its electric-vehicle models, an about-face after the auto maker said last month it would shut many of its locations and move sales online only.

Kimberly Chin and Esther Fung of The Wall Street Journal had the news:

After closing 10% of its locations, Tesla said early on Monday it would reopen a few high-visibility stores though with a smaller number of employees, a process that was under way with at least two stores expected to reopen Monday. It placed an additional 20% of store locations under review. Tesla had 378 stores and service centers globally at the end of last year.

Tesla had hoped the store closings would help it save money. But it has proved an uphill battle, particularly on legal grounds, as landlords, car dealers and lawmakers have protested the move. “The negative reception from landlords must have made them rethink this strategy,” said David Scharf, a partner at the law firm Morrison Cohen LLP.

Some prospective customers also complained about the prospect of store closures, particularly those individuals looking to buy the Model S sedan and Model X sport-utility vehicle. On Twitter, many buyers expressed discontent with not having a local shop to try out the vehicles.

Neal E. Boudette of The New York Times reported that the company appears to be in turmoil:

The flip-flops are the latest sign of turmoil surrounding the company and its chief executive, Elon Musk.

“This reversal is bizarre and indicates a lack of actual planning in the earlier announcement,” said Mike Ramsey, a Gartner analyst. “Their retail stores still serve a real need.”

Until last month, Tesla had been rushing to expand its network of showrooms and mall galleries, which display its cars but take no customer orders.

On Feb. 28, Mr. Musk told reporters in a conference call that Tesla would start offering a long-awaited version of its Model 3 sedan with a starting price of $35,000. Previously, the least expensive Model 3 cost $43,000 before tax incentives.

Tom Krisher of the Associated Press reported that the company’s chief of security has filed a whistleblower complaint:

Remaining stores could have fewer workers but will have vehicles available for test drives and a small inventory in case people want to buy immediately, the statement said.

Also Monday, a New York attorney announced that Tesla’s former chief of security has filed a whistleblower complaint with the U.S. Securities and Exchange Commission. Attorney Andrew Meissner said in a statement that Sean Gouthro provided information about Musk’s Aug. 7 tweet that he had the financing to take the company private at $420 per share. As it turned out, Musk didn’t have the funding secured. The SEC filed a securities fraud complaint, and Musk and Tesla agreed to each pay $20 million and to governance changes including a Twitter monitor for Musk.

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The SEC submission says the go-private plan was discussed internally at Tesla many days before Musk’s tweet “and that many were suspect of the purported deal’s legitimacy,” Meissner’s statement said.