Tesla approaches suppliers

Author: Mario Schmidtgen
Date: 24.07.2018

Liquidity of the company is called into question

According to reports from the Wall Street Journal and the FAZ, California electric car maker Tesla has asked its suppliers to reimburse a part of the payments already made. In a company announcement states the company that they needs the suppliers’ reimbursements to help the business and become profitable. Refunds relate to a larger part of the payments made since 2016. Such a call increasingly illustrates the urgency with which the company seeks to sustain its business in this critical phase of production.

According to Tesla they have asked for the help of all suppliers. Thereby the repayments are an investment in the company to ensure the long-term growth of both parties. However, when asked by FAZ how many companies had been asked for refunds, several suppliers said they did not know anything about such a claim.

“Standard procedures“

Tesla self does not comment on this message. However, the company acknowledged that price reductions were requested from suppliers for certain projects dating back to two years, which, according to the company, was a standard procedure. It would help to optimize the own competitive advantage. The production of the model 3 should also be stimulated. In the second quarter of the year, the goal of 5,000 Model 3 completions was achieved after months of delays. Now Tesla wants to finish around 8,000 cars a week over the next few months.

Reservations go back

Due to too long waiting times there are more and more cancellations on customer reservations, as an analysis report shows. Around a quarter of the 400,000 reservations has already been canceled according to the FAZ. If the order is canceled, Tesla must pay the customer a deposit of $ 1,000. With these high numbers of cancellations, the reaction of the customers therefore also has a negative effect on the finances of the car maker.

Tesla’s claim on suppliers casts a bad light on the company’s liquidity. Every quarter around $ 1 billion is mucked up and the next quarter is started with around $ 2.7 billion available capital. In the first quarter of 2018, a record loss of around $ 710 million was registered for the fifth time in a row. In June, nine percent of the workforce was fired to save costs.