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Elon Musk: Inflation Forcing Tesla To Raise Vehicle Prices - Effects On Consumers & Stock Price

Elon Musk Says Inflation, specifically astronomical raw material prices, are forcing Tesla to raise vehicle prices. however, the company is implementing data-driven cost-cutting strategies.
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Depending on how you count it, about 25% of all the US dollar in existence was created in the past year. This was done in the midst of the worldwide pandemic that forcefully shut down the global economy including the US.

The dollar value created was then distributed by the US congress in various stimulus packages which went towards almost everything ranging from the stimulus check to paying for unemployment to bailing out small businesses, multi-billion-dollar conglomerates, and everything in between.

Some credit the stimulus packages for saving the US economy from the brink of depression caused by the pandemic.

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However, others use all the money printing as evidence of government gone amok, devaluing everyone’s holdings that quickly by that much, and use it to argue the US dollar is not a good store of value.

Whichever side of the argument you happen to fall into, one thing that’s certain is infusing the economy with all that cash is bound to have some consequences.

And the biggest feared consequence, at least from the market’s point of view is inflation causing the Federal Reserve to raise interest rates. And raising interest rates, in a nutshell, will mean no more cheap money, no more lucrative stock market gains.

And this macroeconomic environment can largely be attributed to the recent decrease in Tesla’s stock price. In the past few months, Tesla’s stock price has gone down from an all-time high of $900 to where it currently trades around $600.

Related news: What Tesla Should Do with Its Cash Hoard

And now, Elon Musk responding to a Twitter user unhappy with the overall direction Tesla is going has given us a little bit more clarity about how the inflationary environment is affecting Tesla.

The Twitter user specifically mentions Tesla removing adjustable lumbar support from the Model Y at the same time the company increases the vehicle’s price as a cause for concern.

However, Elon Musk says the recent Tesla price increases are due to industry-wide major supply chain price increases and specifically for raw materials.

Musk also points out the reason Tesla removed adjustable lumbar support (specifically from the passengers’ seat) was data from their vehicles has shown the feature is hardly ever used.

In my opinion, Tesla using the ample metadata the company gathers from its vehicles to help it cut down costs with as minimum effect to consumers as possible is a great decision.

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Given the raw materials price increase, by as much as 80 percent in some cases, and the chip shortage that has plagued the automotive industry, companies that implement creative ways to combat this challenging environment will come out much stronger on the other side.

So what does this mean for people planning to buy a Tesla and for Tesla’s stock price in the short term?

Since Tesla is already implementing data-driven strategies to lessen the burden raw material price increase is putting on the company, I expect prices for Tesla vehicles will remain relatively stable in the short term.

And the same goes for Tesla’s stock price. The same efficiencies the company is implementing to control the price will help the company ensure profitability in the short term.

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Having said this, given the pressure on Tesla’s stock price is macroeconomic and is mostly out of the company’s hands it’s hard to say when the stock price will get back to its all-time highs and beyond.

However, once the macro-environment difficulties improve, Tesla is setting itself up to be the dominant force in the automotive industry.

Also, watch CATL suddenly making an unexpected battery move toward Tesla Giga Shanghai on Torque News Youtube channel and please subscribe us on Youtube and follow on Twitter for daily Tesla and EV news reports.

So what do you think? Do you agree Tesla is right to remove lumbar support? Also, do you think Tesla can successfully weather the recent challenges of the automotive industry? Let me know your thoughts down in the comments below.

For more information check out: Tesla Calls To Cover Giga Berlin In Awesome Graffiti As The Factory Finishes Construction Also, see Refreshed Tesla Model S/X To Launch With 350KW V4 Supercharging, V11 Software

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.


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Comments

I don't mean to sound jaded, but I suspect that the Tesla price hikes are more a function of their upcoming federal subsidy reinstatement. That should mean that before the end of the year, Tesla and GM EVs will once again qualify for a $7500 subsidy, and being American made will add another $2500 to the benefit. So rather than them shooting the model prices up by $5000 when the subsidies are available, they will creep the prices up over the next few months, with a slew of excuses. I expect to see GM do the same.