Tesla seeks rent savings amid coronavirus crunch
Silicon Valley auto maker is one of a growing number of businesses looking to find rent relief in an effort to preserve cash for an economic slowdown
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Tesla Inc. has reached out to at least some of its landlords seeking rent reductions, according to firms contacted by the car company, as the auto maker looks for cost savings in response to the novel coronavirus outbreak that has closed much of its business.
"The rapid world pandemic that is now affecting our country has led Tesla to make strategic decisions to ensure the company's long term success and growth," read an email the company sent to landlords that was reviewed by The Wall Street Journal. "As a result of the increasing restrictions on our ability to conduct business, we would like to inform you that we will be reducing our monthly rent obligations effective immediately."
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The move follows last week's announcement to employees that the Silicon Valley electric-car maker would slash salaried workers' pay and furlough without pay employees unable to work from home.
Tesla didn't respond to a request for comment.
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The company, which operates its own stores and service centers, told its landlords that it would like to discuss in coming days and weeks options "so we can continue to partner and work together to ensure a continued and mutually beneficial relationship."
The Silicon Valley auto maker is one of a growing number of businesses looking to find rent relief in an effort to preserve cash for an economic slowdown. Office-space rental firm WeWork has stopped paying rent at some U.S. locations in its cost-cutting drive.
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Tesla was forced to stop production at its lone U.S. car-assembly factory outside of San Francisco last month as local governments ordered nonessential businesses to close up and for workers to stay home in an attempt to stop the spread of the Covid-19 outbreak. The company said it hoped to resume production May 4, a day after a local-government shutdown order currently is scheduled to be lifted.
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The company's deliveries might fall 21% to 75,000 vehicles this quarter compared with a year ago, according to the average estimates of analysts surveyed by FactSet. The company last month stressed it has enough cash on hand to weather a period of uncertainty.