Tesla Profits Soar Amid Constantly Rising Prices

With demand as high as ever customers are clearly unfazed by Tesla's continuously rising prices.

MIC Tesla Model Y SR (China)

Ben O'Hare

By: Ben O'Hare

Apr 24, 2022 at 8:34am ET

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Tesla is continuing to grow at an unprecedented rate. The world's most valuable automaker recently opened two new Gigafactories, Giga Texas and Giga Berlin, meanwhile the Model Y is quickly becoming one of the best-selling crossovers on the market.

Tesla's continued sales success has not been deteriorated by several price hikes for its best-selling vehicles, the Model 3 and Y. In fact, demand for both remains as high as ever. Deliveries are up 68%, with 295,324 Model 3 and Y EVs sold in Q1 2022 (the 3 and Y represented around 95% of all Tesla deliveries). Total revenue last quarter was $18.76 billion, significantly more than many analysts had predicted. As a result, Tesla made a gross profit of 32.9% ($5.54 billion) - a new personal best for the firm.

Tesla CEO Elon Musk discussed the price rises in a conference call following the release of the automaker's Q1 2022 financial results. Musk outlined that the price hikes were based on expected costs in 6-12 months time, as that is when cars ordered today will be built.

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Actually, on the price increase front, I should mention that it may seem like maybe we’re being unreasonable about increasing the prices of our vehicles given that we had record profitability this quarter. But the waitlist for our vehicles is quite long and some of the vehicles that people order, the waitlist extends into next year. So, our prices of vehicles ordered now are really anticipating supplier and logistics cost growth that we’re aware of and believe will happen over the next six to 12 months. So that’s why we have the price increases today because a car ordered today will arrive, in some cases, a year from now.

That said, Tesla may decrease prices if those predicted additional costs do not occur. Tesla CFO Zachary Kirkhorn mentioned that if growth costs do not materialize, the automaker may "slightly reduce prices".