A Tesla Cash-Back Deal Isn't for Buyers

Sean Reid
July 24, 2018

"The Silicon Valley electric vehicle company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week". Tesla has repeatedly said it will become profitable by the end of 2018, but has struggled amid production issues that have plagued its Fremont, California assembly line.

According to the Journal, Tesla is facing payments on $230 million in debt in November if its stock price doesn't reach a conversion price of $560.6 per share. The request, which was sent in the form of a memo to several suppliers, noted that the cash back would be necessary for Tesla's "continued operation", calling it an investment in "long-term growth". Tesla held about $3.2 billion in cash after the first three months of the year, having spent about $1 billion through March.

Musk, Tesla's co-founder and CEO, confirmed on Twitter that Tesla is asking for money from its suppliers.


After the memo was leaked over the weekend, Musk tweeted: "Only costs that actually apply to [the third quarter and] beyond will be counted".

Tesla did not respond to a series of emails and phone calls seeking comment. The WSJ also spoke to a number of suppliers which had not been contacted about such rebates. 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.

Supply-chain consultants told the paper that sometimes automakers will demand a reduction in price for a current contract going forward or use leverage of the promise of a new deal to get upfront savings.


Tesla shares pared losses and were down 2.7 percent at $305.01.

Tesla may have finally hit its production target of the Model 3, but the company is not yet out of the woods.

As pressure mounted to ramp up Model 3 production, Musk set up a tent outside Tesla's plant in Fremont, California.


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