25 July, 2018
Electric vehicle manufacturer Tesla's share price fell by more than four per cent as markets opened today, after it was revealed that it had requested refunds from some suppliers for previously made payments.
The Wall Street Journal had reported on Sunday 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.
Telsa took another financial hit on Monday, with shares in the company dropping nearly 5% after the electric automaker was reported to have asked some U.S. suppliers to return payments to the money-losing company.
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.
In June, Tesla said it was cutting several thousand jobs to become sustainable profitable without endangering the ramp-up of Model 3 production. In the memo, Tesla described its plea as a way to invest in its company and ensure that it is able to continue ordering new parts in the future. Tesla has been hemorrhaging cash at a rate of about US$1 billion a quarter, and finished the first quarter of 2018 with US$ 2.7 billion in cash on hand.
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It is unclear how much cash back Tesla has requested, or how many of its suppliers have received this request. So even though Tesla may be able to show its investors a pleasant surprise in the second half, Musk may want suppliers to help him shore up cash flow and profits now.
He did, however, defend the company, noting, "Only costs that actually apply to Q3 and beyond will be counted".
David Whiston, an analyst at... "It would not be correct to apply historical cost savings to current quarter", tweeted Musk. Auto manufacturing consultant Dennis Virag told The Wall Street Journal that automakers and suppliers often renegotiate contracts for work going forward, but that it is unusual to make such a reduction retroactive.
The latest bad news came after the entrepreneur got into a confrontation with Vernon Unsworth, a British cave diver who helped rescue a team of Thai soccer players from a system of flooded caves. Analysts say Tesla needs to sell a lot more cars.
Tesla's stock declined 6 per cent in about 20 minutes after his tirade.