Tesla Inc (NASDAQ:TSLA) chief executive Elon Musk revealed that the electric vehicle manufacturer and his rocket company SpaceX are experiencing significant inflation in raw materials and logistics following Russia's invasion of Ukraine.
In a tweet, Musk said that his companies are not alone, noting that commodity prices were at their highest level since 2008, affecting all carmakers.
Shares of EV maker Tesla, which closed 5% lower at US$795.35 on Friday, have lost about 25% year-to-date.
In the wake of Russia's invasion of Ukraine, the price of metals used in vehicles has shot up, as sanctions and self-sanctioining affects Russia, which is a major producer of many key industrial metals, including the aluminium used in car bodywork, palladium in catalytic converters, and high-grade nickel in electric vehicle batteries.
Moreover, with shipping companies and auto-part suppliers avoiding Russian goods, there are added issues for carmakers already under pressure from a chip shortage and higher energy prices.
A significant 44% of global palladium supply is controlled by Russia, while Ukraine produces 70% of the world's neon supply - the two key raw materials used in making computer chips used in cars and electronics.
Tesla recently raised prices of its US Model Y SUVs and Model 3 Long Range sedans by US$1,000 each, as well as some China-made Model 3 and Model Y vehicles by 10,000 yuan (US$1,582.40).
Tesla is not the only one. Rivian Automotive Inc (NASDAQ:RIVN), a maker of electric vehicles, said that soaring raw material prices and supply chain constraints may cause its planned production to drop by half. In order to ease the strain on suppliers suffering from a shortage of chips and other parts, Toyota Motor Corp (NYSE:TM) has also said it would scale back domestic production by up to 20% between April and June.
Giga Berlin gets going this month
After German authorities gave it the green light, last week Tesla officially confirmed that Model Y deliveries from its Giga Berlin factory will start on 22 March.
Analysts at UBS said this was reassuring after the "complex bureaucratic procedures and reports of quality issues in pre-production"..."now the focus is on how fast Tesla can ramp up the production in the Giga Berlin factory".
Demand for the vehicle seems to remain strong and the bank forecasts Tesla will deliver a total of 1.44mln units in 2022 or which up to around 150,000 units of Model Y could come out of the Berlin plant.