over the past year. Since a computer chip shortage slowed production and drove up prices for new and used vehicles, fixing those supply chain problems this year was supposed to normalise the market again, helping cool inflation more broadly.That’s not how car makers see it, nor is it what they want. They need to invest billions of dollars into new production facilities for electric vehicles, and that money has to come from somewhere.
Investors heard this from themselves in the latest round of industry conference calls for fourth quarter earnings results. Tesla chief executive officersaid that the company’s not working on the $US25,000 car that it had previously discussed, saying that it has too much on its plate. Given the cost environment and the shortage of key components such as semiconductors, there’s no reason for a car maker to go out of its way to make lower-priced, less-profitable vehicles right now.
Even at a time of high vehicle prices and low levels of inventory, car makers have good reason to proceed cautiously. As previously mentioned, the industry is in a once-in-a-lifetime transition from petrol-powered to electric vehicles. It’s an all-in moment for a capital-intensive industry that cannot afford to stumble until it’s on the other side. Low inventories and high prices give it a margin of safety for any kind of setback.
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