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Tesla is ‘asking suppliers for a refund in a bid to become profitable’

July 23, 2018

By Paul Homewood


Musk gets ever more desperate.

From the Mail:



  • Tesla requested its suppliers return what it calls ‘a meaningful amount of money’
  • The plea raises questions around the car company’s cash reserves
  • All of Tesla’s suppliers were asked to help the company turn a profit
  • Tesla has been burning cash at a rate of about $1 billion (£0.76bn) each quarter
  • Last week, it was revealed Model 3 buyers have been cancelling their orders

Tesla has requested some suppliers refund a portion of what the automaker has already spent on orders in a bid to help it turn a profit, according to a leaked memo.

The plea, which has been branded ‘desperate’ and ‘ludicrous’ by a leading industry expert, raises questions around Tesla’s cash reserves.

Earlier this year, CEO Elon Musk said he expected Tesla to become profitable in the second half of 2018, despite losing $710 million (£540 million) on a revenue of $3.41 billion (£2.6 billion) during the last quarterly results.

According to the confidential memo, which was sent by a global supply manager for the company, Tesla has requested what it calls a ‘meaningful amount’ of money on its payments since 2016 from its supplier.

ll suppliers for the company are being asked to help Tesla become profitable, according to the memo seen by the Wall Street Journal.

The electric car company declined to comment on any specific leaked memos, however, confirmed that it is seeking price reductions from suppliers for projects, some of which date back to 2016.

Supply-chain consultants told the paper that sometimes automakers will demand a reduction in price for a current contract going forward or use the promise of a new deal as leverage to get savings upfront.

However, it is unusual for an automaker to ask for a refund for past work, they said.

It’s simply ludicrous and it just shows that Tesla is desperate right now,’ Dennis Virag, a manufacturing consultant who has worked in the automotive industry for 40 years, told the Wall Street Journal.

‘They’re worried about their profitability but they don’t care about their suppliers’ profitability.’

Tesla has been burning cash at a rate of about $1 billion (£0.76bn) a quarter and finished the first quarter with $2.7 billion (£2bn) in cash on hand.

However, it has struggled to balance its desire for growth with the expense of launching new vehicles and building out infrastructure to support its business.

Tesla is ready to be profitable, CEO and co-founder Elon Musk recently wrote in an internal email to all staff.

The company just needs to whittle down its capital expenditures, Musk added.

CEO Elon Musk has previously stated that he wants to avoid raising additional cash from venture capitalists and investors, promising the electric automaker will become cash-flow positive thanks to the continued Model 3 build rate.

Many analysts expect Tesla will eventually have to resort to raising more money.

MailOnline has contacted Tesla for comment.

Last week, it was revealed a growing number of Model 3 buyers have been cancelling their orders, following supply chain issues with the vehicle.

  1. Joe Public permalink
    July 23, 2018 3:18 pm

    One has no need to wonder what the response by Tesla would be, if customers went back into their showrooms and asked for a refund on the car they’d contracted to purchase at a previously agreed price.

    • dave permalink
      July 23, 2018 3:30 pm

      Any sensible suppliers will be:

      (a) Selling cash-only;

      (b) Looking for new customers.

  2. Phoenix44 permalink
    July 23, 2018 3:23 pm

    If it finished the second quarter with only $1.7 billion then it is definitely in big trouble. It must have outgoings of $1 billion in Q3 and it will “owe” perhaps another $1 billion if it shuts down, in taxes, redundancy payments and so on. I wonder if that cash reserve also includes pre-payments, which are pretty large?

    Quite why anybody funded the charlatan is beyond me? Why should the founder of Paypal be capable of building a profitable car business from scratch? It makes no sense.

  3. Silver Dynamite permalink
    July 23, 2018 4:04 pm

    Tesla is being overtaken by the established car manufacturers. I doubt it will survive the year.

  4. A C Osborn permalink
    July 23, 2018 4:23 pm

    Add this to their Solar Industry woes and they are in big trouble.
    Especially with also burning money on Space exploration.

    • Henning Nielsen permalink
      July 24, 2018 8:38 am

      But they can get a fast escape in their Hyperloop.

  5. BLACK PEARL permalink
    July 23, 2018 8:08 pm

    Will the BBC pension fund be off loading its stock now with no more free ‘plugs’ ?

  6. Bitter@twisted permalink
    July 23, 2018 10:34 pm

    We will soon see “Enron” Musk doing the perp walk.
    And not before time.

  7. Henning Nielsen permalink
    July 24, 2018 8:40 am

    “Tesla is ready to be profitable, CEO and co-founder Elon Musk recently wrote in an internal email to all staff. The company just needs to whittle down its capital expenditures, Musk added.”

    Like a debt haircut, or what?

  8. Michael permalink
    July 24, 2018 1:19 pm

    years ago I heard hard-nosed sourcing director say ‘check if a suppliers price is too low, we want them to make a profit too,not just try to buy the work’. Surprised me at the time, hearing that,but it makes total sense. Musk is just a scan artist.

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