Tesla, along with other automakers, has been forced to raise prices on its vehicles numerous times this year and in 2021. In Tesla’s case part of the reason is due to rising levels of demand as some vehicle configurations have an estimated delivery date more than one year away.
The other main driver behind the prices increases has been supply chain disruptions and rising levels of inflation. Scarcity and increased prices for the individual parts of the vehicle translate into a higher end price to build one. Even with industry-leading margins, Tesla has had to raise its prices to cope.
Before these strings of price increases, it was not uncommon for Tesla to lower its prices. That all but stopped in early 2021 and might happen again, but only when “inflation calms down,” according to CEO Elon Musk who made the comment this morning on Twitter.
If inflation calms down, we can lower prices for cars
— Elon Musk (@elonmusk) July 15, 2022
The question then becomes when will inflation calm down.
Current rates of inflation are the highest they have been in four decades. In Canada inflation hit 7.7% in May, the highest level seen in 39 years. In the U.S the Consumer Price Index rose 1.3% in June for an overall increase of 9.1% over the previous 12 months.
With as much uncertainty as there is across the globe, there is no guarantee inflation has hit its peak, and could rise even further through the second half of the year.
The one positive with the increasing inflation is that Tesla’s large margins means they are still making money on their vehicles. That is not the case for Ford, which recently said they are no longer making any profit on the Mustang Mach-E due to inflation.