Elon Musk has said sales of the Model 3 electric car are essential to the California-based firm's survival.
Tesla is set to close all of its stores in a cost-cutting measure so it can sell its Model 3 for a reduced starting price of $35,000 (£26,400).
The California-based firm's cars will now only be available online.
Tesla's chief executive officer Elon Musk has said sales of the Model 3, which had been priced at $42,900 (£32,369), are essential to the company's survival.
Reflecting on the store closures, Mr Musk said: "It's 2019. People want to buy online."
The entrepreneur said he believes there is demand for 500,000 Model 3s per year, but conceded: "I don't know what the demand is."
He said he expects Tesla to lose money in the first quarter but is "likely" to be profitable in the second.
Shares fell more than 8% on Friday as investors digested the news.
The electric car and solar-panel company will keep some of its store premises open as galleries or "information centres" in high-traffic areas.
Musk didn't give a number of stores that will be closed or employees who will be laid off, adding: "That isn't today's topic."
He said the decision was hard but is right for the future of the company.
Tesla will offer the standard base Model 3 for $35,000, which can go 220 miles (354km) per charge.
It also will offer a $37,000 (£27,918) version with a premium interior that accelerates faster and can go 240 miles (386km) per charge.
The company started taking orders for the Model 3 in March 2016, but until now hasn't been able to cut costs enough to sell them for $35,000 and make a profit.
Mr Musk said: "This is the only way to achieve the savings for this car and be financially sustainable.
"It is excruciatingly difficult to make this car for $35,000 and be financially sustainable."
Tesla also pledged to make test drives easier, allowing buyers to return a car within seven days or 1,000 miles (1,600 kilometers) for a full refund.
The company said: "Quite literally, you could buy a Tesla, drive several hundred miles for a weekend road trip with friends and then return it for free."
The firm added that it is confident people will like the car enough to keep it.
Tesla said its online sales shift will let it lower all vehicle prices by 6% on average.
The news was announced after the markets closed on Thursday.
Shares of Tesla fell 3% in after-hours trading.
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