Have you been shopping around for a new car
? If so, you’ve probably noticed that prices are high, and in-demand cars are harder to get than ever. Both automakers and consumers alike have been facing the harsh reality of supply chain shortages and inflation. Tesla
was the latest company to raise its prices in response. In mid-March, Tesla CEO Elon Musk announced on Twitter
that both Tesla and SpaceX were suffering the consequences of recent inflation, and overnight, prices went up. The luxury electric vehicle is not known more for its flashy design and sportiness, so an affordable price tag hasn’t always been a priority, but even the brand’s cheapest car, the Model 3, now sells for $46,990. The recent price hike may come as a shock to the market because no models—not even the already lofty Model X or Model S—were spared from a price hike.
Not Tesla’s first price hike
While this price hike did technically happen overnight, Tesla has been steadily increasing its prices over the years in response to inventory shortages, supply chain issues, production disruptions, and increased prices of raw materials.
Talks of producing an affordable vehicle for Tesla have been in the works since as early as 2006, and in 2016 was first announced with the Model 3. It used to start at $35,000—that’s a 34% increase to today’s $47,000.
Dreams of an even more affordable car starting at $25,000, which Musk has hinted at since 2020, may not be in the near future as previously thought. CNN
reported that as of January 2022, Tesla has no imminent plans to work on a $25,000 car. “ This was perhaps foreshadowing to a few months later when Musk would hint at the coming price hikes. Here are the exact numbers:
The Model 3 Rear-Wheel-Drive increased by $2,000 to $46,990
The Model 3 Dual-Motor All-Wheel Drive went increased by $2,500 to $54,500
The Model 3 Performance increased by $3,000 to $61,990.
The Model Y base price increased by $2000 to $62,990
The Model Y Performance Increased by $3000 to $67,990
The Model S increased by $5000 to $99,990
The Model S Performance increased by $5000 to $135,990
The Model X increased $10,000 to $114,990
A changing industry
Tesla is perhaps implementing price hikes to mitigate soaring nickel prices that impact the cost of battery production. According to a report by Barrons
, prices of nickel are up by 80%—a massive hit to one of the main components of the lithium-ion batteries that power electric cars. Throughout the industry, automakers are struggling with the same inflation and production issues that Tesla is facing. Other manufacturers like Ford and General Motors have increased prices over the past year while still turning a profit, so why does it seem that automakers are still struggling?
The bottom line is that regardless of profits, disruptions in the supply chain mean that production still isn’t able to meet consumer demand, and prices aren’t likely to come down until they do.
Companies like Tesla may be able to sell reservations for hundreds of thousands of units to a hungry marketplace, but whether they will be able to manufacture and deliver them in a cost and time-efficient manner while continuing to pour money into innovating their current lineup is another question.
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