Hobbit Business Review

‘I Am Worried’: Elon Musk Signals Alarm for U.S. Economy During Tesla Earnings Call

Elon Musk is expressing concern about the U.S. economy as high interest rates are affecting car sales.

Tesla, which reported a worse-than-expected Q3 2023 on Wednesday, down 37% from the same time last year, is using caution on profit outlooks.

“I am worried about the high-interest rate environment that we’re in,” Musk said while talking about plans for expansion on the company’s Mexico gigafactory during the earnings call. “I just can’t emphasize this enough, that the vast majority of people buying a car is about the monthly payment. And as interest rates rise, the proportion of that monthly payment that is interest increases naturally.”

Musk said that if interest rates continue to stay the same or rise even more, then the average customer won’t be able to afford to purchase a car. He explained that Tesla must find a middle ground between lowering car prices and staying competitive — while also acknowledging that there is “something to be gained on the advertising front” for its vehicles.

“I just can’t emphasize again how important cost is, it’s not an optional thing for most people. It is a necessary thing,” Musk explained. “We have to make our cars more affordable so that people can buy it. And I keep harping on this interest thing, but I mean, it just raises the cost of the car.”

On Thursday, Federal Reserve Chair Jerome Powell hinted that at the next Fed meeting in two weeks, interest rates could stay the same, thanks to strong economic growth.

However, Powell also noted that the Fed was “proceeding carefully” moving forward, which could signal new hikes come December.

“Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment,” Powell said on Thursday. “Doing too much could also do unnecessary harm to the economy.”

The current Federal funds rate is set at 5.25% to 5.50%.

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