Elon Musk is finally delivering on his promise to offer reasonably priced electric cars to the public. Tesla is now offering its Model 3 for $35,000, the MarketWatch reports. The way it’s going to be profitable for Tesla is by cutting retail staff. Tesla is planning to sell its cars online and closesome of retail locations, while keeping a few stores as showrooms. The company expects to save 6 percent on costs by selling over the Internet. It costs slightly over $24,000 to produce Model 3. “I wish there was some other way, but unfortunately it will entail some reduction in force on the retail side,” claimed Mr. Musk.
At the same time, Tesla is planning to hire more service mechanics. This could reduce profits. According to Karl Brauer, an analyst at Kelley Blue Book, “Tesla’s biggest challenge going forward will be meeting production volumes and demand while maintaining timely service for a rapidly-expanding customer fleet.” If Tesla can do well, they can move from a niche vendor to mass market automaker.
According to Mr. Musk, Tesla could make a slight profit in the second quarter of 2019. Currently, shares of Tesla trade around $320, which is about $70 off the 52-week high. The market cap of the company stands at $55 billion, while the company is losing nearly $6 a share. Last year, Tesla had sales exceeding $21 billion, but its net loss was close to $1 billion. To maintain its high valuation, Tesla will need to become profitable and continue to grow.
Elon Musk, Tesla’s founder, recently settled with the SEC over fraud charges. Mr. Musk was accused of providing misleading information. Still, his problems continue. He is currently investigated by the Justice Department for his claims about securing funds for taking Tesla private at $420 a share. There’s also a proposed class action lawsuit by a short seller who claims Elon Musk manipulated Tesla’s stock price.