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Tesla's Supply and Demand Work THIS Way

Tesla continues to have high demand despite continuing to raise prices. Will Tesla be able to sell every vehicle it makes for years to come?

Tesla's Supply and Demand Work THIS Way

Tesla is the front-runner and top EV maker in the world for a market that is just getting started. EVs are still in their infancy, and Tesla is in the prime position to take advantage of this exponential growth.

Here's how Tesla's supply and demand works: Many people are struggling to understand Tesla's supply and demand. Tesla's products (its cars) are very popular and people want them. This is called demand. Tesla is making sure they have enough supply to satisfy the demand of all the customers that want a Tesla vehicle.

A physical good that must be manufactured is what Tesla must do. Tesla must expand existing factories and build new factories in order to meet demand. Tesla also works with suppliers for parts in order to meet the demand for customers. Suppliers also help companies besides Tesla.

The price of Tesla's vehicles matter as well. With customers having to wait for months, Tesla could increase supply to meet this. Or they can increase the price in order to find the market clearing price where supply meets demand. But, due to price rises, profit margins go up, and total profit goes up.

Other expenses may be cut, like advertising. You don't need the extra business, so that cost is further added to profits.

Tesla's Demand

Tesla has such a good product that all customers are telling their friends about it and demand continues to increase even with prices being raised.

Tesla has worked on expansions of existing factories and built two new huge factories in Berlin and Texas.

Tesla is working to have long term contracts with its suppliers.

Tesla could even buy some of its suppliers out or increase its vertical integration in order to handle all the parts necessary to make a vehicle. Costs continue to go down with suppliers offering better deals so they don't lose your business due to increased vertical integration.

Tesla has secured great deals for battery components. This is helping it meet demand at a low cost. Tesla also made two new factories in two important areas. Tesla is spending time and research improving production techniques. The new factories are incorporating these techniques.

Tesla is beneficial to 3rd party suppliers like CATL with its batteries because it is a win-win situation. CATL sells batteries and Tesla sells cars. Still, Tesla can't keep up with demand and keeps raising prices. The whole time, Tesla has been improving production.

Tesla's product is increasing in quality and its cars are being seen everywhere. Tesla's low costs and high prices are creating high margins and profits.

The competition is thinking they can do this, but it's not so easy. What do you think about Tesla's demand for its vehicle? Will Tesla continue to sell every vehicle it makes?

For more information, see this video by Tesla Economist:

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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.

Image Credit, Tesla Economist, Screenshot