Tesla Stock Tumbles After Company Asks Suppliers For Refunds

Tesla Stock Tumbles After Company Asks Suppliers For Refunds

Tesla Stock Tumbles After Company Asks Suppliers For Refunds

The electric auto company declined to comment on the specific memo but confirmed that it is seeking price reductions from suppliers for projects, some of which date back that far. It suggested that all Tesla suppliers were being asked to make partial refunds, but some of the companies that the WSJ talked to denied any knowledge of such a request.

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.

Becoming profitable is clearly a top priority for Musk, who is juggling several highly ambitious companies at the moment, including both SpaceX and the Boring Company.

"Automakers often have brutal pricing demands on suppliers for future work, but retroactive rebates is not something we hear much about, and this is troubling for us to hear", David Whiston, an analyst with brokerage Morningstar wrote in a note to clients. The company reportedly asked suppliers to return a "meaningful amount of money" from the companies payments since 2016. The company has been burning cash at worrying rates, with US$1 billion spent during the first quarter of this year alone.

The remainder of our discussions with suppliers are entirely focused on future parts price and design or process changes that will help us lower fundamental costs rather than prior period adjustments of capex projects.

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Efraim Levy, a senior equity analyst for CFRA, said he found Tesla's request unusual.

As pressure mounted to ramp up Model 3 production, Musk set up a tent outside Tesla's plant in Fremont, California. In addition to boosting Model 3 production, Tesla in short order plans to build new factories in China and Europe and bring the Model Y sport-utility vehicle, a semi truck, pickup and roadster to market.

The race to get the Model 3 going may have added unexpected costs in the second quarter.

The cost of insuring $100 of Tesla debt hit $6.58 around 10:30 am Tuesday, according to data from Bloomberg, amid fresh fears over Tesla's cash position.

Shares in the company were last down 3.4 percent to $303.22.

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