Tesla Stock Stumbles as Company Asks Suppliers for Help Turning a Profit
- Author: Eleanor Harrison Jul 24, 2018,
Jul 24, 2018, 4:26
Telsa took another financial hit on Monday, with shares in the company dropping nearly 5% after the electric automaker was reported to have asked some USA suppliers to return payments to the money-losing company.
A Tesla spokesperson said the electric vehicle maker had asked fewer than 10 of its suppliers for a reduction in "total capex project spend for long-term projects that began in 2016 but are still not complete". The report was received with much reservation from Tesla's critics, many of whom raised further questions about Tesla's cash position.
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 memo said all suppliers were being asked to help the company become profitable.
"I haven't heard of this being done before and I've been following the industry for 20 years", he said.
The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017.
"It sounds like something that happens when you're struggling".
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.
Efraim Levy, a senior equity analyst for CFRA, said he found Tesla's request unusual.
Tesla burned through more than $700 million in the first quarter - leaving it with $2.7 billion cash on hand. "It would not be correct to apply historical cost savings to current quarter". But they said if Tesla has to try this hard to meet its target, it might be a self-defeating effort. The plea is said to have been framed as a way to help Tesla achieve profitability.
At time of publication, Tesla shares were trading down 3.4 percent around $303.