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Tesla Scrambles To Become Profitable

Tesla

Tesla has asked some of its suppliers to return parts of payments that the carmaker has made since 2016 in an attempt to turn in a profit after years of burning cash, the Wall Street Journal reports, citing a memo sent to at least one supplier by a Tesla global supply manager.

The memo notes the refund was essential for Tesla’s survival and would be an investment in the company to ensure the long-term partnership between it and the suppliers. It suggested that all Tesla suppliers were being asked to make partial refunds, but some of the companies that the WSJ talked to denied any knowledge of such a request.

Tesla itself confirmed sending the memo, referring to it as part of standard procurement operations and describing it as a retroactive request for price discounts on services rendered.

The carmaker is facing growing investor pressure as it struggles to ramp up the production of what is to be its flagship model, the Model 3, and reverse a loss-making streak that has been with it since its inception.

Tesla announced it hit its target of 5,000 Model 3s weekly in late June after several delays, but the market reacted skeptically, with analysts noting hitting that the target was one thing while sustaining it was another. Related: Banks Are Falling Out Of Favor With The Wealthy

The Model 3 endeavor is widely seen as the project that will make or break Tesla. The company has been burning cash at worrying rates, with US$1 billion spent during the first quarter of this year alone. As investors started to get restless, Musk kept on making grand promises for future Tesla models and new Model 3 versions, which probably only added investor annoyance.

Yet besides the Model 3 delays, Tesla has also been plagued by unwanted media attention regarding three crashes involving its vehicles with the drivers claiming the Autopilot system was switched on at the time of the accident. Road safety authorities are investigating the crashes, and the company has repeatedly noted that it always warns drivers that the Autopilot does not replace the human at the wheel. Nevertheless, the media noise has not been of any help to the cash-strapped carmaker.

By Irina Slav for Oilprice.com

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