Tesla blames inflation, cost pressure from suppliers for increased car prices

·2 min read

Tesla has raised prices on its vehicles as it anticipates cost pressures from suppliers and logistics over the next six to 12 months, the automaker said on Wednesday during its first-quarter 2022 earnings call.

"We absolutely want to make EVs as affordable as possible. It's been very difficult with inflation at a 40 or 50-year high, and I think the official numbers actually understate the true magnitude of inflation," said Tesla CEO Elon Musk. "In some cases we're seeing suppliers request 20-30% cost increases for parts from last year to the end of this year. So there's a lot of cost pressure there."

The news comes as Tesla has also said it expects a prolonged supply chain crisis to limit production capacities at its factories that will continue through the rest of the year.

During the first quarter, the automaker increased the MSRP on its battery-electric models roughly 5% to 10%. The automaker says the market will bear it as demand continues to outstrip supply.

“It may seem like maybe we're being unreasonable about increasing the prices of our vehicles, given that we had record profitability this quarter,” Musk said during the briefing with investors Wednesday, “but the waitlist for vehicles is quite long, and some of the vehicles that people will order, the waitlist extends into next year.”

Tesla said it is not immediately affected by the rising cost of raw materials, but that cost pressures could mount once its current contracts with suppliers expire.

“Our contracts do directly reflect movement and commodity or raw material prices,” said Zach Kirkhorn, Tesla's CFO, during the briefing. “But as those contracts expire, we have to renegotiate them, so that there can be a lag in some cases.”

The automaker says its prices likely won’t continue to rise over the long-term.

“We hope we don't need to increase the pricing further,” Musk said. “The current pricing is anticipating what we think is the probable growth in costs. And if it does actually materialize we estimate slightly reduced prices.”

“But we don't control the macroeconomic environments,” he added. "Governments keep printing vast amounts of money and if there are not significant increases in lithium extraction and refinement and other raw materials, such that everyone's competing for a limited amount of raw materials, then obviously that will drive prices to high levels."

Musk said Tesla is unwilling to slow the transition to sustainable energy, even given such constraints, and that the company is working with existing suppliers to determine how to accelerate the production of raw materials as quickly as possible.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting