Tesla asks suppliers for cash to reduce costs and turn a profit

Tesla shares were down 3.7% on Monday after the Wall Street Journal reported that the electric car maker was asking suppliers for cash, to help it turn a profit.

A memo provided to the newspaper showed Tesla asked its suppliers for a portion of what it has previously spent in 2016 for parts in the Model 3 program.

Tesla had suffered delays in production of the Model 3 , which also impacted its suppliers, but it did recently achieve the targeted 5,000 units per week production rate.

The requests to suppliers raised questions about Tesla’s cash position, which reportedly dwindled after the delays despite CEO Elon Musk assuring at the start of the year that the company would reach profitability in the second half of 2018.

Such a demand was seen as a move to achieve that profitability goal, and according to the memo, an investment in the company to continue its long-term growth.

Although Tesla declined to comment on the WSJ’s report, they said it was part of "normal" procurement negotiations.

It is not uncommon for a company to negotiate prices with suppliers, but it could be seen as unusual for a firm to ask to be reimbursed for previous payments on programmes that started years ago.

Tesla has been spending cash at a rate of $1bn a quarter, and ended the first quarter with $2.7bn cash on hand.

The company had pledged to reduce capital expenditures to $3bn, down from $3.4bn last year.