Tesla Asks Suppliers for Cash Back to Help Turn a Profit

Tesla asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, according to a memo sent to a supplier last week. This company  requested the supplier return what it calls a meaningful amount of money of its payments since 2016. This request raises further questions about Tesla's cash portion which has dwindled after it struggled to boost production of its  the Model 3.

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(edited)

Probably not good for business. This is just to likely help it raise capital though. This isn't about profitability.

Edited by HermitMunster

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Companies that use payment terms from suppliers to prop up their financial performance rarely prove exceptional in the long run. In fact, it's typically is a tell-tale sign of desperation... and at best mediocrity.

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All the auto companies do this. I think it's also partly agreed to in the initial contracts when supplier business is awarded. But for some reason it's strange when Tesla does it. 

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Renegotiating future contracts is fine. But to ask for refunds on goods/services already  consumed. Not sure if its that common. 

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It's really hard to be profitable without government subsidies.

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(edited)

" All the auto companies do this. "  <==  What a lie and a big mixed bag of apples and oranges. 

All auto companies demand a price reduction schedule before a part would be designed in.  However, just because a part's price is scheduled to drop year after year by no means legitimize parts already delivered under an earlier pricing schedule to receive a refund to bring it under the same pricing per the future schedule! 

A supplier needs time to cost reduce too.  Just because they can make money at $100 per unit in 2020 (for example) does not mean they can be profitable at $100 today, 2018, or when Tesla first bought it a few years back.   

Edited by luckysoul777
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[updated: July 24, 2018]

After researching further, I'm not sure if Tesla is asking for refund on parts that are already installed in a car and shipped

or

they are asking for refund on long term capital equipment project that started a few years back and are still in progress.  

In any case, asking for money back for payments made as far back as *2016* is ridiculous!    Books from 2 years ago are already closed.  Tesla is basically asking these suppliers for donations! 

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