Tesla increases Model 3 prices again to keep its profit margins despite hedging the nickel battery bets

Despite that Tesla may have secured nickel supply at pre-war pricing, the electric carmaker is raising the prices of its Model 3 versions that use long-range batteries with nickel in the cathode yet again. For a third time this year, the Model 3 Long Range and Model 3 Performance listings on Tesla's website show a higher sticker price than the previous day. 

The Tesla Model 3 LR started the year at US$50,990, in itself a significant increase from the US$48,000 it used to cost just in March 2021. Then Tesla raised its price to US$51,990 in the beginning of March 2022, followed by a US$2500 increase just a few days later to US$54,490. With April's price increase, the Tesla Model 3 Long Range now starts from US$55,990, a cool US$5000 or so price jump just in 2022, while the Model 3 Performance version's sticker tag now sits at US$62,990.

The price hikes come despite the fact that Tesla enjoys some of the highest profit margins in the industry that Ford's CEO recently said are north of US$10,000 per vehicle. The latest Model 3 price increases also come only for the vehicles with a high-performance nickel battery, despite that Tesla has a "multiyear supply deal with mining giant Vale SA" as a hedge against events like the invasion of Ukraine that sent nickel's prices soaring.

Thus, the 17% year-on-year price hike of the Tesla Model 3 LR must reflect more than just the new nickel expenses which, according to analysts, only add US$1,580 to the average cost of an electric car with a long-range battery at current levels. Whether Tesla's frequent price increases reflect every supply chain challenge it has, or are simply a result of the current healthy demand for its electric cars, the trend seems to be that Tesla intends to keep its profit margins by passing it all to its customer base.

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