Tesla Remains a Great Luxury Value Despite Price Hikes

Tesla won several awards from Kelley Blue Book including Best Value Luxury Brand. Can that be true when it’s been increasing its pricing?
Written by Andrew Kidd
Reviewed by Kathleen Flear
Mar 22, 2022
Kelley Blue Book recently awarded
Tesla
with three honors: Best Overall Luxury Brand, most Refined Luxury Brand and Best Value Luxury Brand— but that last one is a little surprising.
Despite some recent
price increases
on its lineup—between 4-5% for most of its vehicles—the fact that Tesla still ranked as
KBB’s best value luxury brand
might seem a bit suspect.

Tesla is still a good value

As
KBB
writes, the Tesla Model 3 is an all-electric luxury sedan that starts at a price comparable to other gas-powered competitors on the market, with starting prices in line with the Audi A4, Lexus IS and BMW 3 Series.
Similarly, the
Tesla Model Y
is priced in about the middle of the pack, slightly higher than its competition from Ford, Volkswagen and Kia while undercutting the more luxurious Jaguar, Audi and Cadillac offerings in its segment.
The Model S is also priced in the middle of the pack, more expensive than a Porsche Taycan but coming in under the Audi e-tron GT.
All these models are getting great reviews for things like charging speed, range and included tech. But is it safe to say Tesla is a good value when it has been steadily
increasing the prices
of its vehicle lineup in recent years? In short, yes, and the price increases have little to do with Tesla itself.

Price increases across the industry

Tesla isn’t alone in
jacking up its pricing
. Automakers across the board have increased their vehicle pricing because demand has far outstripped supply since the beginning of the COVID-19 pandemic.
Ford recently
increased the price
of many of its models as inventory shortages and supply chain issues struck the automaker. Despite this, Ford still made a pre-tax profit of $10 billion in 2021—up nearly $7.5 billion from 2020.
General Motors similarly increased its vehicle prices last year. Despite dealing with many of the same production disruptions as other automakers, GM reported record pre-tax profits of $14.3 billion in 2021 compared with $9.7 billion the previous year.
So if automakers are still pulling huge profits, why are we seeing higher prices on dealer lots?

Diminished inventory, skyrocketing demand

Insane dealer markups notwithstanding,
Forbes
reports that prices aren’t likely to come down until supply meets demand. Global supply chain issues and a shortage of computer chips—vital components in tech-filled vehicles—are causing enough delays in production to cause a shortage in vehicles, while demand for new vehicles has only increased due to that shortage.
In short, automakers are having a hard time replenishing their inventory to keep up with consumer demands. Fewer vehicles sold means fewer opportunities for automakers to return a profit, which means a price increase for consumers is how they’ll compensate. 
It could take a few years for inventory to be replenished enough to account for the last few years of lost sales. Until then, we’ll likely see higher sticker prices on new vehicles.
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