Elon Musk says that Tesla is waiting for inflation to “calm down” before it can finally start reducing the prices of its electric vehicles, which have increased 20-30% over the last two years.
Early in the electric vehicle revolution, one of the main complaints was the cost.
EV enthusiasts counter the argument with the claim that cost would go down with volume and as battery cost would improve with new technologies.
They were right until 2020, when the pandemic and out-of-control inflation hit the world economy pretty hard.
Tesla has been the best example of that due to its direct-to-consumer approach that does not rely on car dealerships that agree on the final price with the customers.
Instead, Tesla’s advertised prices on its website are the final prices, and they have been going up steadily.
For example, the Tesla Model Y started at $ 53,000 in early 2020, and today, the same vehicle starts at $ 66,000.
That’s a 25% increase in price in less than two years, and the same is happening across Tesla’s entire vehicle lineup.
Interestingly, those price increases have not affected Tesla’s demand as the automaker still enjoys a significant backlog of orders with some of its models still having a 6- to 10-month delivery timeline on new orders.
But Tesla has stated that its goal has been to reduce electric vehicle prices to make them accessible to more people.
On Twitter today, CEO Elon Musk was asked about when can we expect Tesla to lower prices again, and the CEO said that Tesla plans to lower prices when “inflation calms down”:
It’s important to note that while Tesla has been increasing prices significantly over the last two years, its gross margin on vehicles has also significantly improve – indicating that Tesla’s price increase has been greater than its cost increases due to inflation and supply chain issues.
Tesla has explained this by saying that because of its backlog of order, it has to increase prices based on the cost of vehicles to be produced in 6-10 months from now when they produce vehicles being ordered today. The automaker has not always been able to predict those increases acccurately.
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