Tesla Asks Suppliers for Cash to Stay Afloat

Could Tesla be in trouble

Could Tesla be in trouble

A memo provided to The Wall Street Journal shows the electric vehicle maker asked a supplier to return what it calls a meaningful amount of money on its payments since 2016.

Shares in the electric auto maker had plunged around 6.6pc on Monday, as the market digested the report which had been taken as a worrying reflection of the company's finances.

When asked whether the company has requested refunds from suppliers, a Tesla spokesman referred to a company statement, which said Tesla had asked fewer than 10 suppliers for a reduction in total spending on projects that started in 2016 and are not complete. In the memo, Tesla described its plea as a way to invest in its company and ensure that it is able to continue ordering new parts in the future.

The reasoning behind Tesla's request is to help the company become profitable.

Tesla, whose eroding cash position has alarmed investors, requested a "meaningful" amount of payments made since 2016 to be returned, according to the letter.

Tesla is due to report second-quarter earnings after the stock market closes on August 1.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

Company CEO Elon Musk stated on his official Twitter account that any refunds from suppliers would only involve those from Q3 and beyond would be counted. An analyst at Baillie Gifford, Tesla's third-largest institutional shareholder, told the Journal the firm is "divided" on whether Musk is the right leader for Tesla going forward. Musk marked the occasion by saying the milestone finally made Tesla "a real company". "It would not be correct to apply historical cost savings to current quarter". He has lashed out at journalists for critical coverage of Tesla, and earlier this month he tweeted an unfounded and disparaging claim about a cave diver who participated in the rescue of a Thai soccer team.

Analysts say asking suppliers to retroactively give money back is a troubling sign - one that pushed Tesla's stock down 3.3 percent Monday.

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