Tesla Asks Suppliers for Money to Sustain Production
- Author: Darren Santiago Jul 25, 2018,
Jul 25, 2018, 1:14
Tesla declined to comment on the memo, but did confirm that they have been seeking price reductions from suppliers for their recent projects. If a company needs to request money back from its supplier to achieve profitability, that doesn't seem like a sustainable business model.
Musk tweeted this morning to clarify what the company was up to saying, "Only costs that actually apply to Q3 & beyond will be counted". Musk has pushed back on naysayers, arguing that the company will be profitable this quarter and next.
"This is troubling for us to hear", said Morningstar analyst David Whiston in a note to clients.
Tesla Motors has reportedly asked some of its parts suppliers for financial support, including a partial refund of supply deals.
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. The remainder of supplier discussions focus on future parts price or other changes that will help lower costs, he said.
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.
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Still, industry analysts said it is unusual for automakers to request refunds for two previous years, as Tesla has demanded.
The carmaker is facing growing investor pressure as it struggles to ramp up the production of what is to be its flagship model, the Model 3, and reverse a loss-making streak that has been with it since its inception.
The cost of insuring $100 of Tesla debt hit $6.58 around 10:30 am Tuesday, according to data from Bloomberg, amid fresh fears over Tesla's cash position.
Becoming cash-flow positive is the primary goal of Chief Executive, Elon Musk, who said he wants to avoid raising additional cash, and turn a profit in the second half of the year.
Last month, Tesla allowed all existing Model 3 deposit holders to order their cars, which required those buyers interested in the offer to give the company an additional, non-refundable $2,500 deposit, which some observers saw as another way for Tesla to pull revenue forward.