Tesla With Large Prices Increases For All Vehicles
Inflation and supply chain issues have caused concern according to Elon Musk and a Tweet he sent sharing pressures Tesla was facing due to inflation. The end result of this is one of the biggest price increases in Tesla's history. Let's see what the changes are:
March '21March '22YoY%
Model 3 - Standard Range$38,490$46,99022%
Model 3 - Long Range$47,490$54,49015%
Model 3 - Performance$56,990$61,9909%
Model Y - Long Range$50,490$62,99025%
Model Y - Performance$60,990$67,99011%
Model S - Long Range$79,990$99,99025%
Model S - Plaid$119,990$135,99013%
Model X - Long Range$89,990$114,99028%
Model X - Plaid$119,990$138,99016%
Some of these changes are very significant. The Model X - Long Range is up the most, a whopping 28% since a year ago and the Model S Long Range and Model Y Long Range is up a giant 25% since a year ago. All vehicles are up at least 9%.
With these prices going up so high, are we going to see wait times to get a Tesla vehicle decrease? I visited Tesla's website to take a look at all their vehicles and the only vehicles that have any inkling of a short wait time is the Tesla Model 3 RWD (standard range), but even it is still out to August of 2022.
I have a Tesla Model 3 RWD (standard range) on order and the date of delivery got moved up to the end of March, 2022, from July, 2022, shortly after these price increases were announced. Does that mean I jumped the line because many people canceled their orders? I'm not sure - we'll see if the new date holds.
Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics— Elona Musk (@elonmusk) March 14, 2022
Inflation + Demand = Much Higher Prices
There has been a few thousand dollar price increase over the last couple weeks for the Tesla Model 3 and Tesla Model Y, which are Tesla's most purchased vehicles.
Using Q4, 2021 actual numbers, if Tesla sells cars for an average selling price of now $54,670, and it costs Tesla $39,844 to make the car, we have an average selling price increase of 6.4% and an average cost to produce the car of 9.0%. Even in the face of rising prices, Tesla has found a way to reduce the cost to produce their vehicles.
This tells me that Tesla continues to find a way to take advantage of economies of scale and drive the cost to produce their cars down, even with inflationary pressures and higher material costs. Tesla is an incredibly efficient company.
I wonder if this price pressure will continue for Tesla's vehicles and I think it will continue to happen throughout the year. Tesla still has incredible demand for their vehicles. I think Tesla could have staggered their price increases to get more feedback from customers and cancelled orders/less orders.
Tesla is going to have reduced costs when Giga Berlin and Giga Texas open up, especially with Giga Berlin coming online and no longer having to use Giga Shanghai as a primary export hub - once Giga Berlin has reached volume production.
Tesla will lower prices once these supply chain issues and inflationary pressures end. I think this will happen when batteries and raw materials are so readily available that anyone can get them easily. This will drive costs down - but I don't see this happening for a few more years.
Will Tesla continue to raise prices this year due to supply chain issues and inflation? Will there ever be a point Tesla lowers prices?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.