Thread by @jpr007

THE EFFECTS OF INFLATION ON AUTOMOBILE PRICES

The average transaction price reported for light vehicles in the U.S. market has typically been increasing by about +2% per year

And in February this YOY rate even increased by +6.5%

https://twitter.com/jpr007/status/1376713971936321536

This illustrates that the average consumer continues to gain an increasing capacity to pay

- and an increasing propensity to spend that on higher-priced vehicles

- often manifested as both shifts in the sales mix as well as higher price realization and actual price increases

At a minimum we should expect this price trend of +2% per annum to continue, in line with previously stated inflation targets

If it does so, today's ASP $41,066 will become approximately $50,000 in 2031 or 10 years from now

We have previously assumed that Tesla's Average Selling Price would decline to around KBB's 2020 ASP of $40,000 by 2031

- as Tesla focuses on making more affordable vehicles

- and as its product mix trends towards matching the industry average

WHAT IS THE EFFECT OF AN ASP OF $50,000 ?

In its simplest form this would mean that the Valuation of Tesla shares would increase by the same proportion, if the +2% per year inflation affected everything equally

So the 2031 Price Target of $5,319 would become $6,500 per share