As they say the writing was on the wall. And the economic fallout from the Russian invasion of Ukraine, that will enter its third week in a few days, coupled with crippling inflation probably became the death knell that led to the inevitable.
The dreadful price hike.
It's worth remembering that automakers in the U.S. have still not been able to get back to their days of former glory as they are still recovering from a pandemic that brought production to a complete standstill for months.
Then came the global shortage of chips also unleashed due to the pandemic. Both factors have led to continued slowdowns in production outputs and hinders efforts by car companies to play catch up.
And more recently the spike in the price of nickel, a key battery metal produced by Russia, is making electric vehicle production a lot more expensive. Price of other raw materials used in the automotive sector like aluminum have also shot up.
Russia's war on Ukraine has also spilled over to the European business units of car companies because of lagging production from partners and vendors of auto parts in Ukraine.
Tesla Raises Prices
It should come as no surprise then that electric vehicle giant Tesla (TSLA) has increased prices of its compact sport utility vehicle Model Y, its Model 3 and Model S sedans and the luxury SUV Model X.
In fact Tesla Chief Executive Elon Musk had tried to prepare customers, in his quintessential style of communicating in cryptic but indicative tweets, a day earlier.
Musk recently chimed into the inflation outcry and tweeted that both his companies -- Tesla and SpaceX, valued at over $800 billion and $100 billion respectively, were strained by the recent inflationary pressures in raw materials and logistics.
"Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics," Musk posted on his Twitter account on Monday.
Tesla's latest price increases range from over $3,000 in Model Y to a steeper rise of $14,000 for certain Model Y vehicles.
Model Y prices have risen by roughly $3,000.
Model X and Model S rices have gone up $5,000 and $6,000 respectively.
The sharpest rise is in Model Y that is now priced at $63,000, an increase of $14,000.
Tesla's latest price hikes are more pronounced than those estimated by market watchers.
For EVs, Morgan Stanley analyst Adam Jonas noted last week, that nickel price increases could add $1,000 to the overall cast of making a clean energy vehicle.
"As of this writing, nickel is up 67.2% just today, representing around a $1,000 increase in the input cost of an average EV in the US," he wrote in a note from last week.
Tesla has already hiked prices for its Model 3 sedan and Model Y SUV to offset rising costs by $1,000, a week ago.
General Motors Hikes Prices
Legacy automaker General Motors (GM) also raised prices of its signature brands Chevrolet Silverado and pickup truck GMC Sierra and by roughly $1000 from March 13.
GM plans to launch more electric vehicles in the market this year, the company said during its latest earnings call in February.
“Higher commodity prices will result in a headwind of about $500 per unit based on current prices compared with year-earlier levels,” wrote Benchmark analyst Mike Ward about General Motors as reported by Barron's.
Ward added that chip problems and inflation will hurt GM's top and bottom line.
Expect more bad news from automakers as they pass on the rise in input costs back to the consumer.
