Tesla reportedly asks for money back on payments to suppliers

Outside the Tesla showroom in Newport Beach California

Outside the Tesla showroom in Newport Beach California

The Wall Street Journal over the weekend reported that Tesla had asked some of its suppliers for a refund of payments it had made since 2016 to help it become profitable, citing a memo sent to one of those suppliers.

Musk, Tesla's co-founder and CEO, confirmed on Twitter that Tesla is asking for money from its suppliers. "It would not be correct to apply historical cost savings to current quarter", tweeted Musk.

David Whiston, an analyst at...

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.

Initially, Tesla shares dropped by more than 5% on Monday morning as investors responded to the report, although they recovered some ground later. Chief Executive Officer Elon Musk has said the company does not need to raise cash this year, but several analysts have predicted that the electric vehicle maker would need to raise capital soon.

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In a memo to targeted suppliers, management framed the appeal as an "investment", an opportunity to ensure Tesla's continuation and, by extension, its ability to remain a parts buyer. Analysts say Tesla needs to sell a lot more cars.

"I haven't heard of this being done before and I've been following the industry for 20 years, " he said.

Tesla shares have fallen sharply after it was revealed the electric carmaker is seeking refunds from some suppliers.

"If there are any one-time windfalls that aid in Tesla achieving its profit goals, we expect the market would view that as unsustainable", said Jamie Albertine, senior automotive analyst for Consumer Edge. Auto manufacturing consultant Dennis Virag told The Wall Street Journal that automakers and suppliers often renegotiate contracts for work going forward, but that it is unusual to make such a reduction retroactive.

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.

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