Tesla says it requested supplier discount for ongoing projects

24 July, 2018, 18:55 | Author: Lora Ball
  • Tesla Asks Suppliers for Cash Back in a Bid to Achieve Profitability

The Journal reported that Tesla had turned to some suppliers for a refund of previously made payments in a bid to turn a profit, citing a memo sent by a Tesla global supply manager.

Despite the belt-tightening, many analysts still predict Tesla will eventually need to raise more money.

Becoming cash-flow positive is the primary goal of Chief Executive, Elon Musk, who said he wants to avoid raising additional cash, and turn a profit in the second half of the year.

At the end of its last reporting period, Tesla revealed that it had about $3.3 billion in cash on hand as had lost about $800 million for the quarter.

When a company asks suppliers to retroactively give money back, it's a sign that something has gone wrong.

The leak comes as Musk continues to unnerve investors, with Tesla shares falling from a year high of US$370 in mid-June to around US$301 on Monday.

In the meantime, manufacturing consultant Dennis Virag told The WSJ that Tesla's request shows that it's "desperate right now", and that the company is "worried about their profitability but they don't care about their suppliers' profitability".

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Company CEO Elon Musk stated on his official Twitter account that any refunds from suppliers would only involve those from Q3 and beyond would be counted.

"This is troubling for us to hear", said Morningstar analyst David Whiston in a note to clients.

The report also said it's not clear how many suppliers received the request.

Tesla in late June finally hit an important production target for the Model 3, its most accessibly priced electric vehicle.

As a refresher, Musk told Bloomberg: "Once we break through to mass-market cars, where mass-market is on the order of a quarter million vehicles per year, I can not see us doing a 1.2-million-vehicle program of one particular model". The firm is less focused on one-time reductions for this quarter as it is on reaching a "more sustainable long-term cost basis".

Tesla shares prices are down by 3%.



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