Elon Musk has finally given an explanation as to why Tesla keeps increasing Model 3 and Model Y prices.
The reason is simple: Costs are increasing.
Since the beginning of the year, Tesla had notably adopted a strange pricing strategy that puzzled people following the automaker.
While Tesla has been no stranger to frequent price changes throughout the years, the company clearly ramped them up in 2021 with seven price changes on Model 3 and Model Y in just a few months.
The price changes were small and incremental, but they were significant when you add them up together.
Model 3 Standard Range Plus, Tesla’s cheapest vehicle, increased in price from a low of $37,000 back in February to $40,000 – a more than 8% increase in price.
Just a few months ago, the Model Y Long Range AWD was selling for less than $50,000, and now it starts at $52,000.
Tesla never confirmed any reason behind those price changes.
Now CEO Elon Musk has commented on the issue for the first time after someone on Twitter complained of Tesla increasing prices while removing features, like radar and front passenger lumbar support.
Musk blamed “major supply chain price pressure industry-wide”:
“Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially.”
The CEO didn’t specify which raw materials in particular that are affecting Tesla prices, but you can have your pick.
For example, the price of copper has more than doubled since the beginning of the pandemic:
Other materials essential to the auto industry, like steel and aluminum, have also seen massive cost increases over the last year.
It appears that Tesla is now feeling the pressure of those important cost increases, and it is passing the cost to consumers through the recent price increases.
Well, that puts an end to the speculation. The simplest explanation is often the correct one.
Until now, Tesla had only discussed supply chain issues affecting production in terms of availability of parts and materials – leading to production halts and things of the sort.
But Tesla is now making it clear that it is also affecting costs significantly, which is kind of obvious in hindsight.
Now, it will be interesting to see how Tesla navigates the issue going forward because the automaker has made it clear that its goal is to reduce the cost of its electric vehicles and not the other way around.
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