Tesla has hiked vehicle prices in anticipation of cost constraints from suppliers and logistics over the next six to twelve months, according to the automaker’s first-quarter 2022 conference call on Wednesday.
“We firmly believe that electric vehicles should be as affordable as feasible.” With inflation at its highest level in 40 or 50 years, it’s been extremely challenging, and I believe the official numbers understate the full amount of inflation,” Tesla CEO Elon Musk remarked. “We’ve seen suppliers request cost increases of 20-30 percent for parts between last year and the end of this year in some situations.” As a result, there’s a lot of cost pressure.
The announcement comes as Tesla also announced that a long-term supply chain crisis will constrain manufacturing capacity at its factories throughout the year.
The manufacturer boosted the MSRP of its battery-electric cars by roughly 5-10% in the first quarter. Demand continues to outweigh supply, according to the automaker, thus the market will support it.
“Given our record profitability this quarter, it may appear that we are not being reasonable about raising our vehicle prices,” Musk remarked at the investor meeting.
“However, the vehicle waiting list is extremely extensive, and some of the vehicles that customers will order have a waiting list that continues into next year,” Wednesday said.
Tesla claimed it was not immediately impacted by growing raw material costs, but that if its current contracts with suppliers end, cost pressures could increase.
During the event, Tesla CFO Zach Kirkhorn noted, “Our contracts directly follow commodity or commodity movement and prices.” “However, we must renegotiate those contracts as they expire, so there may be a lag in some circumstances.”
The carmaker claims that its prices are unlikely to climb further in the long run.
“We’re hoping we won’t have to raise costs any further,” Musk added. “Right now, our price is based on what we believe will be an increase in costs in the future.” And if that happens, we expect prices to be slightly reduced.
“However, macroeconomic situations are beyond our control,” he continued. “Governments continue to print vast quantities of money, and if mining and refining of lithium and other raw materials do not significantly rise, everyone will be vying for a limited supply of raw materials, which would undoubtedly drive prices up to high levels.”
Even with such limits, Musk said Tesla does not intend to hold down the shift to sustainable energy, and the business is working with existing suppliers to figure out how to ramp up raw material manufacturing as rapidly as feasible.
To read our blog on “Tesla will be powered by printed solar panels on a 15,000-kilometer journey,” click here.
