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Tesla is closing all its stores so you can have a $35K Model 3

Image of a Tesla store
Tesla store in Paramus, New Jersey. Photo: Michael Brochstein/SOPA Images/LightRocket via Getty Images

Tesla is finally launching that long-promised $35,000 Model 3, but to meet its target price, the company is closing all of its 378 stores worldwide, laying off retail employees and shifting all sales online.

Why it matters: That $35,000 price tag enables CEO Elon Musk to fulfill his 2006 secret master plan to deliver a mass-market electric vehicle, but he told reporters today "there's no other way" to produce it than by closing all its stores and eliminating jobs. Even so, he says the company won't be profitable this quarter.

What's happening: Shifting all of its sales online — plus other cost cuts — means Tesla can lower the price of its vehicles, including Models S and X, by about 6% and achieve the $35,000 Model 3 price point earlier than expected.

  • Tesla will be winding down most of its stores over the next few months.
  • A small number of stores will transition into galleries or information centers.
  • The change to online sales will allow anyone in the U.S. to buy a Tesla, even in states where franchise laws currently prohibit Tesla-owned stores.

The details: Tesla is offering two new budget-priced Model 3s — a standard $35,000 model and a slightly upgraded $37,000 version — but they'll have smaller battery packs and won't travel as far as currently available versions of Model 3.

  • The $35,000 standard range model will go 220 miles on a charge; the $37,000 version is good for 240 miles of range.
  • The top of the line Model 3 now has a 325-mile range.

The catch: Tesla also changed the pricing on its Autopilot packages, shifting some features around, which will make automated driving features more expensive.

  • For $3,000 extra, drivers can get Autopilot — which provides steering assistance and adaptive cruise control at highway speeds —similar to what comes standard on a Honda Accord or Toyota Camry.
  • For another $5,000, drivers can get "Full Self Driving Capability," which adds Navigate on Autopilot—the ability to change lanes, pass slower cars and take interchanges—plus a new Summon automatic parking ability and other yet-to-be detailed features.

Between the lines: "Full Self Driving Capability" doesn't mean the car can drive itself. Tesla continues to confuse consumers by giving its assisted-driving features names that overstate its capabilities.

  • Musk acknowledged "what needs to be finished" is for the car to recognize traffic lights and stop signs, make turns and navigate on side streets—all the things that other companies continue to work on, too.
  • He says full self driving technology will be "feature complete" by the end of the year, but acknowledges it "will take billions of miles" before the technology is more reliable than human drivers.
  • "Then we have to convince regulators," he says.

The bottom line: Tesla cars cannot drive themselves. Drivers who want to use Autopilot and Full Self Driving features have to supervise the technology at all times.

Editor's note: This piece was updated to remove the number of jobs impacted as Tesla declined to confirm or deny the estimates.