B2B Payments

Tesla Suppliers Worry About Financial Risk  


The Tesla saga may have a ripple effect  up and down the supply chain. The Wall Street Journal (WSJ) reported that the automaker has had number of speed bumps, which has some of its suppliers worried about the firm’s financial condition. One of the key corporate events that has some of its vendors fretting is tied to the production of the Model 3 car.

The financial publication reported that surveys conducted by a supplier association found that a vast majority of suppliers surveyed 18 of 22 see Tesla as “a financial risk” to their own firms. The WSJ stated that many suppliers affirmed in interviews that Tesla has looked to extend payment terms, and in some cases has asked for cash back from those suppliers, with requested rebates spanning 9 percent to 20 percent. The company said the requested rebates applied to fewer than 10 suppliers.

Some of those suppliers have looked to get paid for services rendered to Tesla, to no avail. However, according to other sources as noted by the WSJ, the carmaker has boosted its on-time payments record to 95 percent from 90 percent seen last year, at least connected to production-related activity. The company has disputed the reason for some of those payments being stretched out.

The payment rate dropped significantly, to 80 percent of the time, for non-production-related suppliers.

The survey, conducted by the Original Equipment Suppliers Association, had sent the questions to respondents who were members of its council, representing 100 suppliers. There 35 respondents, and 23 of them were past Tesla suppliers or current ones. The WSJ noted that not all questions were answered by those who responded.

Elsewhere, 16 firms have filed mechanic’s liens against the company since October of last year, versus a total of four in the years 2015 and 2016.

As CEO Elon Musk told the financial publication late last week, “We’re not behind because we can’t pay them. It is just because we’re arguing whether the parts are right.” He stated that the firm is not going bankrupt.

In reference to financial position, the CEO and CFO Deepak Ahuja stated that the company’s metrics are getting better, with profit slated for the third (current) quarter. Production is ramping, though glitches with the Model 3 had taken cash to $2.2 billion at the end of the second quarter, down by more than $1 billion, said the executives.

The WSJ noted that all those suppliers who responded said they wanted to see their business with Tesla grow.


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