Tesla Asks Suppliers To Refund Some Money Because It Doesn’t Have Enough

Industry News

Investors and industry analysts won’t like this.

Despite the impressive work and well-deserved praise for Tesla CEO Elon Musk in regards to reaching Model 3 production goals last month, the California-based EV automaker is still not out of the woods yet. More precisely, it’s still hemorrhaging cash.

The Wall Street Journal, citing a company memo, says Tesla has asked some of its suppliers to return previous payments it made in order to help the company reach profitability. The WSJ report was somewhat corroborated by Musk himself on Twitter, stating “Only costs that actually apply to Q3 & beyond will be counted. It would not be correct to apply historical cost savings to current quarter.”

It’s unclear, however, how many of Tesla’s suppliers actually received the memo, and which ones. When asked for clarification, Tesla emailed a statement stating that it “asked fewer than 10 suppliers for a reduction in total CapEx project spend for long-term projects that began in 2016 but are still not complete, and any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in Q3.” Those who regularly pay attention to the business side of the industry will probably be aware that it isn’t too unusual for automakers to ask suppliers for some cost concessions.

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What is unusual, however, is that Tesla is actually asking for cash back. As we’ve already learned, Tesla, which has used $1.4 billion in cash since it began operating in 2010, and had $2.7 billion in cash on hand at the end of March, is quickly burning through money.

A report from last November calculated the automaker is burning through $8,000 a minute, or $480,000 an hour. If those figures are still accurate, that means it’ll exhaust its cash supply on Monday, August 6, 2018 at 2:17 a.m., according to the calculated trajectory data. Hopefully, that won’t happen and Elon Musk has proved time and again he’s not only an innovator, but also a survivor.

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