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Elon Musk Warns of ‘Tough’ Economic Year Ahead


May 17, 2023
Elon Musk Warns of 'Tough' Economic Year Ahead


Tesla held its annual shareholder meeting on Tuesday afternoon, and CEO Elon Musk said the company will make changes to its business practices, including the decision to begin advertising for the first time in its 20-year history.

Following the meeting, Musk sat down for an interview with David Faber of CNBC, where the two chatted about how inflation and the recent rate hikes by the U.S. Federal Reserve will impact Tesla.

Musk said he expects it to be a “tough 12 months ahead” for “everyone, not just Tesla.”

Related: ‘Think Carefully’: Musk Issues Stark Warning About New Hires to Tesla Employees

“You can think of raising the Fed rate as somewhat of a brake pedal on the economy, frankly,” Musk said. “It makes a lot of things more expensive – certainly things that are bought with credit. But then it has downstream effects even on things that aren’t bought with credit … if the car payments or your home mortgage payment is absorbing more of your monthly budget, then you have less money to buy other things.”

Earlier this month, the Fed hiked interest rates for the 10th cycle in a row (by another 0.25 of a percentage point). As of Wednesday morning, rates sit in the range of 5%-5.25%.

Musk also expressed his concerns and warned that the government most likely wouldn’t be lowering rates anytime soon.

“My concern with the way the Federal Reserve is making decisions is they’re just operating with too much latency,” Musk continued. “Basically, the data is somewhat stale. The Federal Reserve was slow to raise interest rates, and now I think they’re going be slow to lower them.”

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Musk compared this ideology with how Tesla sets and adjusts its prices based on demand, noting that the company uses “real-time information” about orders placed on any given day.

During the shareholder meeting, Musk touched on his bleak outlook for the economy in the year ahead, saying the car industry would be vastly impacted due to hiked interest rates but said it is important not to “overreact.”

“It is important to remember that there are good times and there are dark times, but then the good times follow the dark times,” he told attendees on Tuesday. “So my advice would be, don’t look at the markets for the next 12 months. If there’s a dip, buy the dip, and I think you will not be sorry.”

Tesla came off a rough Q1 2023, finishing with a year-over-year net income loss of 24%.

The electric car company was down just over 33.1% in a one-year period as of Wednesday morning.

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