It is "Clear" That Tesla's Price Hikes Are Thanks to Gas Prices Increasing Demand and Awareness of EVs

Regarding Tesla's recent price hikes in the US—to what extent are they because of supply constraints or demand increases?

TMC member @Gigapress uses Google search trends, "probably the single best measure of what the populace is actually thinking about," to find this answer for themselves:

(Featured Image Courtesy of Tesla, Inc)

"The chart below is zoomed out to the last five years and it shows “Tesla” interest has very high variance, which means short term spikes are likely not statistically significant anyway, but the long-term trend shows general interest is double what it was in 2017."

"The big one is this: Unsurprisingly, we see a strong correlation between searches for “gas prices” and “electric cars”. Although gas prices have roughly 20x more interest in general, both search terms tend to follow each other’s relative movements."

"Relatedly, “how much does it cost to charge an electric car” is at triple the interest in the USA compare to last year’s baseline."

Conclusion -
"The dominant conclusion remains that a LOT of people became curious about electric cars when Mr. Putin decided to send troops across the border and fuel prices surged."

"Twitter, FUD, politics, oil-funded smear campaigns, recession, and a bunch of other things demonstrably do not matter as much as frustration with sending money up in smoke at the pump every week."

Please read their full analysis below:

Moderators' Choice: Posts of Particular Merit

I may not be likely to repeat this post, but I'm feeling a bit generous right now. From Gordon Johnson to many others whenever they've seen a company doing toooo well there has tended to be fraud, excessive optimism and hubris. Thus the actual facts are simply not credible to "linear thinkers"...

teslamotorsclub.com

(TMC Staff Note: This post was taken from the Investor's Roundtable discussion in order to promote it to TMC's Blog feed.)

 

[muzhik]

Yes... Fuel prices will do that.... loving skipping Costco gas station

 

[Nosken]

With nearly a 1 year wait for a Model Y. Tesla is pricing as a hedge againts what commodities and labor might be 1 year from now. If they are less than anticipated, they have room to lower prices if needed to be competitive.

 

[Gigapress]

With nearly a 1 year wait for a Model Y. Tesla is pricing as a hedge againts what commodities and labor might be 1 year from now. If they are less than anticipated, they have room to lower prices if needed to be competitive.

I’ve done extensive analysis on that in the investor thread and I believe that inflation is only a small part of the story but demand is the biggest factor. If you click the link the OP left, one of my posts breaking down inflation can be seen.

The OP shows only part of my recent post on gas prices. There has been a staggering increase in interest for EV-related queries for all Tesla models and almost all other EV models that directly corresponds with staggering increasing in searches about gas prices, and the timing also aligns with the waves of Tesla price increases (last October, early March, and now).

 

[EVolv3d]

I believe that Elon is playing another intelligent move beyond just increasing the prices to account for future inflation, increasing production costs and interest (supply & demand). By increasing prices across the board, Tesla increases the probability that people will keep their existing orders/reservations and won't cancel through fear of a potential recession. If buyers see that prices are increasing and they've already locked in their lower price, they're more likely to keep their order. They "know" they'll pay more in the future and will want to keep their "good deal". They could of course keep their reservation and sell their Tesla for a profit once it's delivered if they can't afford it.

EVs are in demand and people are willing to pay the increasing prices. Their still really isn't any EV competition for Tesla in US.. meanwhile fuel prices have exceeded $7/gallon here in California. Rivian & Lucid struggle with their supply chains, production, and costs to stay afloat and avoid bankruptcy. Ford hasn't been able to turn a profit from the Mache-E despite their relatively high price tag & federal EV tax credits. Ford reached a peak of Mache-E sales last month selling 5,179 units and have had to stop sales this month due to a safety defect. Meanwhile, people are willing to pay in the increased prices for Teslas allowing them to turn larger profits while other EV manufacturers struggle.

 

[alangold]

Yes when the recent increases were announced I said that current orders would not cancel as their car was already worth more in their mind - they do the same thing in Florida real estate - new homes keep going up in price keeping owners happy except for taxes

 

[BostonBurley]

Hikes upon hikes upon hikes. I used to defend the price variance, remember the M3P pricing debacle where even cultish Tesla fan Fred from Elektrek called Elon out???. If there’s a way to squeeze the customer, Tesla will find it and make you think you’re lucky bc others are behind you in line. To see the base model 3SR+ with a 25-28% margin (according to musk), to see it increase in price by 25-30%… wow. Reminds of autopilot FSD hikes, meanwhile the gimmick isn’t even used by those duped into paying for it.

 

[AdamSmash]

I'm glad I placed my order when I did. Ordered early/mid feb '22, received my M3LR at the end of may before a bunch of the price hikes.

 

[Gigapress]

Hikes upon hikes upon hikes. I used to defend the price variance, remember the M3P pricing debacle where even cultish Tesla fan Fred from Elektrek called Elon out???. If there’s a way to squeeze the customer, Tesla will find it and make you think you’re lucky bc others are behind you in line. To see the base model 3SR+ with a 25-28% margin (according to musk), to see it increase in price by 25-30%… wow. Reminds of autopilot FSD hikes, meanwhile the gimmick isn’t even used by those duped into paying for it.

