Economy

Tesla Reportedly Asked Suppliers for Cash Back to Show Profit

Tesla Reportedly Asked Suppliers for Cash Back to Show Profit

The memo said all suppliers were being asked to help the company become profitable.

A Tesla spokesman told CNNMoney that it asked "fewer than 10" suppliers for money back for long-term projects that began in 2016 and have not yet been completed, The spokesman said the cost savings will help Tesla increase its production volume, though he claimed Tesla would be profitable without the concessions.

Tesla in late June finally hit an important production target for the Model 3, its most accessibly priced electric auto.

In a memo to targeted suppliers, management framed the appeal as an "investment", an opportunity to ensure Tesla's continuation and, by extension, its ability to remain a parts buyer.

Tesla stock fell 3.3 percent to $303.20 Monday in heavier than normal trading.

Tesla had previously experienced serious production delays on its Model 3, which reportedly also impacted its supplier.

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The electric vehicle 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.

"This is one more sign that money is getting shorter and shorter and I am sure that Tesla needs fresh money at the latest next year", said Frank Schwope, an analyst with brokerage NORD/LB. While Musk has said the company does not need to raise cash this year, several analysts have predicted that the electric auto maker would need to raise capital soon. "It sounds like something that happens when you're struggling".

Tesla burned through $700 million in cash last quarter, and its cash reserves dipped 20%.

"If there are any one-time windfalls that aid in Tesla achieving its profit goals, we expect the market would view that as unsustainable", said Jamie Albertine, senior automotive analyst for Consumer Edge.

CEO and top shareholder Elon Musk has said that Tesla intends to become profitable in the second half of 2018, and analysts said Monday that the memo is an attempt to meet that goal. However, a spokesperson at the company did confirm that Tesla has been seeking price reductions from suppliers for projects, some of which date back as far as 2016.