Tesla to Hike Car Prices for the Second Time in Less Than a Week After Rising Inflation Pressures

Tesla to Hike Car Prices for the Second Time in Less Than a Week After Rising Inflation Pressures
Tesla's China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China, on Jan. 7, 2020. (Aly Song/Reuters)
Bryan Jung
3/16/2022
Updated:
3/17/2022
0:00

Tesla hiked its prices for its electric vehicles in the United States and China for the second time in a week, after CEO Elon Musk said that the company was facing inflation pressures in raw materials and logistics.

The electric car company had last raised its prices on March 9.

Tesla’s Model 3 and Model Y have seen massive cost hikes as metal prices are on the rise due to sanctions on Russia, which had supplied the raw materials, and the already existing supply chain crisis.

The prices of metals used in cars have soared globally—including aluminum, which is used in the bodywork; palladium for catalytic converters; and nickel and lithium, key components that power electric vehicle (EV) batteries.

The price of nickel surged 130 percent this year alone, according to analysts at Wells Fargo, while aluminum, cobalt, and lithium are up by between 16 percent and 88 percent.
In a tweet earlier this week, Musk said that Tesla and his space exploration company SpaceX have seen “significant recent inflation pressure in raw materials & logistics.”

“And we are not alone,” he added.

Meanwhile, a surge in CCP(Chinese Communist Party) virus cases in China and the resulting lockdowns in several cities have hit already-stretched supply chains, with critical components like semiconductors, which are mostly made in East Asia, remaining in short supply.

Tesla’s U.S. website indicated that prices of its American-produced cars have risen between 5 and 10 percent.

Tesla’s cheapest available car, the Model 3, now costs $46,990, up from its old price of $44,990, while its most expensive U.S. vehicle model, the Model X Tri Moto, now costs $138,990, up from $126,490.

The prices of Model 3 and Model Y vehicles made in China have increased roughly 5 percent.

China’s Tesla website listed the starting price of the Model 3 Performance at 367,900 yuan ($57,648).

The Model Y Long Range in China now costs 375,900 yuan, up from the previous price of 357,900 yuan, while the Model Y Performance is currently priced at 417,900 yuan, up from 397,900 yuan previously.

Rising costs have raised concerns about the economics of electric vehicles, as legacy automakers and startups prepare to launch new cars at the tail end of a long semiconductor supply crunch in Asia that has continued to reduce production at companies such as Toyota and Volkswagen.

Last summer, Musk told analysts that Tesla was reprogramming software to use computer chips that were more readily available domestically.

Tesla, which has a diversified supply chain, is particularly vulnerable to supply chain disruptions of raw materials, as the world’s biggest electric vehicle manufacturer.

It was discovered this week that millions of euros worth of aluminum had been bought by Tesla from Russian company Rusal going back to late 2020, according to CNBC.

However, this was before the Russian company had been subject to U.S. sanctions, which have further complicated issues in the global supply chain crisis.

The aluminum was being used at a Tesla vehicle assembly plant near Berlin for casting parts.

Tesla received a conditional go-ahead for its 5 billion euro ($5.5 billion) German factory outside Berlin earlier this month after months of delay.

It appears that U.S. production of Tesla vehicles did not make use of aluminum from Rusal.

Even if Russian-made aluminum is not used in American-made Teslas, rising aluminum prices for vehicles in the United States are only compounding already high inflation in the country, which is facing the highest 12-month inflation rate in 40 years.

Reuters contributed to this report.