Tesla seeking cash from suppliers

A Tesla sign at a showroom

Shares of Tesla tumbled Monday on reports that the company asked suppliers for refunds to help it turn a profit.

When asked whether the company has requested refunds from suppliers, a Tesla spokesman referred to a company statement, which said Tesla had asked fewer than 10 suppliers for a reduction in total spending on projects that started in 2016 and are not complete. While it's not clear which suppliers Tesla asked for cash back, or how much, the Wall Street Journal said the amount was "meaningful".

"Now that we're in a stronger position with Model 3 production ramping [up], it is a good time to improve our competitive advantage in this area", a company spokesman said.

Tesla did not respond to a series of emails and phone calls seeking comment. In a memo sent to several suppliers requesting money back, Tesla said the cash back would be necessary for Tesla's "continued operation" and that it was an investment in "long-term growth".

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".

CEO and top shareholder Elon Musk has said that Tesla intends to become profitable in the second half of 2018, and analysts said Monday that the memo is an attempt to meet that goal. "It sounds like something that happens when you're struggling", he said.

After the memo was leaked over the weekend, Musk tweeted: "Only costs that actually apply to Q3 & beyond will be counted". Musk further added that "it would not be correct" to apply historical cost savings to the current quarter. Tesla has been burning through cash at a rate of about $1bn a quarter, or more than more than $7,430 every minute, according to data compiled by Bloomberg, and finished the first quarter with $2.7bn in cash on hand.

The requested reduction in project capex would not impact Tesla's ability to achieve third-quarter profitability, a spokesperson told Reuters.

Tesla stock fell 3.3 per cent to $445.35 today in heavier than normal trading.

As a possible crunch for Tesla approaches, Musk has said he has personally taken control of production and that he was sleeping occasionally at the factory.

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