Did Tesla ask its suppliers for refunds to appear profitable?
Tesla seems to be in the midst of yet another controversy. On Sunday, the Wall Street Journal, based on a memo it had obtained from one of Tesla's global supply managers, reported that the car manufacturer was asking for retroactive refunds from its suppliers to appear profitable. Understandably, Tesla drew considerable criticism, despite the company's assurances that such was not the case. Here's more.
Details of the memo reviewed by the WSJ
The WSJ reviewed a memo sent to one of Tesla's suppliers that requested the supplier to refund a "meaningful amount" of money Tesla had paid it since 2016. The memo, sent by one of Tesla's global supply managers, said that the money was "essential" for Tesla to continue operating, and that the supplier should view the refund as an "investment" for a long-term relationship.
Many think Tesla's request was bizarre and desperate
Although the memo reportedly claimed that all suppliers were receiving such refund requests, not all suppliers contacted by the WSJ seemed to be aware of the issue. Meanwhile, a Tesla spokesperson had told WSJ that asking for such refunds was a "standard" practice. People outside Tesla, however, including experts, thought that Tesla's request was downright bizarre, self-centred, and desperate.
Experts weigh in on Tesla's bizarre request
"I have never heard of that. Suppliers have been asked for reductions, but going back for them in arrears reeks of desperation," said finance expert Ron Harbour to Bloomberg. David Whiston, another prominent financial analyst, called Tesla's request "troubling".
Details about Tesla's response to the WSJ report
In its response to the WSJ report, Tesla said that it was negotiating with suppliers in a bid to reach a "more sustainable long-term cost basis", and that fewer than 10 suppliers had been requested for a refund. It added that other discussions with suppliers were focused on price negotiations for future supplies. Despite the assurance, Tesla's shares closed, down by 3.3% on Monday.
Tesla CEO Elon Musk, of course, had to respond
Tesla's financial woes point towards a troubling situation indeed
Looking at figures, Tesla's situation does seem troubling. In the midst of a financial crisis, Tesla's current woes are centred around its Model 3 car that has faced several production issues resulting in delays in deliveries around the world. While Tesla has stepped up production of the Model 3, revenues from sales aren't expected before Q3 2018. Additionally, Tesla carries a $10bn debt burden.
