Elon Musk Says Tesla, SpaceX See Significant Inflation Risks as Ukraine-Russia War Raises Commodity Costs

Tesla Chief Executive Officer Elon Musk said on Sunday the US electric carmaker and his rocket company SpaceX are facing significant inflationary pressure in raw materials and logistics.

Musk in a tweet also asked about inflation rate outlook and said his companies “are not alone”, retweeting an article saying the Ukraine-Russia conflict sent commodity prices to their highest levels since 2008.

Russia’s invasion of Ukraine has been ramping up the prices of metals used in cars, from aluminum in the bodywork to palladium in catalytic converters to the high-grade nickel in electric vehicle batteries, and drivers are likely to foot the bill. While metals have not been the target of Western sanctions as yet, some shippers and auto-parts suppliers are steering clear of Russian goods, putting more pressure on carmakers already reeling from a chip shortage and higher energy prices.

Escalated by housing, food, and gas prices, the US consumer inflation saw its steepest spike in the last four decades, likely cementing the case for an interest rate hike by the Federal Reserve.

Tesla’s shares, which closed 5 percent lower at $795.35 (roughly Rs. 60,870) on Friday, have lost about 25 percent year-to-date.

The electric-car maker last week raised prices of its US Model Y SUVs and Model 3 Long Range sedans by $1,000 (roughly Rs. 76,510) each and some China-made Model 3 and Model Y vehicles by CNY 10,000 (roughly Rs. 1.2 lakh).

US electric vehicle maker Rivian said last week supply-chain issues could cut its planned production in half, citing soaring raw material prices and supply chain constraints. Japan’s Toyota said it would scale back domestic production by up to 20 percent for April-June to ease the strain on suppliers struggling with shortages of chips and other parts.

Tesla and SpaceX did not immediately respond to Reuters’ requests for comment late on Sunday.

© Thomson Reuters 2022