Elon Musk Explains Why Tesla Asked Suppliers For Refunds

Tesla Monday released an explanation on why the electric car maker asked some of its suppliers for refunds.

The luxury electric car maker was responding to the Wall Street Journal’s report on Sunday that said the company asked a supplier to return a “meaningful amount of money of its payments since 2016.”

In a statement, Tesla said it asked fewer than 10 suppliers for a reduction in spending on long-term projects that began in 2016 but have not yet been completed. The company said any changes with these suppliers would improve its future cash flows, but not impact its ability to achieve profitability in third quarter.

In a tweet, Tesla CEO Elon Musk also said, “Only costs that actually apply to Q3 & beyond will be counted. It would not be correct to apply historical cost savings to current quarter.”

“Negotiation is a standard part of the procurement process, and now that we’re in a stronger position with Model 3 production ramping, it is a good time to improve our competitive advantage in this area.” Tesla said.

“We’re focused on reaching a more sustainable long term cost basis, not just finding one-time reductions for this quarter, and that’s good for Tesla, our shareholders, and our suppliers who will also benefit from our increasing production volume and future growth opportunities.”

On Sunday, WSJ reported, citing a memo that was sent to a supplier last week, that Tesla asked some suppliers to refund a portion of what the electric-car company had spent previously.

According to the report, Tesla’s appeal indicated the car maker’s dire situation to sustain operations during a critical production period.

The auto maker’s memo, sent by a global supply manager, described the request as essential to Tesla’s continued operation and characterized it as an investment in the car company to continue the long-term growth between both players, the Journal reported.

TSLA closed Monday’s trading at $303.20, down $10.38 or 3.31%, in the after hours trade.

by RTTNews Staff Writer

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