Elon Musk: Rampant Tesla price increases are forward-looking despite record profits per car ↺
Upon announcing Tesla's record quarterly profit of US$3.7 billion during its Q1 earnings press conference, Elon Musk commented on the latest drastic price increases of the EV maker's cars. The Model 3 alone saw its price rise 34% in the span of three years, with the bulk of it coming in the span of the last year or so. Ditto for the rest of Tesla's roster, despite that the company is the most profitable carmaker with average profit margins north of US$10,000 per electric car sold. According to Elon Musk speaking at Tesla's quarterly conference call with analysts and investors:
It may seem like maybe we're being unreasonable about increasing the prices of our vehicles given that we had record profitability this quarter, but the wait list for our vehicles is quite long. And some of the vehicles that people will order, the wait list extends into next year. So our prices of vehicles ordered now are really anticipating supplier and logistics cost growth that that we're aware of and believe will happen over the next 6 to 12 months. We absolutely want to make EVs as affordable as possible. It's been very difficult [as] inflation is at like a 40- or 50-year high. Suppliers are under severe cost pressure. In some cases we're seeing suppliers request 20% to 30% increase in costs from the end of last year.
The forward-looking price increase argument of Tesla's CEO somewhat explains why the EV maker's cars way more expensive now than at launch, despite that Tesla hedged the price increase of nickel and moved to the cheaper LFP batteries for its standard-range models. The rest of the explanation seems to touch on the fact that the demand for Tesla cars is off the charts anyway, so it can get away with passing any increase in production costs to its customers in anticipation of higher raw material prices and eventual supply chain problems down the line.