Tesla, Inc. (TSLA) has raised the price of several of its US electric vehicles (EVs) again due to a combination of inflation and supply chain constraints. The shortage of semiconductor chips is also a threat to the company's growth.
The price hike affects the long-range version of the Model 3 as well as the high-end models such as Model Y and Model X. The steepest increase is for the Model X Dual Motor All-Wheel Drive which will now be available at $120,990, up from $114,990--a difference of $6000.
The Model S Dual Motor All-Wheel Drive will also cost $5000 more and will sell at $104,990, up from $99,990.
While the price revision will not affect the most affordable Rear-Wheel Drive version of the Model 3 which sells at $46,990, the cost of the Long Range Model 3 will be higher by $2,500 and will be sold at $57,990. The Long Range Model Y will also cost $3000 more, with a new sticker price of $65,990.
- Tesla has increased the price of some of its US models due to the rising cost of raw materials for its batteries, chip shortage, and supply chain constraints.
- This is the fourth price increase since early March.
- The steepest increases will be for the Dual Motor All-Wheel Drive versions of Models X and Y.
- The price for the basic version of Tesla's most affordable model, the Model 3, will remain unchanged.
Repeated Price Hikes
In mid-March, when Tesla raised the price of all its EV, the company's chief executive officer (CEO), Elon Musk, tweeted that inflationary pressure was hurting the company's margins as the price of raw materials such as steel, nickel, and palladium increased. The week before, the company had raised the price of its long-range EVs due to the rising cost of raw materials such as lithium which is used in batteries. A third price increase on Model 3's that have nickel-based batteries followed in April.
One reason given is that 7.2% of the world's nickel supply comes from Russia. Uncertainty about whether Russian metals will be subject to sanctions the same way Russian energy exports have been has pushed up prices. A substantial amount of other metals used in EV production are also produced in Russia, compounding the issue further.
|Old and New Prices of Tesla Models|
|Model||Old Price||Current Price||Difference|
|Model X Dual Motor All-Wheel Drive||$114,990||$120,990||$6000|
|Model S Dual Motor All-Wheel Drive||$99,990||$104,990||$5000|
|Model Y Long Range||$62,990||$65,990||$3000|
|Model Y Performance||$67,990||$69,990||$2000|
|Model 3 Long Range||$54,490||$57,990||$2500|
Though the repeated hikes in its EV prices may curb demand, for now, Tesla's production has yet to catch up with its order bookings. Tesla has an order backlog with delivery schedules stretching several months and the lineup seems to be growing.
Earnings and Stock Performance
In Q1 2022, the company reported revenues of $18.8 billion and beat expectations due to higher sales, an increase in the average price of its EVs, and inflows from other businesses. Adjusted earnings per share (EPS) of $3.22 also came in above expectations, partly due to the lower cost of goods sold (COGS).
The stock however has been taking a beating in recent weeks due to the larger inflationary fears and the Fed’s interest rate hikes that have resulted in a recessionary downtrend for the market. Though it was already trading well below its all-time peak of $1243, Tesla's stock plunged after the news and has recovered slightly. The shares closed out the week at around $650.
The Bottom Line
Tesla has raised the price of its vehicles for the fourth time since the beginning of March. Increasing commodity prices due to market turbulence caused by Russia's invasion of Ukraine are likely a major cause. Prices of commodities involved in EV production had already been rising due increased demand. Lower costs helped Tesla boost its earnings in Q1, so it remains to be seen if these price increases will be enough to offset rising costs when Tesla reports Q2 earnings.
Twitter. "Inflation and the Price of Raw Materials."
Bloomberg. "Tesla Raises Prices Across its Entire Range."
S&P Global Market Intelligence. "Nickel producers confident they can fill gap if Russian supply is cut off."
Yale Environment360. "How Russia’s War Is Putting Green Tech Progress in Jeopardy."
Yahoo Finance. "Tesla's Record Demand and New Factories."
Twitter, "Tesla's growing backlog."
Yahoo Finance. "TSLA."