Tesla's call for suppliers to refund cash 'reeks of desperation'

Tesla Appeals To Suppliers For Refunds To Buffer Cash Position

Tesla Inc. asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, the Wall Street Journal reported, citing a memo sent to a supplier last week.

"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.

Tesla's stock declined 6 per cent in about 20 minutes after his tirade.

"What stuck out to us as a negative is that Tesla's memo reportedly described the request as essential to the company's continued operation", Citi Investment Research analyst Itay Michaeli wrote in a note to clients.

Tesla had $2.7 billion in cash on hand at the end of the first quarter and many specialists think it will need to raise money soon.

Based on the WSJ report, suppliers appear reluctant to compromise their own profitability to buoy Tesla. 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. "It would not be correct to apply historical cost savings to current quarter", Musk tweeted.

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. 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. "It's simply ludicrous and it just shows that Tesla is desperate right now", he said. Even though Tesla is making more of the sedans, the company won't complete delivery and collect revenue for many of them until the third quarter, Whiston said. The company also has taken $1,000 deposits for Model 3 orders to help fund development and manufacturing, which established carmakers don't have to do.

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