Elon Musk: Demand for Tesla Cars Is High, People Are Just Too Poor to Afford Them

Tesla CEO Elon Musk discussed the issue of demand for Tesla cars on an investor call Wednesday, stating that demand is “insanely high,” but that people just cannot afford Tesla’s cars.

Tesla CEO Elon Musk is optimistic if nothing else, as proven by the Tesla earnings call this week in which Musk made a number of promises and projections for the future of the electric car manufacturer. At one point during the call, Musk predicted a 50 percent increase in Tesla sales stating:

2019 is going to be an amazing year for Tesla. As I mentioned, we are expecting to increase sales by 50%. Perhaps could be a lot more than 50%, but I think 50% is a very reasonable number. But that’s crazy growth for the automotive industry.

Amidst the company’s cost-cutting measures which included cutting seven percent of its workforce and recent worries about lack of demand for Tesla vehicles, this is quite a large promise. But according to Musk, the demand for Tesla vehicles is “insanely high,” but the cars are just unaffordable for most consumers:

The demand for — the demand for Model 3 is insanely high. The inhibitor is affordability. It’s just like people literally don’t have the money to buy the car. It’s got nothing to do with desire. They just don’t have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary.

But Wall Street analysts are not as confident as Musk is; many are concerned by Tesla’s plans to only produce cars for Europe and China and their expectation of a gap of approximately 10,000 vehicles between production and deliveries due to the number of vehicles in transit at the end of the first quarter. Cowen analysts noted: “This is a strong indication that demand in the U.S. for both the mid-range and long-range Model 3 versions has largely been exhausted, and the company is still working through the estimated ~6.8k of unsold Model 3 inventory.”

Analysts are also beginning to question Tesla’s investment in their Shanghai factory which Tesla hopes will begin producing 500,000 vehicles a year once completed: “Tesla serves the purpose of a ‘stalking horse’ to the fast growing domestic Chinese EV industry, but we believe it has limited to zero terminal value in a region where a number of domestic champions should emerge,” Morgan Stanley analysts said.