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Entry-level Tesla costs $10,000 more than last year amid an 'immense increase in interest in electric cars'

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A Tesla dealership in Colma, California, on Wednesday, Jan. 26, 2022.
David Paul Morris | Bloomberg | Getty Images
Key Points
  • Tesla has increased its car prices in the U.S. and China for the second time in a week.
  • The Model 3, Tesla cheapest vehicle, now costs $46,990. That's a $10,000 increase from a year ago.
  • "We're seeing an immense increase in interest in electric cars, which happens anytime gas prices spike," says Jessica Caldwell, executive director of insights at Edmunds.

Tesla has increased its car prices in the U.S. and China for the second time in a week after CEO Elon Musk warned of inflation pressure on the business.

"This isn't taking anyone by surprise," says Jessica Caldwell, executive director of insights at Edmunds. "We're seeing an immense increase in interest in electric cars, which happens anytime gas prices spike."

About a year ago, Tesla's cheapest model, the Model 3, had a starting prices of $36,900. Now the Model 3 starts at $46,990. And the prices of Tesla's wide array of electric vehicles are up by 5 to 10% over the past year.

The cost of the Model 3 isn't that far off from other non-electric car prices, Caldwell points out: "The average new vehicle transaction price in February was $45,596. That was a 12.7% increase, year over year."

Used cars, and especially used Teslas, have seen their costs surge even more, Caldwell says. Over the last year, used-car prices shot up 41%, according to the Consumer Price Index, which tracks inflation.

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Musk notes 'recent inflation pressure'

While the company hasn't explicitly said what's behind the price increase, Tesla CEO Elon Musk tweeted "Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics."

Musk didn't elaborate, but in a separate tweet, he linked to a Financial Times article about the rising cost of key commodities following the Russian invasion of Ukraine.

Teslas offer some an escape from pain at the pump

Another reason Teslas are so in-demand is because of their fast delivery time compared to other electric vehicles, Caldwell says. "Tesla is probably inundated with requests, given gas prices, and they offer the fastest delivery compared to competitors like Ford's Mustang Mach-E or the F-150 lighting, and Rivian EV pickup truck."

And a lot of drivers would like relief from high gas prices ASAP. In California, gas prices are at their highest levels in the country. On Tuesday, the sunshine state broke records when the average gallon cost $5.75. The national average is $4.31 per gallon, according to AAA.

"I'm so happy I don't have to pay these insane gas prices," says California resident and Tesla owner Rachel Swartz.

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