Tesla Stock Stumbles as Company Asks Suppliers for Help Turning a Profit

Outside the Tesla showroom in Newport Beach California

When asked whether the company has requested refunds from suppliers, a Tesla spokesman referred to a company statement, which said Tesla had asked fewer than 10 suppliers for a reduction in total spending on projects that started in 2016 and are not complete.

Elon Musk's struggling auto company made the rebate request in a memo, according to the report.

He wrote early Monday: "Only costs that actually apply to Q3 & beyond will be counted".

Instead, he has told investors that he expects the firm to turn a profit in the third quarter of this year.

"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.

This strategy is part of a plan announced past year where Tesla was able to negotiate longer payment terms to about 60 days for Model 3 parts, which would allow the auto maker to make the vehicle and get paid for it before the bill is due to suppliers.

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In a Tweet, CEO Elon Musk said the company would need three to six months of full production of the mass-market Model 3 to become profitable enough that it could afford to bring the long-promised $35,000 base Model 3 to market.

The remainder of our discussions with suppliers are entirely focused on future parts price and design or process changes that will help us lower fundamental costs rather than prior period adjustments of capex projects. Tesla has been burning through cash at a rate of about $1bn a quarter, or more than more than $7,430 every minute, according to data compiled by Bloomberg, and finished the first quarter with $2.7bn in cash on hand.

Still, industry analysts said it is unusual for carmakers to request refunds for two previous years, as Tesla has demanded.

Of course, this news won't make Tesla investors happy.

Tesla intends to stretch that goal to 10,000 per week.

Tesla cut nine per cent of its workforce in June in a bid to reduce its costs ahead of meeting Musk's targets of producing 5,000 Model 3 sedans per week. Tesla's stock prices have taken a tumble since reports emerged about the request.

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