Tesla has hiked car pricing 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 are committed to making electric vehicles as inexpensive as feasible.” With inflation at a 40- or 50-year high, it’s been challenging, and I believe the official figures understate the true scale of inflation,” Tesla CEO Elon Musk remarked. “We’ve seen suppliers seek 20-30% pricing hikes for items from last year to the end of this year in certain situations.” So there’s a lot of financial strain.”
The announcement comes as Tesla also said that a prolonged supply chain issue will constrain production capacity at its plants for the rest of the year. During the first quarter, the manufacturer raised the MSRP of its battery-electric vehicles by between 5% & 10%. Demand continues to outweigh supply, according to the carmaker, thus the market will bear it. “It may appear that we’re being unreasonable in raising our vehicle prices, given that we had record profitability this quarter,” Musk said during the investor briefing on 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 claimed that while growing raw material costs are not affecting it right now, cost pressures might increase once its current contracts with suppliers end. During the meeting, Tesla’s CFO, Zach Kirkhorn, remarked, “Our contracts do directly mirror movement and commodity or raw material costs.” “However, once those contracts expire, we must renegotiate them, which may cause a delay in some circumstances.” The company claims that its pricing is unlikely to grow in the long run. “We’re hoping we won’t have to raise prices anymore,” Musk added. “The existing pricing anticipates what we believe will be a likely increase in expenses.” And if that does come to pass, we anticipate significantly lower pricing.”
“However, the macroeconomic situations are beyond our control,” he continued. “Governments continue to create large sums of money, and if there aren’t big increases in lithium extraction and refining, as well as other raw materials so that everyone is vying for a limited supply of raw materials, then prices will certainly rise.” Even with such limits, Musk said Tesla is reluctant to halt the move to sustainable energy, and that the business is working with existing suppliers to figure out how to speed up raw material manufacturing.