In an unusual move, Tesla reportedly asked some suppliers to return part of the money it’s paid them since 2016, including for past work. According toÂ the Wall Street Journal, which reviewed a memo Tesla sent to a supplier last week, the electric auto maker said it is asking suppliers for refunds to help it reach profitability. This stokes concerns about the companyâ€™s cash flow, despite earlier assurances from Tesla founder and CEO Elon Musk that it will be profitable in the third and fourth quarters of this year.
After months of production delays for the Model 3, Tesla recently hit a major milestone, announcing earlier this month that it reached its 5,000-per-week production target for the vehicle.
According to the Wall Street Journal, the memo, sent by one of Teslaâ€™s global supply managers, said the company is requesting back a â€œmeaningfulâ€� portion of its payments since 2016. Tesla described it as not only important for Teslaâ€™s operations, but an investment in the companyâ€™s long-term growth that will also benefit its suppliers.
Tesla declined to comment about the memo to the Wall Street Journal, but said it is seeking price reductions on some projects, including several dating back to 2016 and some which haven’t been completed. It also told the newspaper that requests like the memo are standard in procurement negotiations between auto manufacturers and their suppliers.
But if Tesla is indeed asking suppliers for money back on past work to help it achieve profitability, as opposed to reduced prices on future work, it adds to concerns about companyâ€™s cash flows. It may also make some suppliers reluctant to work with Tesla. As manufacturing consultant Dennis Virag told the Wall Street Journal, â€œitâ€™s simply ludicrous and it just shows that Tesla is desperate right now. Theyâ€™re worried about their profitability but they donâ€™t care about their suppliersâ€™ profitability.â€�
TechCrunch has contacted Tesla for comment.
Source: Techcrunch Disrupt