Published: Tue, July 24, 2018
Finance | By Gustavo Carr

Tesla reportedly asks for money back on payments to suppliers

Tesla reportedly asks for money back on payments to suppliers

A Tesla spokesperson said the electric vehicle maker had asked fewer than 10 of its suppliers for a reduction in "total capex project spend for long-term projects that began in 2016 but are still not complete".

The company experienced a similar shares fall last week, as a result of a tweet from Musk that labelled a British diver assisting in a rescue effort in Thailand as a "pedo guy".

"What stuck out to us as a negative is that Tesla's memo reportedly described the request as essential to the company's continued operation", Citi Investment Research analyst Itay Michaeli wrote in a note to clients. The company has been burning cash at worrying rates, with US$1 billion spent during the first quarter of this year alone.

Not too long ago, Tesla CEO Elon Musk, who has a penchant for making bold promises, claimed that Tesla would be able to turn a profit sometime before 2019.

The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017. If a company needs to request money back from its supplier to achieve profitability, that doesn't seem like a sustainable business model.

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David Whiston, an analyst at...

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

Tesla did not respond to a BBC request for comment. The WSJ also spoke to a number of suppliers which had not been contacted about such rebates. The 15-year-old company has reported only two quarterly profits in its history and has never made a profit for a full year.

Supply-chain consultants told the paper that sometimes automakers will demand a reduction in price for a current contract going forward or use leverage of the promise of a new deal to get upfront savings. At the same time, and through the second and third quarters, it is ramping up production of its crucial Model 3.

After the statement, Tesla shares bounced back, but were still down 2.7 percent.

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