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July 23, 2018
4 minutes read

Tesla responds to reports concerning Supplier refund request

Tesla Following several reports of EV maker Tesla calling on suppliers to return parts of payment made to them for…

Tesla

Following several reports of EV maker Tesla calling on suppliers to return parts of payment made to them for delivered products in a bid for profitability, Tesla has now said it asked just a small number of suppliers to reduce on-going long term projects in order to improve its cash flow.

The reports of Tesla asking for returns from its suppliers sparked investor concerns over the company’s ability to turn profits which led to Tesla’s stock going down by as much as 6.6% during trading today.

The report first came from The Wall Street Journal which reviewed a memo sent by Tesla last week to global suppliers indicating the EV maker requested what it said was a meaningful amount of its money made since 2016 in a bid for Tesla to be profitable.

Investors and financial analysts in reaction to this have stated concerns over Tesla’s ability to turn profits with the company now in a critical production stage churning out its Model 3 vehicles at the rate of 5,000 a week which may have seen the company spend so much on manufacturing while not selling all the cars yet which would not look good on its revenue reports.

According to a spokesperson for Tesla, The company had asked less than 10 of its suppliers for reduction in “total capex project spend for long-term projects that began in 2016 but are still not complete.”

The spokesperson also stated of any future pricing adjustments having the ability to improve “future cash flows, but not impact our (Tesla’s) ability to achieve profitability in Q3,”.

Tesla has been burning through cash at a heavy rate of about $1 Billion per quarter and reported having $2.7 Billion of cash as at Q1 this year. With the company both combining the aim of being profitable and also putting much efforts and resources into producing and delivery more vehicles to long-waiting customers, Things don’t seem to be quite straight-forward and clear for the auto maker.

Tesla currently trades at about $303 a share (as of writing) and counts a market cap of just over $50 Billion.