Share Price Of Tesla Plummets After Requesting Refunds From Suppliers

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Today, the share price of Tesla, the electric car manufacturer dropped by over four percent as the markets opened, following the revelation that the company had asked for refunds from some of its suppliers for its previously made payments.

According to the Wall Street Journal, a global supply manager for Tesla sent a memo describing a request for some suppliers to refund the money that was paid by the firm since 2016.

The manager called the refunds as “essential” to the ability of Tesla to continue operating at its current scale and speed, portraying the return of the money as an investment into the future of the company.

A Tesla representative said that the “negotiation is a standard part of the procurement process.” He added that this is considered to be “the right thing to do.”

He added: “We asked fewer than 10 suppliers for a reduction in total capex project spend for long-term projects that began in 2016 but are still not complete, and any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in Q3.”

He continued: “The remainder of our discussions with suppliers are entirely focused on future parts price and design or process changes that will help us lower fundamental costs rather than prior period adjustments of capex projects.”

Elon Musk, the CEO of Tesla, also said in a tweet that any costs that will be accounted for in the next quarter of the year would not be retroactive.

The tech titan has been chasing profitability during the recent months, following the promise of Musk that the company would achieve that target by the third or fourth quarter the year.

Last June, Tesla lost nine percent of its workforce in an attempt to reduce its costs ahead of meeting the targets set by Musk of producing 5,000 Model 3 sedans every week.

Even though the firm has now been able to meet its June production target, it is also working on a fresh battle to achieve its next stage of production for 10,000 cars per week by the same time in 2019.

Currently, the share price of Tesla is down by 4.22 per cent, after going down a low of 4.3 percent in pre-market trading this morning. The company is set to release its second-quarter results next week.

The firm experienced a similar drop in shares last week, as an outcome of a tweet from Musk that called a British diver that assisted in a rescue effort in Thailand as a “pedo guy.”