The price is determined by the market. Wait times are approaching a year or more. The options are 1) Raise prices 2) Close the order book 3) Let backlogs increase and have the price of used Teslas exceed the price of new Teslas, which just invites flippers to buy up the supply for easy arbitrage profit.

 

[BostonBurley]

The price is determined by the market. Wait times are approaching a year or more. The options are 1) Raise prices 2) Close the order book 3) Let backlogs increase and have the price of used Teslas exceed the price of new Teslas, which just invites flippers to buy up the supply for easy arbitrage profit.

Easy arbitrage profit is how I’d describe Tesla’s strategy from any and every angle. Securing nickel mine deals isn’t about saving the planet. It’s about taking away the opponents potential to compete, while shoring up the potential to grow.
Btw the three options presented above have terrible tunnel vision.

 

[Gigapress]

Easy arbitrage profit is how I’d describe Tesla’s strategy from any and every angle. Securing nickel mine deals isn’t about saving the planet. It’s about taking away the opponents potential to compete, while shoring up the potential to grow.

Tesla started securing deals for nickel and other raw materials years ago when competitors had far more credibility and financial resources. Why didn’t they sign up for contracts? Oh yeah, I remember…they were too busy saying EVs were more than a decade from popularity and focusing on short-term ICE profits.

Also, who is using nickel and other raw materials most efficiently in EVs? Tesla. Everyone else wastes the material on battery packs that get less miles per kWh. Is there some moral reason why they should have a share of the materials that they voluntarily decided not to buy in advance?

Btw the three options presented above have terrible tunnel vision.

Enlighten me then. What plausible alternative options exist?

 

[BostonBurley]

Enlighten me then. What plausible alternative options exist?

Well, it has nothing to do with enlightenment
The subtext of absolutes like “these are the only options” and “the market determines the value” is not very academic. Tesla “raise prices” for “future cost of materials” a few months after doing the same thing, twice. It could include details and discrepancies, but it’s left vague. It could mean $1200, $1800. But we know it means $5000, $6000. THAT raises the value of every used model 3. That’s not the market; it’s the manufacturer, justifying its cause for a few days, all Tesla’s increase in value to exaggerate the effect, teeing up another cost raising for the future. If anyone is going to be the greedy grinch, don’t let re-sellers and individuals do it, let the richest man on earth. Cause he gooboi.

 

[Gigapress]

Well, it has nothing to do with enlightenment
The subtext of absolutes like “these are the only options” and “the market determines the value” is not very academic.

I have an academic background in economics and this is precisely what I was taught.

THAT raises the value of every used model 3. That’s not the market; it’s the manufacturer, justifying its cause for a few days, all Tesla’s increase in value to exaggerate the effect, teeing up another cost raising for the future.

That is not how this works at all. If Tesla raises the price of all new vehicles to $1 million each, do you think the used market will also be dragged to near that price?

 

[DrChaos]

Securing nickel mine deals isn’t about saving the planet. It’s about taking away the opponents potential to compete, while shoring up the potential to grow.

I bet Tesla was thinking 99% about its own needs and 1% about its competitors in these circumstances. For better or worse (and there are definitely some worse aspects to this), Tesla the company is entirely internally focused on its operational efficiency and production maximization. Its revenue can be nearly perfectly guaranteed and predicted with a given level of production.

 

[AndrewZ]

 

[Gigapress]

Search interest for everything related to EVs spiked in mid March and remains elevated. What point are you trying to make?

 

[John Nemesh]

You can choose to believe it or not, but Elon has already stated why the prices are increasing. With lead times up to a year out (!) they are trying to anticipate future cost increases and mitigate for them NOW by increasing the price...rather than either taking a loss on the vehicle, or trying to tell the customers that their car will cost more than what they were quoted when they put in their reservation.

Too many want to see this as some kind of conspiracy theory! WHEN (not if) Tesla ramps production and catches up with demand, they will have a better handle on the costs to manufacture and the prices should drop...assuming that the prices for certain commodities, like nickel or lithium, don't remain at sky high prices.

 

[uscbucsfan]

You can choose to believe it or not, but Elon has already stated why the prices are increasing. With lead times up to a year out (!) they are trying to anticipate future cost increases and mitigate for them NOW by increasing the price...rather than either taking a loss on the vehicle, or trying to tell the customers that their car will cost more than what they were quoted when they put in their reservation.

Too many want to see this as some kind of conspiracy theory! WHEN (not if) Tesla ramps production and catches up with demand, they will have a better handle on the costs to manufacture and the prices should drop...assuming that the prices for certain commodities, like nickel or lithium, don't remain at sky high prices.

"Losses"...What he means is that they are raising prices to maintain their insane profit per car. They are reporting record profits per car in the midst of COVID, supply issues, inflation, etc.

 

[Hiline]

Can we just agree that prices depend on supply and demand?

With order lead time up to 1 year, I think it’s clear which has the upper hand in the current environment.

 

[Trifocal3]

I had a Tesla rep call me this week about lease end options. No option to purchase the car outright, did have the option to extend the lease 6 months, but he recommended that I put in an order for my next vehicle now anyways as it could be a 12 month lead time and he also mentioned prices just went up again so you may want to get an order in before another price hike.