Tesla Inc CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) in Shanghai, China August 29, 2019.
Aly Song | Reuters
Musk’s remarks came in response to an analyst’s questions about recent price increases for Tesla vehicles, and how Tesla plans to make good on its longstanding goal of bringing fully electric vehicles to the masses, in part to reduce people’s reliance on fossil fuels.
Musk said Tesla absolutely wants to make EVs as affordable as possible still, but lamented that pricing can be a challenge in the face of shifting macroeconomic conditions.
The CEO said, “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.” In some cases, Musk said, Tesla suppliers are requesting 20% to 30% cost increases for parts from 2021 to 2022.
“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 cautioned.
Tesla is especially grappling with rising costs for raw materials, commodities and outbound logistics, Musk and other Tesla executives said on the Q1 call.
In its shareholder deck, Tesla wrote: “Challenges around supply chain 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.”
The CEO encouraged entrepreneurs to consider getting into the business of producing lithium to supply Tesla and the rest of the growing battery and electric vehicle industry.
“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.”
With the recent price hikes for Tesla cars in the US and China both, analysts wanted to know if Musk thought the company may need to raise prices again soon.
Musk said no, that current pricing is in anticipation of what Tesla thinks its probable growth in costs will be. “Current prices are for a vehicle delivered in the future like six to 12 months from now so this is our best guess.”
But he caveated that by saying “obviously, we don’t control the macroeconomic environment,” and whether or not “governments keep printing vast amounts of money.”