Markets

Tesla Sinks on Report That Suppliers Were Asked to Return Cash

Tesla Sinks on Report That Suppliers Were Asked to Return Cash

However, a spokesperson at the company did confirm that Tesla has been seeking price reductions from suppliers for projects, some of which date back as far as 2016.

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. The company spends about $1 billion a quarter, and its stock price has declined by about 4.5 percent over the course of the a year ago. Following the report, the company laid off 9 percent of its workforce and reduced investments in new projects and expanding existing operations.

It's not so unusual for carmakers to ask suppliers for discounts retroactively, and some Japanese automakers have done it before, said Tatsuo Yoshida, an analyst at Sawakami Asset Management Inc.in Tokyo, who worked at Nissan Motor Co. between 1983 and 1999. Now that Tesla has achieved its target of 5,000 units per week production rate, the company is in a better position to negotiate with suppliers. Musk has since released a new target of 6,000 Model 3s per week. "It's simply ludicrous and it just shows that Tesla is desperate right now", he said.

Shares are down more than 3% after The Wall Street Journal reported that Tesla is asking some suppliers for partial refunds, another sign of a cash crunch at the company.

Lost amid the Serena fairy-tale story ... the Kerber fairy-tale story
Kerber played as cleanly as can be, covering the court well and picking her spots for big shots as she cruised through the first set.


"The remainder of our discussions with suppliers are entirely focused on future parts price and design or process changes that will help us lower fundamental costs rather than prior period adjustments of capital expenditure project spending". "It would not be correct to apply historical cost savings to current quarter", Musk tweeted.

It's worth noting that such supply contracts are often renegotiated as volume increases, which reduces part-costs.

Tesla's share price is now down 4.22 per cent, after hitting a low of 4.3 per cent in pre-market trading this morning.

While certainly an ambitious goal given Tesla's history, there's reason to believe that Musk's promise might actually pan out.


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