Tuesday, 21 August, 2018

Tesla Stock Tumbles After Company Asks Suppliers For Refunds

No caption Tesla Asks Suppliers for Cash Back in a Bid to Achieve Profitability
Scott Davis | 24 July, 2018, 18:58

According to a report from The Wall Street Journal, Tesla has asked suppliers to refund part of the money it's previously paid to them. What may be happening is that Tesla spent so much money racing to get its factory to 5,000 Model 3s in a week - while not delivering all of them to buyers yet - that second-quarter numbers are going to look rough and Musk needs a hand from suppliers to shore up the balance sheet until later in the year.

The manager described the refunds as "essential" to Tesla's ability to continue operating at its current speed and scale, portraying the money's return as an investment into the company's future.

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

FILE PHOTO: A row of new Tesla Model 3 electric vehicles is seen at a parking lot in Richmond, California, U.S. June 22, 2018. According to a leaked memo, the company is requesting money back from suppliers to help the auto company become profitable, as if this is the responsibility of the company's suppliers.

"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.

"Only costs that actually apply to Q3 & beyond will be counted", Tesla CEO Elon Musk said on Twitter in response to the report.




In early May, Musk cut off a Morgan Stanley analyst who had asked if the company should raise more capital while it could, even if it did not need it. Musk responded that he "specifically" did not want to, and called the analyst's questions "so dry".

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".

Last month, Tesla said it was cutting several thousand jobs to become sustainably profitable without endangering the ramp up of Model 3 production.

Tesla's cash position is a concern because the company has burnt through billions of dollars to step up production of the Model 3, its first mass-market vehicle.

Tesla intends to stretch that goal to 10,000 per week.

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

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