Tesla seeking cash from suppliers shows the automaker's desperation

Marco Green
July 23, 2018

The plea raises questions about the company's cash position, which has dwindled following some production issues. "Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo".

"The Silicon Valley electric auto company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week".

While Musk wants to become cash-flow positive and turn a profit in the second half of the year, The WSJ suggests that raising more money will likely be necessary. 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 could not be immediately reached for comment, although the WSJ quoted the company as confirming it is seeking price reductions for projects, some of which date back to 2016.

Tesla's rally call was aimed at all suppliers, although in the memo it was not made clear how they were expected to comply with the company's request for refunds.

"It's simply ludicrous and it just shows that Tesla is desperate right now", Dennis Virag, a manufacturing consultant who has worked in the automotive industry for 40 years, told the paper.

Tesla had about $3.2 billion in cash as of the first quarter ended March 31, after spending about $1 billion in the quarter.

Tesla had previously experienced serious production delays on its Model 3, which reportedly also impacted its supplier.

An analyst for Needham & Co last week said the refund rate has now hit 24 per cent, doubling what it was last summer.

Shares in the company fell 4.3 percent to $300.27 in premarket trading on Monday, knocking $2.26 billion off its market capitalization.

Other reports by Click Lancashire

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