As Tesla sparks EV price war, suppliers brace for Musk looking to push back |
SAN FRANCISCO, Feb 1 (Reuters) – Tesla Inc ( TSLA.O ) suppliers to Chief Executive Elon Musk and his team for electric car after its leader aggressively cut vehicle prices in a slowing economy prices are bracing for pressure to lower it further, industry officials car Those working with the manufacturer and suppliers were expressed.
Suppliers, Tesla’s Chief Financial Officer Zach Kirkhorn car they saw the manufacturer’s comments that it was “attacking every other cost area” including its supply chain and would work closely with suppliers. During Tesla’s earnings conference call last week, Musk said the recession could lead to “meaningful reductions” in almost all input costs.
“It’s never good for suppliers when (automakers) lower car prices because that pressure comes down,” said Dan Sharkey, a lawyer who represents suppliers to Tesla and other automakers. “I never like it because I know eventually they’re going to try to take it out of one of us.”
Brooks Wilkins, co-founder of Sharkey & Turco, added: “My message is that there will be nowhere.” “Many suppliers are struggling financially.”
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Most Tesla suppliers, including battery makers Panasonic ( 6752.T ), LG Energy Solution ( 373220.KS ) and CATL ( 300750.SZ ), as well as Italian foundry maker IDRA Group, have avoided public discussions with the automaker because of confidentiality agreements. .
Tesla’s cost-cutting efforts come after it aggressively cut car prices last month and USAThe competitor Ford Motor Co (FN) has started to take the same step. This threatens to erode Tesla’s profit margins, which are the largest in the industry.
While the pressure on suppliers to lower their prices is not new, one Tesla supplier who spoke on condition of anonymity said that during the COVID-19 pandemic, the EV leader is more focused on delivery than price and is even willing to pay more. to get parts faster. He worries about comments on the conference call signal that could change last month’s earnings.
Tesla did not immediately respond to a request for further comment on its suppliers.
‘SUPPLIERS ARE NOT A CHARITY’
According to a study by the consulting company Bain, Tesla and other car manufacturers higher car during the pandemic prices and although they enjoyed strong margins, suppliers could not fully pass on the higher costs and their margins declined. Automakers’ profit margins were about 3 percentage points higher than suppliers’ in the third quarter of last year.
Industry officials said further price cuts could be painful in a sector where some suppliers are already struggling.
For example, Gissing North America, which counts Tesla as its largest customer, partly high labour costs and goods prices filed for bankruptcy last year because of it, said Steven Wybo, chief restructuring officer of the Michigan-based maker of acoustic systems and speakers. for car roofs.
“I think there are some things that will get easier, but it’s built into the price of everything labour component, and I don’t see that easing happening anytime soon, potentially ever,” he said.
Sharkey, a lawyer for the suppliers, warned: “Not all of these suppliers are charities. They have to make money, and if they lose money, they’re in financial trouble.”
Industry officials said Musk may be trying to convince suppliers that lower prices will offset potential losses in higher volumes.
However, some suppliers increase prices due to material cost inflation.
NXP Semiconductors ( NXPI.O ) said on Tuesday it was raising the prices it charged to customers, citing higher input costs. NXP has not disclosed that it is a Tesla supplier, but analysts suggest that Tesla’s car scrapping is the case.
“Honestly, we don’t have a lot of pushback from car companies,” NXP CEO Kurt Sievers told Reuters on Tuesday.
A former Tesla executive told Reuters that Tesla could negotiate cost reductions with suppliers through “shared” efficiencies or simply by twisting their arms and taking some of their profits.
“Tesla will now do what every other (automaker) has done for decades,” said the executive, who spoke on condition of anonymity.
Tesla will face resistance, industry officials have warned.
“They’re going to get a lot of pushback from suppliers to cut costs,” said Laurie Harbour, an industry consultant who works with suppliers.
Reporting by Hyunjoo Jin in San Francisco, Additional reporting by Stephen Nellis in San Francisco and Jane Lanhee Lee in Oakland, California report. Edited by Ben Klayman and Matthew Lewis
Our standards: Thomson Reuters Trust Principles.
2023-02-01 23:09:28
Source – reuters
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