The year 2022 was a banner one for Tesla, as the company set new records for quarterly revenue, operating income, net income, and electric vehicle deliveries. During the company’s Q4 and full year 2022 financial results and Q&A webcast, CEO Elon Musk addressed the question on many investors’ minds: demand for electric cars.
Musk stated that after Tesla reduced prices globally, orders for their vehicles surged to new record levels in January. He sought to put investors’ concerns about demand to rest by saying, “So far in January we’ve seen the strongest orders year-to-date than ever in our history.” This is particularly noteworthy because at the end of 2022, it was reported that Tesla’s global electric car order backlog was falling quickly, to less than 100,000 units.
The CEO also revealed that currently, the number of new orders is almost two times higher than the rate of production, which is great news for the manufacturer. However, it’s unclear whether this trend will continue in the coming months. As a short-term response to increased demand, Tesla has slightly increased prices on some models, a clear indication that supply and demand are key factors.
Despite a possible contraction in the automotive market or even a recession, demand for electric vehicles is expected to remain strong, according to Musk. He also acknowledged that prices are a significant factor in the success of electric cars, saying “the price really matters.” He acknowledged that many people want to buy a Tesla car but can’t afford it, and that small changes in prices can make a big difference for the average consumer.
Tesla’s ability to reduce electric car costs and lower prices has been a major advantage for the company. It has allowed them to achieve very high operating margins and now, to increase sales volume by reducing prices further. This, in turn, has a positive impact on the entire electric vehicle market, as other original equipment manufacturers may be forced to lower their prices to remain competitive.
