Tesla wants price cut on long-term projects

TESLA has asked some of its suppliers to reduce prices in long-term projects, responding to a media report which had knocked more than 6pc off its share price. The Wall Street Journal over the weekend reported that Tesla had asked some of its suppliers for a refund of payments it had made since 2016 to help it become profitable, citing a memo sent to one of those suppliers. Shares in the electric car manufacturer had plunged around 6.6pc yesterday, as the market digested the report which had been taken as a worrying reflection of the company’s finances.

However, in a statement released later yesterday, a spokesman for Tesla said it had 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”.

He said that “any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in the third quarter.

“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. This is the right thing to do.”

The clarification helped Tesla pare some of the losses in late trade, closing down around 3.3pc. Investors have been jumpy over Tesla’s finances, as it has had to hike spending substantially in order to increase production of its Model 3 vehicles, after repeatedly missing targets.

Earlier this month, it finally hit the target of 5,000 of the Model 3 vehicles per week, coming almost six months later than planned and after it had to construct a tent-covered production line in order to manufacture some of the cars. Last quarter, Tesla burned through around $1bn (£760m) in cash, prompting speculation it could be forced to launch a fundraising.