Published: Tue, July 24, 2018
Markets | By Josh Butler

Tesla Stock Stumbles as Company Asks Suppliers for Help Turning a Profit

Tesla Stock Stumbles as Company Asks Suppliers for Help Turning a Profit

However, in a statement released later on Monday, a spokesman for Tesla said it had asked "fewer than 10 suppliers for a reduction in total capex project".

With Tesla doing everything in its power to make Musk's promise of a profitable quarter a reality, a new report from The Wall Street Journal relays that Tesla in recent weeks has been asking select suppliers to return portions of previous cash payments as a pseudo-price reduction of sorts. What's more, a recent teardown of the Model 3 suggests that Tesla's mass market EV might be far more profitable than initially anticipated.

Becoming cash-flow positive is the primary goal of Chief Executive, Elon Musk, who said he wants to avoid raising additional cash, and turn a profit in the second half of the year.

Concern that the memo signaled that money-losing Tesla was scrambling to find cash to fund its current operations and multiple long-term projects had sent shares down.

Tesla has been burning cash at a rate of about $1 billion a quarter and finished the first quarter with $2.7 billion in cash on hand.

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On the road to profitability, suppliers often get squeezed. The remainder of supplier discussions focus on future parts price or other changes that will help lower costs, he said. It is spending about $1 billion a quarter as it ramps up manufacturing of the Model 3 sedan, a lower-priced vehicle that is key to Tesla's plans of becoming a major mass-market automaker.

As pressure mounted to ramp up Model 3 production, Musk set up a tent outside Tesla's plant in Fremont, California. Chief Executive Officer Elon Musk has said the company does not need to raise cash this year, but several analysts have predicted that the electric auto maker would need to raise capital soon. "It's simply ludicrous and it just shows that Tesla is desperate right now", Dennis Virag, a manufacturing consultant, told The Wall Street Journal.

Shares in the company were last down 3.4 percent to $303.22.

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