The automotive market, much like many other markets right now, has been dealing with chaos since not long after the beginning of the COVID-19 pandemic. While the pandemic is arguably to blame for most of the issues still today, the specific concerns are surrounding supply chain constraints and a lack of inventory.

Musk points to supply chain and production obstacles and inflation for the rising prices. He said during the Q2 2022 earnings conference call via Automotive News:

“We’ve raised our prices quite a few times. They’re frankly at embarrassing levels. But we’ve also had a lot of supply chain and production shocks and we’ve got crazy inflation.”

The CEO did add that it seems inflation may ease up. If that happens, Tesla will be able to avoid further price hikes, and could eventually begin to bring its prices back down. Musk continued, warning that his words should be taken with a grain of salt:

“I think inflation will decline towards the end of the year. I’m hopeful — and this is not a promise — but I’m hopeful at some point we can reduce prices a little bit.”

The CEO reiterated that Tesla doesn’t have a demand problem, but rather, the issue is production. He said Tesla is doing everything it can to make delivery times shorter, not longer.

If Tesla reduced its prices, more people would order vehicles, and that would just make the situation worse. Musk has made the same comments about why Tesla hasn’t yet brought the Cybertruck to market, and why it’s not focusing on the affordable compact car. Tesla can’t even fill the orders it has in a timely fashion, so adding models would just push people’s orders back further.