Inflation rose again in March, but Tesla CEO Elon Musk said he thinks inflation could be worse than reported and that it will likely not dissipate any time soon.
During Tesla’s first-quarter earnings call on Wednesday, Musk addressed questions about the recent price increase for Tesla vehicles, CNBC reported.
There were also questions about how Tesla plans to fulfill its goal of making electric vehicles available to the general public in order to scale back reliance on fossil fuels.
Musk responded that Tesla still aims to make EVs as affordable as possible, but said that pricing right now is a challenge due to the current economic conditions and inflation.
In March, inflation hit 8.5 percent, the Bureau of Labor Statistics reported.
“I think the official numbers actually understate the true magnitude of inflation. And inflation appears to be likely to continue for at least the remainder of this year,” Musk said.
The U.S. is struggling not only with inflation, but also supply chain issues and labor shortages.
As the U.S. Chamber of Commerce noted, over the past two years, millions of jobs have been added to the market, but millions of Americans have also left the labor force.
Meanwhile, instead of getting better, the supply chain issues are getting worse all around the globe.
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“Problems keep piling on top of another. Global supply chains may be disrupted for quite some time,” CNN reported.
These issues have Tesla facing higher production costs, which is then driving costs up for vehicles.
Prices have gone up as suppliers are requesting 20 to 30 percent cost increases for parts, CNBC reported.
But Musk said they are trying to keep costs down since they have locked in contracts with their suppliers. Once contracts expire and have to be renewed, however, costs will rise.
“What’s keeping costs down at least in the short term is that we have locked in contracts with suppliers. Those modular contracts will obviously run out, and then we’ll start to see potentially significant cost increases,” Musk said.
Tesla has continued to deal with the rising costs of raw materials due to inflation and supply chain snags.
According to CNBC, the company noted in its shareholder deck: “Challenges around supply chain have remained persistent, and our team has been navigating through them for over a year. In addition to chip shortages, recent COVID-19 outbreaks have been weighing on our supply chain and factory operations. Furthermore, prices of some raw materials have increased multiple-fold in recent months.”
Musk said that Tesla will endeavor to keep prices down, but also said that “obviously, we don’t control the macroeconomic environment” or whether or not “governments keep printing vast amounts of money.”