Tesla: asking suppliers for cash back is 'standard' negotiating strategy

Tesla Asks Suppliers for Cash Back in a Bid to Achieve Profitability

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.

Tesla has asked some of its suppliers to reduce prices in long-term projects, responding to a media report which had knocked more than 6pc off its share price.

The electric carmaker reportedly asked select suppliers to return part of the money it paid them for past work to help the company reach profitability, the Wall Street Journal reports. The newspaper cited a memo sent to a supplier the previous week.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

Tesla's Australia and Asia media office, as well as a spokesman and spokeswoman in the US, didn't reply to emails seeking comment on the Journal report.

A Tesla spokesperson said the electric vehicle maker had asked fewer than 10 of its suppliers for a reduction in "total capex project spend for long-term projects that began in 2016 but are still not complete". "It would not be correct to apply historical cost savings to current quarter", tweeted Musk.

Analysts say asking suppliers to retroactively give money back is a troubling sign - one that pushed Tesla's stock down 3.3 percent Monday. The WSJ calls the sum "meaningful", and reports that the refunds are on payments made since 2016. It is spending about $1 billion a quarter as it ramps up manufacturing of the Model 3 sedan, a lower-priced auto that is key to Tesla's plans of becoming a major mass-market automaker.

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

Tesla has said the company will be profitable in the third and fourth quarters of the year. It posted a loss of $US709.6 million in its first quarter.

Last month, Tesla said it was cutting several thousand jobs to become sustainably profitable without endangering the ramp up of Model 3 production.

Tesla's share price is now down 4.22 per cent, after hitting a low of 4.3 per cent in pre-market trading this morning.

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