Tesla's share price falls 4 per cent after asking suppliers for refunds

Tesla's share price falls 4 per cent after asking suppliers for refunds

Troy Powers
July 25, 2018

The electric auto company declined to comment on the specific memo but confirmed that it is seeking price reductions from suppliers for projects, some of which date back that far. If a company needs to request money back from its supplier to achieve profitability, that doesn't seem like a sustainable business model.

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.

Tesla has said the company will be profitable in the third and fourth quarters of the year.

Tesla is pushing to improve its financial position as it spends heavily to boost production of its latest vehicle, the Model 3.

The Journal said Tesla confirmed that it is "seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven't been completed". When approached, some suppliers said they were unaware of Tesla's demands. "It would not be correct to apply historical cost savings to current quarter", tweeted Musk.

Tesla announced it hit its target of 5,000 Model 3s weekly in late June after several delays, but the market reacted skeptically, with analysts noting hitting that the target was one thing while sustaining it was another.

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Tesla had about $3.2 billion in cash as of the first quarter ended March 31, after spending about $1 billion in the quarter.

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.

Tesla intends to stretch that goal to 10,000 per week. Even if Tesla's operations are cash-flow neutral this year and next, just paying off that debt would leave Tesla with only $900 million in cash on the balance sheet, said Joel Levington, a debt analyst with Bloomberg Intelligence.

Tesla's stock declined 6% in about a 20-minute period after his tirade.

Last month, Tesla allowed all existing Model 3 deposit holders to order their cars, which required those buyers interested in the offer to give the company an additional, non-refundable $2,500 deposit, which some observers saw as another way for Tesla to pull revenue forward.