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article imageTesla launches cheaper Model 3 - Wall Street not impressed

By Karen Graham     Mar 1, 2019 in Business
Tesla CEO Elon Musk made some splashy announcements Thursday, but Wall Street analysts were unimpressed after Musk announced a cheaper Model 3.
Tesla basically upended its product lineup and business model on Thursday — leaving analysts to wonder just what in the devil had just happened. Barclays analyst Brian Johnson probably had the coldest reaction, calling it the "un-iPhone moment," according to CNBC News.
Tesla introduced dozens of changes, not only in production (again) but in the company's business model. Let's examine each part of Musk's announcement, starting with the cheaper Model 3 sedan.
1. Cheaper Model 3:
There will be six Versions of the Model 3, plus some big price cuts. Fulfilling a decades-long goal, Tesla is finally releasing a pared-down version of its Model 3 sedan. The price tag: $35,000. It will come with a glass roof and some other features that weren’t originally planned, along with 220 miles of range on a single charge.
This is just one version of the six models that will be available. There is also a “Standard Range Plus” for $37,000, with 240 miles of range and options such as premium seat materials, heated seats, and upgraded audio. Then, there is the Mid Range version, which dropped in price to $40,000 from $42,900. It has a range of 264 miles and Tesla’s full suite of premium features
I think everyone sort of gets the picture, right? The most expensive of the six models will be the top-line performance Model 3. It's price declined to $58,000 from $60,900. Musk said it was $20,000 cheaper than when it was first released last year. Musk told reporters that making these final cuts in price was "excruciating" and there won't be any more price reductions in the Model 3.
2, Store closures and online sales:
Musk said most of its stores will be closed and retail workers will be laid off. This is so that Tesla will be able to make it financially possible to lower its vehicle prices. Musk says that by taking this approach, it will result in a 5 to 6 percent decrease in the average vehicle cost.
All sales will now be done online. There will be some "galleries" that remain open in key market areas, and Tesla will be increasing the number of service centers and staff worldwide. “My top priority this year is making service amazing,” Musk said,
It will be easier to return a car if you find you don't like it, too. Buyers will have seven days or 1,000 miles during which they can return the car for a full refund. Luckily, while consumers are quick to return all kinds of products, CNN says returning a new car is almost unheard of.
3. About that production forecast
Yes, Musk is changing Tesla's production forecast, again. Musk is actually upping the production numbers on the Model 3 from his January 30 earnings call. At that time, he was quoting 350,000 to 500,000 Model 3s this year. Now, Musk is saying Tesla will make between 420,000 and 600,000 cars this year.
Here's the big blow - Tesla no longer expects to turn a profit in the first quarter of 2019 due to “a lot of one-time charges” and “challenges getting cars to China and Europe,” Musk said. “We do think that profitability in Q2 is likely,” he said. This statement saw Tesla shares tank more than 8 percent at one point Friday morning.
J.P. Morgan probably has the best comment on the Tesla announcement: "The centerpiece of the announcement revolved around the long-awaited debut of the shorter range base version of the Model 3 sedan starting at the long-promised price of $35,000 — a seemingly positive development. ... However, in a posting to the company's blog and in an email to employees made publicly available, Tesla CEO Elon Musk explained that in order for the company to be able to both offer the car at this low a price and to remain financially sustainable, it has become necessary to close most of the company's well over one hundred stores, which we estimate could result in another round of potentially thousands of lay-offs."
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