April 22, 2019

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Tesla Ends Online Sales of $35,000 Model 3, Creating New Hurdle for Buyers

Tesla Ends Online Sales of $35,000 Model 3, Creating New Hurdle for Buyers
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Tesla said it aimed to upgrade Model 3s returned after a lease to allow them to drive themselves, with no human at the wheel, and be deployed in a driverless taxi fleet. The company acknowledged that the technology for driverless taxis was still in development and would need to be approved by safety regulators before such a business could begin.

The latest moves coincide with a slump in Tesla’s sales, especially in the United States. In the first quarter, the company delivered about 63,000 cars, a 31 percent drop from the fourth quarter. Elon Musk, the company’s chief executive, has also said Tesla has experienced delays and difficulties starting up deliveries of the Model 3 in Europe and China, and will report a loss in the first quarter after producing profits in the final two quarters of 2018.

Tesla has forecast 2019 deliveries of 360,000 to 400,000 cars, but after the weak showing in the first quarter, it will have to deliver an average of about 100,000 cars in the final three quarters to reach that range. Domestic demand is likely to be tempered further after July 1, when the federal tax credit available to Tesla customers falls to $1,875 from the current $3,750.

“We think TSLA will be hard pressed to hit the guidance” on deliveries, Garrett Nelson, an analyst at CFRA Research, wrote in a note to investors Thursday.

New areas of concern have emerged, too. Tesla’s battery partner, Panasonic, said this week that it was “watching the demand situation” and studying whether to go ahead with further investments in the battery plant, known as the Gigafactory, that the two companies operate in Nevada.

The statement was a response to a report by the Japanese news organization Nikkei that Panasonic was freezing its investments in the plant. The company recently ousted the executive who had engineered the partnership with Tesla.

In its own statement, Tesla said it and Panasonic “continue to invest substantial funds” in the Nevada plant, but were now focusing more on increasing production without adding new equipment.

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