Tesla CEO Elon Musk has called the extent of the company’s recent price rises “embarrassing” – but price cuts could be on the way, once material prices stabilise.
Tesla has acknowledged criticism of recent price rises across its electric-car line-up – but for customers holding out on placing an order, lower prices could be on the way.
Tesla has increased prices significantly across the Model 3 and Model Y ranges in recent months, pushing the cheapest Model 3 electric car up by $5600 in six months – and the entry-level Model Y SUV up by $3400 within a week of its Australian launch.
The price rises have hit even harder in the US, where multiple price increases over the last 18 months have pushed cars such as Tesla the Model 3 Long Range from about $US48,000 ($AU69,300) in early 2021, to $US57,990 ($AU83,800) today – an increase of more than 20 per cent.
Speaking to media and investors in a briefing this morning, Elon Musk explained the need to raise prices to protect Tesla from rising inflation and material costs – but nonetheless called the extent of the price increases “embarrassing”.
“Since there’s quite a long wait when somebody orders our car – it’s like six months or so, or in some cases, up to a year – we have to anticipate what the global inflation rate is over that period of time,” Musk told the briefing.
“So that’s what we’re trying to do on the [price rises]. If we see indications that the inflation rate is declining, then we would not need to increase our car prices.
“It’s possible that there could be a slight decrease in car prices. But this is mainly dependent on that global economic inflation, which is not something we can control.”
Despite the price rises being unavoidable, Musk admitted: “I do feel like we’ve raised our prices quite a few times there, frankly, [to] embarrassing levels.
“But we’ve also had a lot of supply chain and production shocks, and we’ve got crazy inflation so, you know, I’m hopeful. This is not a promise or anything but, I’m hopeful that at some point we can reduce the prices a little.”
Much of the price increases across Tesla’s range are attributed to the rising cost of materials and production, as well as inflation. Musk noted some raw materials are affected more than others.
“Take this with a grain of salt, but I think inflation will decline towards the end of this year. We’re certainly seeing prices of commodities trading lower,” said Musk.
Another Tesla executive added: “The price of lithium has really shot up, but you know not every situation is that bad – so it’s kind of a spectrum.
“Carbon steel and aluminium have started trending down. We will only see the benefits of this probably in the later part of this year, or early next year. Most commodities [are] pursuing a downward trend towards the end of this year or next year.”
The price rises are backed by long wait times across Tesla Australia’s two currently-available models, the Model 3 sedan and Model Y SUV, which stretch to February or May 2023 delivery for orders placed today.
Driven by record production months for Tesla’s Fremont, USA and Shanghai, China factories, the electric-car specialist posted a net profit of $US2.3 billion for the second quarter of 2022 (April to June). Although Tesla is in positive territory, this profit figure was down from $US3.3 billion in the first three months of this year.
Tesla said it delivered 254,695 vehicles over the period – down on the 310,048 delivered in the first three months of the year, but up on the 201,304 delivered in the second quarter of 2021.
Alex Misoyannis has been writing about cars since 2017, when he started his own website, Redline. He contributed for Drive in 2018, before joining CarAdvice in 2019, becoming a regular contributing journalist within the news team in 2020. Cars have played a central role throughout Alex’s life, from flicking through car magazines as a young age, to growing up around performance vehicles in a car-loving family.