Tesla pushes suppliers to return payments

Randal Sanchez
July 24, 2018

However, in a statement released later on Monday, a spokesman for Tesla said it had asked "fewer than 10 suppliers for a reduction in total capex project".

The company, which has already tapped the debt and equity markets for much-needed cash, turned recently to some suppliers for "meaningful" rebates on payments made to them since 2016, according to a report.

That move is worrisome because CEO Elon Musk has said that the success of the new Model 3 sedan should pull the perennial money-loser into the black in this year's second half and show positive cash flow. The request, which was sent in the form of a memo to several suppliers, noted that the cash back would be necessary for Tesla's "continued operation", calling it an investment in "long-term growth". Tesla has been burning through cash at a rate of about US$1 billion a quarter, or more than US$7,430 every minute, according to data compiled by Bloomberg, and finished the first quarter with US$2.7 billion in cash on hand.

A tweet from co-founder Elon Musk has confirmed this.

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Mendy replied to the Tweet by simply putting a French flag next to the names of each player along with the word "fixed". France has been celebrating its second football World Cup victory with a big welcome for the returning team.

Of course, forecasting that far out has its challenges, and what the company will even look like in 2027 " is still highly uncertain", given new vehicle introductions. It suggested that all Tesla suppliers were being asked to make partial refunds, but some of the companies that the WSJ talked to denied any knowledge of such a request.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

It is unclear how much cash back Tesla has requested, or how many of its suppliers have received this request.

Instead, he has told investors that he expects the firm to turn a profit in the third quarter of this year. "It would not be correct to apply historical cost savings to current quarter". On July 1, the company said it reached its goal of producing 5,000 Model 3 sedans - its newest vehicle - just hours after its self-imposed deadline, making it a "real auto company", according to CEO Elon Musk.

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