Tesla asks suppliers for refunds. As a result, Tesla, Inc. (NASDAQ:TSLA) shares dropped this morning, as Elon Musk tweets confirmation that his company is seeking refunds from suppliers to reach profitability. As per Yahoo Finance, TSLA closed Friday’s market at $313.58 a share and opened this morning at $295.80. The car manufacturer opened the market this morning at nearly a 6% drop in its share price.
Tesla Asks Suppliers for Refunds
In its report Sunday, the Wall Street Journal cited a memo sent out by Tesla to its suppliers last week asking for the return of a “meaningful amount of money of its payments since 2016.”
Only costs that actually apply to Q3 & beyond will be counted. It would not be correct to apply historical cost savings to current quarter.
— Elon Musk (@elonmusk) July 23, 2018
The news publication said that the memo was addressed to the company’s suppliers and they are being asked to aid Tesla in becoming profitable. The WSJ reports that it is unclear at this time how many of the suppliers were asked for price reduction for parts in the Model 3 program.
In May, Tesla stated that its company should see positive GAAP net income within its third and fourth quarters of 2018. At the end of the Q1 2018, Tesla only had $2.7 billion in cash.
The automotive company lost nearly $2 billion last year and burned through $3.4 billion in cash after capital investments. The latest announcement calls into question the company’s financial position, due to the Model 3 roll-out debacle.
Model 3 Development
Despite the company’s ramp-up of Tesla 3 production, Needham & Co. analyst, Rajvindra Gill, found that the rate of cancellations on the ‘affordable’ Tesla model has doubled. The $1,000 deposit to reserve a Model 3 is fully refundable, and an individual can pay $2,599 to choose a specific model type.
Gill’s report states that the wait time for a car is from 90 days to a year, but Tesla has officially responded to this report and states the current wait time is 30 days to nine months.
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