BC.Game

Elon Musk: Inflation Is Worse than Reported

UTC by Darya Rudz · 3 min read
Elon Musk: Inflation Is Worse than Reported
Photo: Shutterstock

According to the official reports, the US annual inflation rate accelerated to 7.9% in February of 2022 and rose to as much as 8.5% in March, the highest since January 1982, matching market expectations.

On Wednesday, Tesla Inc (NASDAQ: TSLA) reported its Q1 2022 results, beating analysts’ expectations and delivering incredible numbers. However, not everything is as good as it seems, as the EV maker can face risks caused by inflation later this year. During the first-quarter earnings call, Tesla CEO Elon Musk said he believes that inflation is worse than reported. Besides, it is likely to remain till the end of 2022.

Musk stated:

“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.”

According to the official reports, the US annual inflation rate accelerated to 7.9% in February of 2022 and rose to as much as 8.5% in March, the highest since January 1982, matching market expectations. Supply chains strains and labor shortages as well as the Russian invasion of Ukraine have driven inflation. Cost increases had been running fast for a year and accelerating for months, posing a problem for the Federal Reserve, which is in charge of achieving price stability.

What does inflation have to do with Tesla? Recently, the company increased prices for Tesla cars following the cost increase for raw materials, commodities and outbound logistics. According to Musk, he would like to make EVs ‘as affordable as possible’, but it seems to be challenging taking into consideration the changing macroeconomic conditions. Some of the Tesla suppliers have already requested 20% to 30% cost increases for parts from 2021 to 2022.

Musk added:

“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.”

Speaking of the further price increases, Elon Musk has noted that despite inflation, Tesla will keep the present costs for vehicles delivered ‘someday like six to twelve months from now.’

Tesla Q1 2022: Review

In the first quarter of this year, Tesla has performed great. Its revenue of $18.76 billion has beaten the $17.80 billion analysts expected. Besides, earnings per share made up $3.22 against the $2.26 predicted. Further, the company’s automotive revenue reached $16.86 billion, up 87% from the same period last year. Despite supply chain issues and increasing costs, Tesla has managed to achieve a 32.9% GAAP Automotive gross margin in the quarter.

Such results followed a delivery record of just over 310,000 vehicles for the first quarter of 2022. For comparison, for the same period last year, Tesla produced 180,338 cars and made a delivery of 184,800 EV models. This means that Tesla recorded an increase of 68% in delivery.

After the Q1 earnings call, Tesla stock closed at $977.20, or 4.96% down, However, in the pre-market trading, it has gained 6.74% and is trading at $1,043.02 as of press moment.

Business News, Market News, News, Stocks, Technology News
Darya Rudz
Author Darya Rudz

Darya is a crypto enthusiast who strongly believes in the future of blockchain. Being a hospitality professional, she is interested in finding the ways blockchain can change different industries and bring our life to a different level.

Related Articles