This week began with a statement from Elon Musk that turned many heads on Wall Street. On March 13, the Tesla (NASDAQ:TSLA) CEO tweeted that both of the electric vehicle (EV) company and SpaceX were facing significant inflationary pressures. Investors wondered how the company would respond and what it would mean for TSLA stock. Today, they found out. News broke that the EV innovator will be raising prices on its current vehicle lineup.
This morning, CNBC reported that Tesla will be raising the prices of all its current EVs. This comes after it had already raised the prices of both the Model 3 and the Model Y in China. The company has not issued a direct statement on the matter as of yet. However, its timing suggests the hikes were spurred by the inflationary trends eluded to by Musk.
After starting the week on a low note, however, TSLA stock has responded well to the price hike news. As of this writing, it has pulled back into the green, rising steadily with gains of 3.8% for the day.
What’s Happening with TSLA Stock
These price hikes aren’t small in some cases. According to The Verge, the Model 3 Rear-Wheel Drive — its least expensive EV — will now start at just under $47,000. What’s more, the expensive Model X Tri Motor has gone from a price tag of $126,490 to $138,990. That’s an increase of roughly $12,500.
Of course, it’s not hard to see why Tesla is raising prices. The company is seeing the costs of some key components in EV batteries rise sharply, chiefly nickel. Last week brought a squeeze that pushed up nickel prices so much so that the London Metal Exchange (LME) halted trading, although it is set to resume tomorrow. Many experts have speculated that the ongoing Russia-Ukraine conflict may pose further problems for EV producers as well. However, Tesla’s early year deal with nickel miner Talon Metals (OTCMKTS:TLOFF) should help it weather the storm — a storm that will likely be worse for competitors dependent on imported metals.
Additionally, these price hikes aren’t likely to pose any severe constraints on TSLA stock. The company is expanding throughout Europe and remains one of the world’s most searched for car brands. It has also proven it doesn’t need cheap cars to thrive and grow. Plus, the current oil crisis is driving further demand for EVs. Tesla remains a go-to EV brand name for most consumers.
What It Means
The rise of lower-priced EVs hasn’t harmed TSLA stock so far and isn’t likely to moving forward. Customers who have opted to purchase Tesla EVs aren’t doing so to save money on up-front costs. They are buying Tesla because they trust the brand and the company. Sure, shoppers on a budget will be drawn toward options from General Motors (NYSE:GM) and Nissan (OTCMKTS:NSANY). Those who can afford Tesla, though, won’t likely be swayed from paying a bit more.
As InvestorPlace‘s Louis Navellier recently noted, despite a “growing list of concerns,” TSLA stock can be expected to retain its long-term growth potential.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.