Tesla shares drop on report that it asked suppliers for refunds


Telsa took another financial hit on Monday, with shares in the electric carmaker dropping nearly 5 per cent after it was reported to have asked some United States suppliers to return payments made by the money-losing company. The Journal said Tesla confirmed that it is "seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven't been completed".

The Wall Street Journal reported that Tesla was asking its suppliers for cash back on old orders.

"Now that we're in a stronger position with Model 3 production ramping [up], it is a good time to improve our competitive advantage in this area", a company spokesman said.

In a note to clients, Citi Investment Research analyst Itay Michaeli stated that Tesla's refund requests to its suppliers gave the impression that the negotiations were essential to the company's continued operations.

Tesla has asked its suppliers to provide retroactive discounts to help it to reach profitability, an unusual request that raised concerns about its cash position and spooked investors yesterday.

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.

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Tesla shares pared losses and were down 2.7 percent at $305.01.

"It sounds like something that happens when you're struggling". Not too long ago, Tesla CEO Elon Musk, who has a penchant for making bold promises, claimed that Tesla would be able to turn a profit sometime before 2019. Tesla held about $3.2 billion in cash after the first three months of the year, having spent about $1 billion through March.

He wrote early Monday: "Only costs that actually apply to Q3 & beyond will be counted".

"This is one more sign that money is getting shorter and shorter and I am sure that Tesla needs fresh money at the latest next year", said Frank Schwope, an analyst with brokerage NORD/LB.

As a possible crunch for Tesla approaches, Musk has said he has personally taken control of production and that he was sleeping occasionally at the factory.