Tesla Stock: Elon Musk may have a price problem (and no $25,000 car)

You’re here (TSLA) – Get the Tesla Inc report CEO Elon Musk may want to save the world by making electric vehicles and solar power more widespread, but his cars have always been for, if not the wealthy, the well-to-do. Musk may support populist ideas, but his products are decidedly aimed at the elite.

“Tesla’s electric cars have base price ranges between $43,990 and $129,990 in 2022 depending on model,” according to EnergySage.com. “Customization like paint changes, interior upgrades and self-driving capabilities can add up to $19,000 more to your costs.”

There are, of course, tax incentives that could lower the cost of buying a Tesla for those high numbers. Their application depends on your place of residence and your personal tax situation.

Yes, the Model 3 made the company’s cars more affordable, but the so-called $35,000 Tesla never sold for $35,000. Some current supply chain headwinds suggest it won’t be anytime soon.

Tesla faces supply chain issues

At around one million cars a year, with plans to hit 1.5 million by 2022, Tesla is making a lot of cars for an electric vehicle (EV) company. Its production volume, however, lags well behind traditional automakers, and that, combined with the company’s general inventiveness, has kept it from feeling a major impact from the chip shortage in 2021.

Chief Financial Officer Zach Kirkhorn said the company was not immune to supply chain issues and noted that its Austin and Berlin plants had operated below peak capacity due to them. He said he expects these sites to ramp up “once the limitations are relaxed,” in his remarks during the company’s fourth-quarter earnings call.

“This will lead to higher fixed and semi-variable costs in the short term, in addition to the usual inefficiencies as we build a new plant,” he said. “We are also seeing inflation and rising commodity prices, which we believe will continue to put pressure on our costs.”

The CFO specifically pointed out that current and past issues could impact pricing.

“But please keep in mind that due to backlogs, price changes will generally impact our finances over the next several quarters,” he said. “Supply chain challenges and port congestion caused our ramp-up costs to rise significantly in the fourth quarter.”

Kirkhorn, however, sees these issues as temporary. He is optimistic about Tesla’s ability to cut costs and find new revenue streams.

“Over a longer term horizon, however, we are quite bullish on margin expansion,” he said. “On the hardware side, we are aggressively driving manufacturing innovations and operational efficiencies to reduce costs. And with the rapid development of FSD, software-based profits will eventually become an important addition to the profits generated from the sale of hardware.

Elon Musk says he’s not expecting a $25,000 Tesla

While Tesla has added the low-end Model 3, don’t expect the company to launch a competitor to the Toyota (TOYOF) Corolla or any other mid-range sedan.

“Well, we’re not currently working on the – on a $25,000 car. We – you know, at some point we will, but we’ve got enough on our plate right now, too much on our plate , frankly,” Musk said in response to a question on the call. “So, you know, at some point there will be. I think it’s kind of a question that – it’s kind of the wrong question, really.”

The CEO/serial entrepreneur, however, believes there is a path to a cheaper Tesla.

“It’s — what really matters is when is the car self-driving? I think the moment it’s self-driving, the cost of transportation drops, I don’t know, by a factor of four or five”, he said.

Eleanor C. William