Tesla has raised prices for its vehicles in anticipation of cost pressures from suppliers and logistics over the next six to 12 months, the automaker said Wednesday during its first-quarter 2022 earnings call.
“We absolutely want to make electric vehicles as affordable as possible. It’s been very difficult with inflation at its highest level in 40 or 50 years, and I think the official numbers actually underestimate the true extent of inflation,” Tesla CEO Elon Musk said. “In some cases, we are seeing suppliers asking for cost increases of 20-30% for parts between last year and the end of this year. So there’s a lot of cost pressure there.
The news comes as Tesla also said it expects a prolonged supply chain crisis to limit production capacity at its factories which will continue throughout the year.
During the first quarter, the automaker increased the MSRP of its battery-electric models by around 5-10%. The automaker says the market will support it as demand continues to outstrip supply.
“It may seem that we may not be reasonable about raising our vehicle prices, given that we had record profitability this quarter,” Musk said during the investor briefing. Wednesday, “but the waiting list for vehicles is quite long, and some of the vehicles that people will order, the waiting list extends into next year.
Tesla said it was not immediately affected by rising raw material costs, but cost pressures could mount once its current contracts with suppliers expire.
“Our contracts directly reflect commodity or commodity movement and prices,” Tesla CFO Zach Kirkhorn said during the briefing. “But as those contracts expire, we have to renegotiate them, so there may be a lag in some cases.”
The automaker says its prices are unlikely to continue to rise in the long term.
“We hope we don’t need to raise prices any further,” Musk said. “Current pricing anticipates what we think is likely to grow in costs. And if that actually materializes, we estimate slightly reduced prices.
“But we don’t control macroeconomic environments,” he added. “Governments continue to print large amounts of money and if there is not a significant increase in the mining and refining of lithium and other raw materials, then everyone is fighting a limited amount of raw materials, this will obviously drive prices up to high levels.”
Musk said Tesla doesn’t want to slow down the transition to sustainable energy, even given such constraints, and the company is working with existing suppliers to figure out how to ramp up production of raw materials as quickly as possible.