Elon Musk Expects a Recession

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Photo credit: Theo Wargo - Getty Images
Photo credit: Theo Wargo - Getty Images
  • The Tesla CEO shared his views this week at the Qatar Economic Forum when asked about the chances of an economic recession in the US.

  • The automaker is in the process of hiring workers for two new plants as it seeks to increase production in the coming months, even as it raises prices on versions of all four models.

  • The Twitter purchase deal is still in the works, even as the Tesla CEO publicly raises questions about the social network's share of bot accounts.

Tesla CEO Elon Musk in recent weeks has forecast rough seas for the economy in the months ahead, starting with his signals about the prices of raw materials for the auto industry. The CEO said a year ago that prices on raw materials were motivating price hikes for Tesla models, and reiterated the same earlier this spring, as several other automakers had begun to face much higher prices for metals and other materials used in EV production.

The Tesla CEO reiterated his views this week at the Qatar Economic Forum when asked about the chances of an economic recession in the US.

"Well, I think a recession is inevitable at some point. As to whether there is a recession in the near term, I think that it's more likely than not," Musk said. "Certainly it's not a certainty," he added, hedging his statement a bit.

The Tesla chief had cited a worsening economic prognosis amid the automaker's recently stated goal of cutting 10% of salaried staff, while increasing the numbers of hourly workers, just weeks after the automaker inaugurated two new plants in Berlin-Brandenburg, Germany and Austin, Texas. The decision to cut salaried staff just as production was slowly getting started at two new plants certainly raised eyebrows in auto industry circles during a financial quarter that could provide some surprises, largely owing to weeks of downtime at Giga Shanghai forced by anti-coronavirus measures implemented by Chinese authorities.

Nevertheless, the Tesla and SpaceX CEO is still wrapping up the Twitter purchase, a process that has perhaps become more complex and costly than expected.

Tesla stock had notably lost value in the weeks after news of the deal first broke, as questions were raised by Musk about the numbers of possible bot accounts on the social network. Musk is still widely expected to complete the deal, even as he poses more questions about the site in what has become an unusual corporate move.

The Twitter deal now appears to have been hatched in another economic climate entirely, one without an imminent recession. As many observers have pointed out, it had likely been in consideration by Musk for months if not years, but has now fallen on awkward economic timing.

In another sign of a belief in a worsening economic climate, Tesla has recently raised prices across the lineup, in another major round of price hikes since March of this year.

The recent move, rolled out without a prior warning last week, was largely interpreted as catching up with the increases in the cost of raw materials, which Musk had warned about months prior. The Model X received the stiffest hike of $6000, while the Dual Motor AWD Long Range version of the Model S received a $5000 price increase. The entry-level Model S had already been sitting above the $100,000 mark for some time, tens of thousands of dollars north of where it had been just a few years prior.

Tesla's two less expensive models, the Model 3 and Model Y, received somewhat smaller price hikes in proportion to their prices.

Photo credit: Hearst Owned
Photo credit: Hearst Owned