Tesla plunges after report suppliers asked to hand back cash
Tesla 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' has reported, citing a memo sent to a supplier last week.
The company's shares dropped as much as 5.9pc yesterday, following the report. The bonds also declined. Tesla, whose eroding cash position has alarmed investors, requested a "meaningful" amount of payments made since 2016 to be returned, according to the letter. The note stated all suppliers had been asked to help the Californian company become profitable.
The request indicates more struggles for Tesla in its quest to reverse losses. While CEO Elon Musk proclaimed the company to be a "real" carmaker after hitting a weekly goal of producing more than 5,000 mass-market Model 3s, there are doubts the volumes can be sustained. Some of the increased output, pivotal for boosting revenue and earnings, came from a makeshift tent.
Tesla's stock was down 5.7pc to $295.64 (€252.70) at one stage yesterday in New York. Its 5.3pc bonds due in 2025 fell as much as 1.75 cents, the biggest drop since May, according to Trace bond price data.
The US auto manufacturer declined to comment, but confirmed it's seeking price reductions from suppliers for projects, some of which go back to 2016, according to the report. Tesla called such requests a standard part of procurement negotiations to improve its competitive advantage, especially as it increases Model 3 production, the 'Journal' said.
It's not clear how many suppliers were asked to hand back money, with some saying they weren't aware of the request, the newspaper said. (Bloomberg)