Tesla asked suppliers for money back to boost profitability

Lloyd Doyle
July 23, 2018

The WSJ calls the sum "meaningful", and reports that the refunds are on payments made since 2016. 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".

The Wall Street Journal sites a Tesla memo, in which the carmaker asked its major supplier to refund some money Tesla had paid earlier.

Musk tweeted this morning to clarify what the company was up to saying, "Only costs that actually apply to Q3 & beyond will be counted".

Tesla did not respond to a BBC request for comment. "It would not be correct to apply historical cost savings to current quarter". That's not to mention that it is sure to make future suppliers leery of working with Tesla.

Tesla has been burning cash at a rate of about $1 billion a quarter and finished the first quarter with $2.7 billion in cash on hand. 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. The newspaper said it was unclear how many companies had received the request. The memo said all suppliers were being asked to help the company become profitable.

Tesla expects to be profitable in the third and fourth quarters of the year after posting a loss of $709.6 million in its first quarter. If a company needs to request money back from its supplier to achieve profitability, that doesn't seem like a sustainable business model. Last week Munro & Associates announced that their tear-down analysis of a Model 3 had concluded it will be highly profitable.

Other reports by Iphone Fresh

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