Elon Musk Hints at Tesla Price Hikes Amid Sky-High Inflation

Elon Musk's latest Twitter maelstrom is here.

Over the last 12 hours to 24 hours, Musk's Twitter feed mimics yet another incoherent monologue that ranges from soaring inflation to Netflix(NFLX) - Get Netflix, Inc. Report to the war in Ukraine.

But there is a potential warning in there to prepare consumers that a price hike may be around the corner. Though not in as many words.

Musk recently chimed into the inflation outcry and tweeted that both his companies -- electric vehicle giant Tesla(TSLA) - Get Tesla Inc Report and space company SpaceX, valued at over $800 billion and $100 billion respectively, were strained by the recent inflationary pressures in raw materials and logistics.

The controversial billionaire also tweeted, "And we are not alone," and shared a news article about soaring commodity prices.

At a time when automakers in the U.S. are racing to electrify their fleet and setting ambitious targets to shift to clean energy vehicles, the surging price of nickel, a key battery metal produced by Russia, is making electric vehicle production a lot more expensive.

The price of nickel is trading slightly above $48,000 on Monday after briefly touching the $100,000 mark over a week ago.

Russia is responsible for 6% of global aluminum supply and 7% of mined nickel, Reuters reports. So a war and sanctions could further wreak havoc on global supplies of the metals.

Price of other raw materials used in the automotive sector like aluminum also rose to $3,499 at last check.

What Does This Mean For Tesla?

Companies, just like consumers, are facing a lot of economic headwinds right now. They're facing much higher costs in the form of rising raw material prices, labor and supply chain issues and other pandemic-related disruptions.

For EVs, Morgan Stanley analyst Adam Jonas noted last week, that nickel price increases could add $1,000 to the overall cast of making a clean energy vehicle.

"As of this writing, nickel is up 67.2% just today, representing around a $1,000 increase in the input cost of an average EV in the US," he wrote in a note from last week.

Tesla has already hiked prices for its Model 3 sedan and Model Y SUV to offset rising costs by $1,000.

So far, companies in the food sector including meat giant Tyson Foods(TSN) - Get Tyson Foods, Inc. Class A Report, JBS and Kellogg(K) - Get Kellogg Company Report have raised prices of products for consumers.

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Average prices for all of Tyson's products climbed by 19.6% for the quarter ended Jan.1, Reuters reported.

Separately, Kimberly-Clark, the maker of toilet paper, Kleenex tissues and Huggies diapers also raised prices of its products.

Last year, automakers reeling from a global chip shortage had to push up prices for new vehicles amid record demand.

And this year could bring more of the same.

Russia's war on Ukraine has also spilled over to the European business units of car companies because of lagging production from partners and vendors in Ukraine.

Semiconductors used in cars, smartphones and laptops were in short supply during the worst of the coronavirus pandemic.

Legacy automakers General Motors(GM) - Get General Motors Company Report, that wants to produce 1 million electric vehicles by 2025, along with rival Ford(F) - Get Ford Motor Company Report got acknowledged for their ambitious electric vehicle goals in President Joe Biden's State of the Union address on March 1.

U.S. gasoline prices, on Monday, remain welded near their highest levels on record, with the AAA pegging the average national cost per gallon at $4.325, just off last week's all-time peak of $4.331.

Major American companies have been alarmed by the war in Ukraine and a rally in commodity prices sparked by the conflict is not helping.

Escalating energy, food and services prices have pushed record high U.S. inflation to a 7.9% annual rate in February—another four-decade high—with oil and commodity market disruptions from the Ukraine crisis expected to add more cost pressures.

Musk's Advice on Crypto

Musk told his 77.7 million Twitter followers that it would be better to hold on to safer assets like real estate or stock in "companies you think make good products" compared to the U.S. dollar.

To be sure, inflation reflects the broad rise of prices or the fall in the value of money. It generally results from too much demand chasing too few goods or limited services, leading to price increases.

But he was quick to pander to his crypto fan base and add that he will be glued to his cryptocurrency investments in bitcoin, ethereum and dogecoin.

Prices of crypto including bitcoin and ethereum edged higher Monday, according to CoinGecko, a price-tracking website for crypto assets.