Tesla's Gross Profit To Reach New High As Global Electric Car Price Hikes Set Off

Tesla's price hike foreshadows a new round of electric vehicle price increases that may be set off globally. The main drivers of this round of price increases include Europe and the United States in severe inflationary distress, as well as the epidemic resulting in insufficient supply. But for Tesla, with its China, Germany super factory expansion and production, price increases may be more in the case of sufficient orders, so that revenue and gross profit to further enhance the means.

On June 16 Tesla announced that it continues to raise prices for all models on sale in the U.S. This is the fourth price increase for Tesla since it entered 2022, with this price increase of about 5% (Model Y long-range model raised from $63,000 to $66,000).

Then Tesla China's official website announced that the Model Y long-range version for the Chinese market also saw a price increase, with prices rising by $2,800 to $58,000.

According to the latest data, Tesla's total revenue for the first quarter of 2022 reached $187.56, with a gross margin of 32.9%, setting a new all-time high record.

In response to Tesla's worldwide price increase plan, some industry insiders said that the price increase is still mainly to counter the rising costs brought about by the rising prices of battery raw materials. Lithium carbonate raw materials in January this year for the first time exceeded 44,000 U.S. dollars / ton, February is a wild rise to 56,000 U.S. dollars / ton, in a year rose nearly 8 times.

Tesla's main purpose of price increases is to continue to maintain high gross margins in the general environment of continued high raw material prices. Ernst & Young Bozhi Long strategic consulting partner Zhang Yichao said, "Price increases and market recognition to improve the relationship between the brand premium, mainly to level out the cost pressure brought about by rising upstream raw material prices."

In addition, he also said that Tesla is still competitive in the Chinese market, the price increase has little impact on sales.

In fact, the practice of hedging against rising costs by raising prices has become the new norm in the industry - Rivian, the new North American electric vehicle powerhouse, said on March 1 this year that both the R1T pickup and R1S SUV will see significant price increases, with the R1T going up 18 percent to $79,500 and the R1S rising 21 percent to The R1T will increase 18 percent to $79,500 and the R1S will increase 21 percent to $84,500.

Also announcing a price increase is Lucid Group, a North American luxury electric vehicle manufacturer. On May 5, Lucid CEO Peter Rawlinson said that all versions of Lucid's Air models on sale will increase by 10 to The price of the Air will be increased by 10 to 12 percent.

And to appease consumers, Rawlinson also said that those who order the car before June 1 will not be affected by the price increase. "The world has changed dramatically from when we first launched Lucid Air in September 2020."

Despite better economies of scale compared to the new forces, supply chain shortages and rising raw material prices are actually putting traditional car companies under the same pressure.

On May 16, Cadillac announced an increase in the starting price of its electric model Lyriq to $63,000, an increase of $3,000. Cadillac also previously said that it would spend $5 billion on commodity costs in 2022, which is twice as much as earlier predictions.

Old rival Ford chose to bite the bullet, with the all-electric pickup truck model F-150 Lightning opting to maintain a price tag of about $40,000, a low price that shocked many analysts even when the model was released last year.

In April, Ford expects to spend $4 billion on raw materials in 2022, twice as much as Cadillac did the previous year.

Interestingly, not all electric cars are going up in price with the rising costs. For models with a certain sales volume, the scale effect helps manufacturers maintain current prices even though they will also be affected by higher costs.

Chevrolet, one of the GM Group brands, has increased its electric car Bolt by only $500 compared to the beginning of the year and now starts at $31,500, while the Nissan Leaf LEAF, which was introduced back in 2010, has not made any price adjustment, with the two segment models priced at $27,400 and $35,400 respectively.

Currently, both the Chevrolet Bolt and Nissan Leaf LEAF sales have passed the 100,000 mark, and as of 2021, the two vehicles will sell 100,600 and 165,700 units in the U.S. market, respectively.

Rising raw material prices and supply chain shortages triggered by factors such as epidemic outbreaks and local tensions have plagued the auto industry, especially the electric vehicle industry, for nearly two years.

Different companies also have different views on when the current predicament will end. Pessimistic such as Stellantis Group CEO Tavares, that the current situation is only a prelude to more difficulties in the future; while some analysts believe that this phenomenon will be gradually improved from the end of 2022.

About Author
John Murphy

John Murphy is the founder of TOPCARS Tesla Aftermarket Accessories, as well as an investor in Tesla and owner of the Model Y. He posts about Tesla news while running the site on a daily basis.

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