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Elon Musk: Rampant Tesla price increases are forward-looking despite record profits per car

The Model 3 price has risen significantly since launch (image: Tesla)
The Model 3 price has risen significantly since launch (image: Tesla)
Despite that Tesla managed to hedge the price increase of nickel and move to cheaper LFP batteries for its EVs with standard range packs, it has been unabashedly raising its car prices to preempt future production cost increases, according to Elon Musk. Also, he argued, the waitlist for Tesla cars is long anyway, so people don't seem to be put off by their higher prices.

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.

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> Notebook / Laptop Reviews and News > News > News Archive > Newsarchive 2022 04 > Elon Musk: rampant Tesla price increases are forward-looking despite record profits per car
Daniel Zlatev, 2022-04-21 (Update: 2022-04-21)