Tesla shares drop on report that it asked suppliers for refunds

Tesla shares drop on report that it asked suppliers for refunds

Tesla shares drop on report that it asked suppliers for refunds

Telsa took another financial hit on Monday, with shares in the electric carmaker dropping nearly 5 per cent after it was reported to have asked some USA suppliers to return payments made by the money-losing company.

"The Silicon Valley electric vehicle company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week".

Shares in the electric auto maker had plunged around 6.6pc on Monday, as the market digested the report which had been taken as a worrying reflection of the company's finances.

The Wall Street Journal also received confirmation that Tesla is seeking price reductions from fewer than 10 suppliers for uncompleted projects that began in 2016, and CEO Elon Musk tweeted it will only count costs applicable to and beyond the third quarter.

Any pricing adjustments would improve Tesla's "future cash flows, but not impact our ability to achieve profitability in Q3", the spokesperson added.

Tesla was trading below $300 per share at the opening bell on Wall Street, losing over $2.3 billion off its market capitalization.

Cowen analyst Jeffrey Osborne told Reuters that Tesla's supplier explanation appeared "rational", but that there remained lingering concerns.

The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017.

In early May, Musk cut off a Morgan Stanley analyst who'd asked if the company should raise more capital while it could even if it doesn't need it. Musk responded that he "specifically" didn't want to, and called the analyst's questions "so dry".

Still, industry analysts said it is unusual for automakers to request refunds for two previous years, as Tesla has demanded. "It would not be correct to apply historical cost savings to current quarter". "We're focused on reaching a more sustainable long term cost basis, not just finding one-time reductions for this quarter". It posted a loss of $US709.6 million in its first quarter.

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

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