Musk warns interest rates weighing on EV demand

The news: Tesla CEO Elon Musk says he is worried that higher borrowing costs would prevent potential customers from affording its vehicles despite substantial price cuts.

The numbers: Shares in the world’s most valuable automaker stock closed down 9.3% at USD220.11, a day after the EV maker missed revenue estimates by the most in more than three years. Shares in rivals including Rivian, Lucid Group and Fisker also ended down between 4% and 5%.

The context: Musk said in a Tesla earnings call it was impossible to maintain a 50% annual delivery growth rate, changing tone from last year, when he had called his company "recession-resilient". Tesla is expected to cut prices further to meet its annual deliveries goal of 1.8 million vehicles, despite its gross margin contracting sharply. Musk said higher financing costs due to rising interest rates meant to fight stubbornly high inflation in some cases almost entirely offset the price reductions, making consumers looking to shift away from gas-guzzling vehicles wary.

"If interest rates remain high ... it's that much harder for people to buy the car. They simply can't afford it," Musk said, adding he would "accelerate" expansion of the Mexico factory if interest rates come down.