Tesla stock skids on report it asked suppliers for refunds
The Canadian PressQuality Automotive Elon Musk tesla
The 15-year-old company has reported only two quarterly profits and has never made a profit for a full year.
NEW YORK – Shares of Tesla tumbled Monday on reports that the company asked suppliers for refunds to help it turn a profit.
A memo provided to The Wall Street Journal shows the electric car maker asked a supplier to return what it calls a meaningful amount of money on its payments since 2016. The memo said all suppliers were being asked to help the company become profitable.
Tesla 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.
The request raised more questions about Tesla’s cash position. The 15-year-old company has reported only two quarterly profits and has never made a profit for a full year. It is spending about $1 billion a quarter as it ramps up manufacturing of the Model 3 sedan and had $2.7 billion in cash on hand at the end of the first quarter.
Citi Investment Research analyst Itay Michaeli said the request itself isn’t unusual, but when companies ask suppliers for refunds, they usually want to boost their profit margins or to counteract an increase in costs. He said Tesla appeared to be facing bigger problems.
“What stuck out to us as a negative is that Tesla’s memo reportedly described the request as essential to the company’s continued operation,” he said.
Tesla stock fell 4 per cent to $301.08 at midday Monday. It’s down from a peak of $385 in September, with many investors growing concerned about Tesla’s spending and its ability to meet its production goals.
CEO and top shareholder Elon Musk has said that Tesla intends to become profitable in the second half of 2018. In June the company said it was eliminating 3,600 jobs, or 9 per cent of its staff, to help achieve that goal.
At the beginning of July the company said it met a long-time target of building 5,000 Model 3s in a week, but industry analysts have questioned whether Tesla can sustain that pace. The lower-cost Model 3 is critical to Tesla’s goal of becoming a mass-market car company.