Tesla may have finally hit its production target of the Model 3, but the company is not yet out of the woods.
According to a report from The Wall Street Journal, Tesla has asked suppliers to refund part of the money it’s previously paid to them.
It is unclear how much cash back Tesla has requested, or how many of its suppliers have received this request. The WSJ calls the sum “meaningful,” and reports that the refunds are on payments made since 2016.
The appeal was reportedly made as part of a wider effort to make Tesla profitable. 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.”
With high expenses and CEO Elon Musk’s unwillingness to raise additional cash, this may prove to be another means to increase Tesla’s cash flow. Tesla already cut its workforce by 9% in June, and Musk reportedly promised to slow spending.
While Musk wants to become cash-flow positive and turn a profit in the second half of the year, The WSJ suggests that raising more money will likely be necessary.
In the meantime, manufacturing consultant Dennis Virag told The WSJ that Tesla’s request shows that it’s “desperate right now,” and that the company is “worried about their profitability but they don’t care about their suppliers’ profitability.”
