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The real impact of decades-high inflation is even worse than US government data shows, according to Tesla CEO Elon Musk.
Musk detailed the dire landscape for US inflation while answering a question about Tesla’s recent move to hike prices across its entire vehicle lineup – despite the company’s long-stated goal of making electric cars more affordable for the mass consumer market.
The billionaire said Tesla still aiming to makes its vehicles “as affordable as possible,” but the goal has been “very difficult” to achieve. US consumer prices increased 8.5% in March – the most since 1981.
“I think the official numbers actually understate the true magnitude of inflation,” Musk told analysts during Tesla’s first-quarter earnings call.
He added that Tesla’s suppliers are under “severe cost pressure” – with some requesting 20% to 30% higher prices for key parts compared to one year earlier. Musk said inflation appeared likely to remain high through at least the end of the year.
The Tesla price hikes first reported in March ranged from 5% to 10% depending on the model, with the auto maker’s cheapest available car, the Model 3 with rear wheel drive, jumping to $46,990 from $44,990.
Tesla has faced higher costs for key materials such as nickel and aluminum, especially since Russia’s invasion of Ukraine caused further disruption to commodity markets.
Musk warned consumers will likely face even steeper prices in the future as Tesla’s current contracts with suppliers expire and are renegotiated on less favorable terms. He added that the company’s “hope” is that it won’t “need to increase the pricing further” in the months ahead.
“If governments keep printing vast amounts of money and if there are not significant increases in lithium extraction and refinement and other raw materials, such that everyone is competing for a limited amount of raw materials, then obviously, that will drive prices to high levels,” he said.
Tesla and other automakers have faced mounting difficulties with their supply chains as the COVID-19 pandemic caused bottlenecks and higher shipping costs.
Last summer, Musk told analysts that Tesla was reprogramming its car software to use computer chips that were more readily available due to a severe global semiconductor shortage.
Despite the inflationary pressures, Tesla posted strong quarterly results. The company’s revenue jumped 81% to $18.8 billion for the quarter, outpacing Wall Street’s estimates.