Tesla CEO Elon Musk said Wednesday that he thinks inflation is worse than what the media reported. With the way things are going, he expects inflation to persist throughout 2022.
Musk Says Inflation is Worse Than Reports Indicate
Musk gave his comments during Tesla’s first-quarter earnings last Wednesday, CEO Elon Musk said he thinks that inflation is worse than reported and is likely to last all year in 2022.
The US Bureau of Labor Statistics said that inflation reached 8,5% in March this year. The past two months registered the highest inflation rates in the last 40 years.
The spiraling cost of energy supplies, exacerbated by Russia’s invasion of Ukraine, is pushing prices of nearly everything to new highs.
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During the earnings call, an analyst asked Musk about Tesla’s recent price increases. He also asked Musk how the EV company plans to fulfill its promise of producing affordable electric vehicles for the mass market.
Cars that run on electricity are seen as one way to reduce ordinary people’s reliance on fossil fuels.
Inflation is Worse, ‘Official Numbers Understate the True Magnitude’
Musk confirmed that Tesla “absolutely” wants to make its EVs as affordable as possible. However, he said that pricing is challenging right now, given the high inflation in a recession-ripe economy.
“I think the official numbers actually understate the true magnitude of inflation. And inflation appears to be likely to continue for at least the remainder of this year.” he said,
The Tesla CEO also noted that some Tesla suppliers are asking for 20 to 30% additional markups for parts orders this year and last.
“What’s keeping costs down at least in the short term is that we have locked in contracts with suppliers. Those modular contracts will obviously run out, and then we’ll start to see potentially significant cost increases,” Musk warned.
The company is currently dealing with rising costs for raw materials, commodities, and outbound logistics.
Supply Chain Issues Persist
Tesla issued a summary of the ongoing problems that necessitate price increases for its popular electric vehicles.
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“Challenges around supply chain(s) have remained persistent, and our team has been navigating through them for over a year.
In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations. Furthermore, prices of some raw materials have increased multiple-fold in recent months,” it wrote.
Meanwhile, Musk challenged entrepreneurs to consider going into the lithium production business. He said that lithium is currently lucrative given the growing battery needs of Tesla and other EV companies.
“Lithium margins right now are practically software margins,” he said. “It’s like, do you like minting money? Well the lithium business is for you.”
Will Tesla Raise Prices Again Soon?
Additionally, analysts asked Musk if Tesla plans to raise prices for their cars. Musk replied that the current price increase already anticipated rising costs.
So, the company doesn’t need to issue a new round of price hikes.“Current prices are for a vehicle delivered in the future like six to 12 months from now,” he said.
“So, this is our best guess”. Musk did warn that Tesla has no control over the macroeconomic environment. Tesla has no way of knowing if or when “governments keep printing vast amounts of money.”
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Do you agree with Tesla CEO Elon Musk that the current inflation is worse than what reports indicate? Also, do you agree that high inflation will persist throughout 2022 and maybe beyond?
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