Tesla profits fall as Elon Musk admits customers may not be able to afford his cars

Elon Musk, who said his car maker Tesla will operate at full capacity and weather any recession, admitted he now fears customers won’t be able to afford his electric cars despite falling prices.

The electric vehicle maker reported worse-than-expected third-quarter results. Profits fell 44 percent, partly due to price cuts to stimulate demand.

In contrast to his previous optimism, Musk struck a cautious tone about Tesla’s prospects and expressed concerns about the broader economy, including high interest rates and their impact on potential buyers.

“People are hesitant to buy a new car when the economy is turbulent,” Musk told analysts. Higher borrowing costs due to interest rate hikes to curb inflation have all but offset Tesla’s price cuts aimed at dissuading drivers from gasoline and diesel alternatives.

“If interest rates stay high… it will be much more difficult for people to buy a car. “They just can’t afford it,” Musk said.

He said he would “break the record” for interest rates. “Interest rates must be lowered. If interest rates continue to rise, affordability will fundamentally decline,” he said.

The entrepreneur said Tesla is delaying plans to open a new car plant in Mexico, adding that it would “accelerate” the expansion of the Mexican plant if interest rates fall. “I don’t want to rush into uncertainty at top speed,” he said.

Last year, he promised that Tesla would not cut production “in any meaningful way, whether there is a recession or not.” We are very busy with metal, rain or shine,” he said.

The automaker said it will still deliver 1.8 million vehicles to customers this year, up from 1.3 million last year, but is cautious about future growth. The company previously said it wanted to increase sales by an average of 50 percent a year.

“You can’t always have an average growth rate of 50 percent, otherwise you’ll exceed the mass of the known universe,” Musk said.

Tesla also announced that it was having problems with its futuristic truck. The Cybertruck, first introduced four years ago, is expected to be Tesla’s first new passenger model. According to the company, more than a million people have reserved the vehicle. Musk said Tesla expects to eventually produce 250,000 Cybertrucks a year, but not until 2025.

Musk said Tesla “dug its own grave” by making the car too complex, leading to design changes and increased costs.

There were also technical problems with his vehicles. The US Highway Safety Agency this week ordered Tesla to recall 54,676 of its popular models. Tesla has released a software update to fix the problem, the National Highway Traffic Safety Administration (NHTSA) said.

The American manufacturer also faces increasing competition from rivals. Chinese automaker BYD has overtaken Tesla in electric vehicle production, although the company lags behind in global sales.

It’s not just electric vehicle manufacturers that are facing these challenges. General Motors and Ford in the United States have shelved their plans to make electric vehicles, and Volkswagen in Germany said it would abandon a planned electric vehicle plant and cut production elsewhere. Swedish truck maker Volta, which produces electric vehicles in Coventry, has declared bankruptcy.