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Tesla Wants Money Back From Suppliers To Turn A Profit

Automaker Tesla Inc. is reportedly seeking partial refunds from suppliers it’s already paid in an effort to become profitable more quickly, according to reports in The Wall Street Journal.

Reports on Monday (July 23) said the publication reviewed a memo that was reportedly sent to one of Tesla’s suppliers last week, requesting the return of a portion of payments the company has made to the vendor since 2016. The memo described the cash back as key to the company’s ability to continue operating, and described the refunds as an investment in Tesla that supports continued growth between buyer and supplier.

Tesla did not comment on the memo, but did tell reporters that it is seeking price cuts from suppliers for some projects dating back to 2016. According to reports, the company said those efforts are standard procurement negotiations. The memo stemmed from a Tesla global supply manager, reports said.

One industry expert, manufacturing consultant Dennis Virag, told the publication that the memo could be bad news for Tesla.

“It’s simply ludicrous and it just shows that Tesla is desperate right now,” he said. “They’re worried about their profitability, but they don’t care about their suppliers’ profitability.”

Reports said that Tesla has struggled to maintain a strong cash position, though the company did say that it had reached its goal of manufacturing 5,000 Model 3s in a single week last quarter – a goal that is key to cash generation. Tesla Chief Executive Elon Musk said he does not want to raise cash, and vowed to become cash-flow positive now that the company is more quickly manufacturing Model 3s. Some analysts believe the company will eventually be forced to raise funds, however.

Earlier this year, Musk announced plans for Tesla to roll out a rideshare program in 2019, enabling drivers to lend their cars out when not in use.

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