Suppliers brace for Musk’s request for givebacks as Tesla sparks electric vehicle price battle

Suppliers of Tesla Inc are preparing for increased pressure from CEO Elon Musk and the company’s leadership team to reduce their prices as the electric vehicle manufacturer aggressively cuts vehicle prices in an economic slowdown, according to industry sources with knowledge of the situation. Last month, Tesla’s CFO, Zach Kirkhorn, stated that the automaker was “attacking every other area of cost,” including the supply chain, and would work closely with suppliers.

During a recent earnings conference call, Elon Musk indicated that a potential recession could lead to “meaningful decreases” in most of the company’s input costs. This has caused concerns among suppliers, as the downward pressure from vehicle price cuts is expected to be passed on to them. Some suppliers are worried about the financial strain this will cause, as many are already struggling.

Confidentiality agreements prevent most Tesla suppliers, including Panasonic, LG Energy Solution, CATL, and IDRA Group, from publicly discussing their dealings with the automaker. These cost-cutting efforts by Tesla come after it recently reduced vehicle prices, which led to similar actions by competitor Ford Motor Co. This move is expected to impact Tesla’s profit margins, which are currently the highest in the industry.

One executive at a Tesla supplier, who wished to remain anonymous, expressed concern that the company may be changing its focus from delivery speed to pricing, as it had been willing to pay more for parts during the COVID-19 pandemic. However, recent comments during the earnings call have caused this executive to question this approach.