Elon Musk Puts Demand Concern To Rest: "Price Really Matters"

After price cuts, Tesla notes the strongest orders ever in its history.

Tesla Model 3 and Tesla Model Y

Mark Kane

By: Mark Kane

Jan 26, 2023 at 9:41am ET

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The year 2022 was a record one for Tesla, which noted the highest-ever quarterly revenue, operating income, net income, and electric vehicle deliveries.

During the Tesla Q4 and full year 2022 financial results and Q&A webcast, the company's CEO Elon Musk addressed the most common question among investors - demand for electric cars.

According to Elon Musk, after the company reduced prices (globally), there is no demand concern as orders surged to new record levels (at least year-to-date in January).

"I want to put this concern to rest. So far in January we've seen the strongest orders year-to-date than ever in our history."

Let's recall that at the end of 2022, it was reported that Tesla's global electric car order backlog was falling quickly (to less than 100,000 units).

Elon Musk said that currently, the number of new orders is almost two times higher than the rate of production. That's outstanding news for the manufacturer. However, it's hard to say whether that will continue in the following months.

The short-term response to increased demand is a slight price increase in some models, which is proof that supply and demand are key factors.

Overall, demand is expected to be good - despite that there is a probable contraction in the automotive market as a whole (or even a recession), Musk noted.

One of the most interesting things was about prices: "the price really matters".

"There is a true pain that a vast number of people want to buy a Tesla car, but can't afford it, and these price changes really make a difference for the average consumer."

What do you think?

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Prices might be Tesla's major advantage, as the company successfully lowered electric car costs which initially allowed it to achieve very high operating margins, and now allows it to reduce prices to increase sales volume.

The recent input from Munro & Associates indicates that Tesla still will be profitable, even when prices are reduced. That would be very positive news for the entire EV market (although some OEMs might be forced to step up their game and also lower costs).