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Tesla asks suppliers for price cuts as deadline to become profitable inches closer

July 23rd, 2018 at 6:47 PM
Tesla

Tesla may have kickstarted the EV revolution with a string of award-winning and revered vehicles, but the company — despite an avalanche of accolades — still can’t quite seem to turn a profit. Not too long ago, Tesla CEO Elon Musk, who has a penchant for making bold promises, claimed that Tesla would be able to turn a profit sometime before 2019.

While certainly an ambitious goal given Tesla’s history, there’s reason to believe that Musk’s promise might actually pan out. For starters, Model 3 production appears to be ramping up, with Tesla having reached the 5,000 unit/week threshold during the last week of June. What’s more, a recent teardown of the Model 3 suggests that Tesla’s mass market EV might be far more profitable than initially anticipated. All told, there is a chance Tesla might report a profitable quarter when the company posts its Q3 earnings report on August 1.

With Tesla doing everything in its power to make Musk’s promise of a profitable quarter a reality, a new report from The Wall Street Journal relays that Tesla in recent weeks has been asking select suppliers to return portions of previous cash payments as a pseudo-price reduction of sorts.

Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.

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.

While there’s no way to know how many suppliers Tesla reached out to, the memo has once again prompted skeptics to cast doubt on Musk’s claims that Tesla will become profitable anytime soon.

Tesla has since commented on the WSJ story, telling Reuters that it has contacted a small number of suppliers as part of a broader effort to secure price cuts.

“Negotiation is a standard part of the procurement process,” Tesla said in a statement, “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.”

A life long Mac user and Apple enthusiast, Yoni Heisler has been writing about Apple and the tech industry at large for over 6 years. His writing has appeared in Edible Apple, Network World, MacLife, Macworld UK, and most recently, TUAW. When not writing about and analyzing the latest happenings with Apple, Yoni enjoys catching Improv shows in Chicago, playing soccer, and cultivating new TV show addictions, the most recent examples being The Walking Dead and Broad City.




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