Elon Musk’s “Mild Recession” Thesis Holds Water in Light of the Utter Mess That Is Tesla’s Pricing Strategy
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A lot of pundits expect the US economy to tip into a recession later this year in light of the Federal Reserve’s incessant interest hike campaign, compounded by the tightening of the lending standards following a series of troubling bank failures. Elon Musk has not only thrown his weight behind this thesis but has also gone a step further by predicting that the US economy is already in a “mild recession.” While the jury is still out on the current economic momentum in the world’s largest economy, Tesla’s demand woes certainly suggest troubling undercurrents.
Fed data has too much latency. Mild recession is already here.
It’s not like just the canary in the coal mine (SVB) died, one of the staunchest miners (Credit Suisse) died too & the cemetery is filling up fast!
Further rate hikes will trigger severe recession. Mark my words.
— Elon Musk (@elonmusk) April 30, 2023
On Sunday, Elon Musk took to Twitter to declare that further interest rate hikes by the Federal Reserve would trigger a “severe recession.” But it seems that no one was listening to his advice in the Eccles Building, as the Fed raised its benchmark interest rate by an expected 25 basis points this week.
Of course, the overall demand weakness is just one aspect of the challenge that Tesla is facing at the moment, with the EV giant’s rumored refresh of the Model 3 and the attendant muted demand for the current version, as well as its confounding pricing strategy continuing to act as stimulants for further demand softness.
Tesla cut the prices of its EVs by an average of between 12 and 15 percent during the first quarter of 2023.
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