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Elon Musk says he thinks inflation is worse than reported and likely to continue through 2022

Elon Musk says he thinks inflation is worse than reported and likely to continue through 2022

During Tesla’s first-quarter earnings call on Wednesday, Elon Musk, the company’s CEO, stated that he believes inflation is higher than reported and will likely last the entire year of 2022.

Annual inflation in the United States surged to 8.5 percent in March, a 40-year high, according to Labor Department numbers released Tuesday, as Russia’s merciless invasion of Ukraine pushed up energy expenses.

Musk was responding to a query from an analyst on Tesla’s recent price hikes and how the firm plans to achieve its long-term goal of delivering completely electric vehicles to the masses, in part to reduce people’s reliance on fossil fuels.

Musk added that Tesla’s goal is to keep electric vehicle prices as low as possible, but that pricing can be tough in the face of shifting macroeconomic conditions.

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“I feel the official numbers exaggerate the true degree of inflation,” the CEO continued. And it looks like inflation will continue for the rest of the year. ” In some cases, Tesla suppliers are requesting cost increases of 20% to 30% from 2021 to 2022, according to Musk.

“We’ve locked in contracts with suppliers, which keeps costs low for the foreseeable future.” “Those modular contracts will, of course, expire, and then we’ll start to see potentially huge cost rises,” Musk added.

Tesla is particularly concerned about rising prices for raw materials, commodities, and outbound logistics, according to Musk and other Tesla executives on the Q1 call.

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Tesla’s shareholder presentation stated, “Challenges related supply chain have remained persistent, and our team has been navigating through them for over a year.” In addition to chip shortages, COVID-19 outbreaks have wreaked havoc on our supply chain and production operations. Furthermore, in recent months, the cost of some raw materials has increased by a factor of 10.”

The CEO encouraged entrepreneurs to consider creating a lithium production company to supply Tesla and the rest of the fast-growing battery and electric vehicle industry.

“Lithium margins are almost software margins right now,” he observed. “It’s as though minting money is something you enjoy doing.” On the other side, the lithium business is for you.”

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Given the recent price hikes in both the US and China, analysts wanted to know if Musk thought Tesla would need to boost pricing again soon.

No, according to Musk, current pricing is predicated on what Tesla anticipates will be a future cost rise. “For the time being, the costs are for a car that will be delivered in the next six to twelve months, so this is our best guess.”

“Obviously, we have no control over the macroeconomic climate,” he said, adding that “governments continue to print tremendous amounts of money.”


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