Tesla Inc (NASDAQ:TSLA) has increased prices multiple times over the last few months, and now we know why. The automaker also announced plans to remove lumbar support from the Model 3 and Model Y.
Musk explains Tesla's price increases
Tesla has raised the prices on the Model 3 and Model Y seven times so far this year. Although the increases were small and incremental, they add up. The standard range Model 3, Tesla's least expensive vehicle, increased from a low of $37,000 in February to $40,000, marking a more than 8% increase. Just a few months ago, the long-range Model Y with all-wheel drive sold for less than $50,000, but now it starts at $52,000.
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Tesla never offered any explanation for the price increases, but CEO Elon Musk has now explained in response to a Twitter remark from a longtime Tesla enthusiast. Twitter user @Ryanth3nerd said he was displeased with the direction the automaker was moving in by raising prices and removing features like lumbar support for the Model Y. Additionally, he pointed to rumors that the full self-driving feature would increase to $14,000 without any real added features unless you are a beta tester.
Musk told him that they removed lumbar support from the front passenger seat of the Model 3 and Model Y because almost no one was using it, according to logs. He said it wasn't worth the cost or mass for everyone when it was rarely used.
He added that prices are increasing "due to major supply chain price pressure industry-wide." He said raw materials especially have increased in price.
Moving lumbar was removed only in front passenger seat of 3/Y (obv not there in rear seats). Logs showed almost no usage. Not worth cost/mass for everyone when almost never used.
Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially.
— Elon Musk (@elonmusk) May 31, 2021
Raw material prices on the rise
Musk didn't say which raw materials are causing Tesla's prices to increase, but it's no secret that many industrial metals have been under price pressure. The recent shortage of chips for electric vehicles could be causing pressure there as well.
The copper price has more than doubled since the pandemic started. When China announced price controls for industrial metals, it temporarily eased some of the pressure, but then prices started rallying again toward the end of last week. Additionally, aluminum and steel prices have also been increasing in price.
Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders' families.