Tesla Takes New Cost-Cutting Initiative, Seeks Rent Reduction

“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,” said the email sent to landlords, as seen 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.”

The automaker told its landlords that it would like to discuss options over the following days and weeks “so we can continue to partner and work together to ensure a continued and mutually beneficial relationship.”

Meanwhile Tesla recently decided to furlough non-critical employees without pay and temporarily cut executive salaries as much as 30%.

The move is designed to enable the company to conserve funds while the coronavirus pandemic has caused much of its operations to be suspended. According to the company memo, Tesla plans to resume vehicle production on May 4 at its US facilities.

Analysts remain concerned about Tesla’s outlook. According to TipRanks, the stock has received no less than 10 sell ratings in the last three months vs 13 hold ratings ad 5 buy ratings. The $489 average analyst price target indicates downside potential of almost 25%. (See Tesla’s stock analysis on TipRanks)

In the last five days the stock has soared 26%, bringing the stock’s year-to-date gain to 56%.

“The further along other competitive EV [electric vehicle] programs get pushed out, the more Tesla will, in our view, be able to extend its competitive edge in electrification from the perspective of the consumer” Morgan Stanley analyst Armintas Sinkevicius told investors on April 10.

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