After multiple price hikes that pushed Tesla’s bestselling Model Y above $65,000 for the base version, CEO Elon Musk said the automaker’s overall pricing is “at embarrassing levels” and blamed supply chain shocks and overwhelming demand for the steady march upward.
“We’ve raised our prices quite a few times,” Musk said on the company’s second-quarter earnings call Wednesday. “They’re frankly at embarrassing levels. But we’ve also had a lot of supply chain and production shocks and we’ve got crazy inflation.”
Musk said that inflation appears to be cooling off and he’s hoping to avoid any additional increases on Tesla’s four-vehicle lineup this year — and to perhaps even bring prices down.
“I think inflation will decline towards the end of the year,” Musk said, adding that economic predictions should be taken with a grain of salt. “I’m hopeful — and this is not a promise — but I’m hopeful at some point we can reduce prices a little bit.”
Tesla sells at fixed prices online directly to consumers.
Tesla’s entry-level vehicle, the Model 3 compact sedan, starts at $48,440 with shipping after briefly selling for $35,000 three years ago. The EV maker’s most expensive Model X crossover — in Plaid performance trim — costs $140,440 with shipping.
Still, Musk said that Tesla vehicles represent good value for the money and noted that demand is very strong. In fact, the automaker’s goal is to ramp up production globally as fast as possible so that its backlog does not continue to grow.
“Right now our problem is very much production,” Musk said on the call. Customers ordering a Model Y today, he added, would likely receive their vehicle next year.
Tesla struggled with its overall production ramp in the second quarter after its China factory was shut down for several weeks and new plants in Berlin and Austin started off slowly. On the other hand, the automaker’s plant in Fremont, Calif., operated at record capacity.
Tesla also said June production globally set a new record.
Its total output in the first half of the year was 563,987. The automaker expects to see a 50 percent increase for the full year compared with 2021 production of 930,422.
The company also expects 50 percent growth per year for the foreseeable future as it scales to 10 million or 20 million vehicles by the early 2030s, Musk has said.
“We’ve had many 30,000 car weeks already, so I think a 40,000 car week is within our reach by the end of the year,” Musk said on Wednesday’s call. Production of 30,000 vehicles a week would represent over 1.5 million annually and 40,000 a week would be just over 2 million.
Musk said he expects Tesla to begin delivering its much anticipated Cybertruck pickup by the middle of 2023, adding to Texas factory production. He forecast output at Texas and Berlin at 5,000 vehicles a week by the end of this year or early next year, and 10,000 a week by the end of 2023.
In its second-quarter shareholder letter, Tesla revised installed capacity numbers for its plants upward, with Fremont rising to 650,000, Shanghai rising to about 750,000, Berlin at 250,000 and Austin at 250,000. In Tesla’s first-quarter earnings letter, it had listed Fremont as 600,000, Shanghai as 450,000 and Berlin and Austin as “early ramp.”
In second-quarter financial results, the EV maker posted an adjusted profit of $2.27 per share vs. analysts’ consensus estimates of $1.81.
Its automotive gross margin fell to 27.9 percent, down from a year earlier and the preceding quarter, amid inflationary pressure.
Total revenue fell to $16.93 billion in the second quarter from $18.76 billion a quarter earlier, ending its streak of posting record revenue in recent quarters, as it struggled to meet demand for its electric cars due to a shutdown of its Shanghai factory and production challenges at new plants.
Analysts were expecting revenue of $17.10 billion, according to IBES data from Refinitiv.
“Tesla’s solid quarter is the latest sign that it has done an outstanding job navigating through global supply chain and logistics challenges, weathering the storm better than most legacy automakers,” Jesse Cohen, senior analyst at Investing.com, told Reuters.
Shares of Tesla were up about 9 percent in mid day trading Thursday. The shares are down about 35 percent since their peak in November.
Reuters contributed to this story.