Tesla stock skids on report it asked suppliers for refunds
NEW YORK (AP) — 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 percent 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.