As Tesla asks for money back from suppliers, investors go running

Tesla Model 3
Miles Branman/Digital Trends

Tesla may be ramping up its production schedule for the Model 3, but it’s apparently coming with pretty serious costs. According to The Wall Street Journal, Elon Musk’s car company asked suppliers for its cash back. Tesla sent a memo to a supplier that requested a “meaningful amount of money” to be returned, noting that the request would be necessary for Tesla to continue its operations. It’s a highly unusual move and one that hasn’t been met with much confidence on Wall Street. Tesla’s stock prices have taken a tumble since reports emerged about the request.

Apparently, fewer than 10 of Tesla’s suppliers were asked to provide a retroactive discount, and the company assured Digital Trends that there was no widespread memo sent to all of its business partners. Rather, a spokesperson told us, “We 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, and any changes with these suppliers would improve our future cash flows, but not impact our ability to achieve profitability in Q3.”

Tesla has continued to insist that these requests are standard procedure, particularly in this critical moment for its highly anticipated Model 3.

“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 told Digital Trends. “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.”

To say that money has been tight at Tesla would be something of an understatement. The company spends about $1 billion a quarter, and its stock price has declined by about 4.5 percent over the course of the last year. In efforts to become profitable, Tesla has let go of quite a few employees. In June, Musk reduced the employee base at the company by nine percent, and reduced other spending, too.

Still, it seems that these strategies have not proven sufficient, and in a tweet on Monday, July 23, Musk confirmed reports of the request. He did, however, defend the company, noting, “Only costs that actually apply to Q3 and beyond will be counted. It would not be correct to apply historical cost savings to current quarter.”

Becoming profitable is clearly a top priority for Musk, who is juggling several highly ambitious companies at the moment, including both SpaceX and the Boring Company. In an email to employees last month, the executive wrote, “What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.”

Tesla is continuing its conversations with suppliers. As a spokesperson told us “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.”

Updated on July 23: Added Tesla statement.  

Gaming

Google’s Stadia is the future of gaming, and that’s bad news for our planet

Google’s upcoming Stadia cloud gaming service, and its competitors, are ready to change the way gamers play, but in doing so they may kick off a new wave of data center growth – with unfortunate consequences for the environment.
Outdoors

The best sustainable outdoor gear for Earth Day and beyond

Take some time to clean up trash on a highly-used hiking trail for Earth Day, but don't stop there. Take the next step by choosing only sustainable gear for your outdoor adventures.
Emerging Tech

Inside the Ocean Cleanup’s ambitious plan to rid the ocean of plastic waste

In 2013, Boyan Slat crowdfunded $2.2 million to fund the Ocean Cleanup, a nonprofit organization that builds big, floating trash collectors and sets them out to sea, where they’re designed to autonomously gobble up garbage.
Emerging Tech

Burgers are just the beginning: Embracing the future of lab-grown everything

You’ve almost certainly heard of the 'farm to fork' movement, but what about 'lab to table'? Welcome to the fast-evolving world of lab-grown meat. Is this the future of food as we know it?
Cars

21 charged in Chicago carsharing heist; 100+ cars stolen, many still missing

More than 100 Mercedes-Benz vehicles belonging to carsharing service Car2Go were stolen in Chicago. Police are still working to recover all of the cars, which are equipped with GPS, and 21 people have been charged.
Cars

The VR goggles you wear to shoot alien ships is helping Magna design car parts

Canadian automotive supplier Magna has started using virtual reality in its research and development department. The technology helps engineers get a better view of what they're working on, whether it's an interior part or a powertrain.
Cars

Toyota leads $1 billion investment in Uber’s self-driving tech division

In a move that has been a long time coming, Uber filed its S-1 documents, which sets the stage for the company to finally go public with an initial public offering. The company could be valued at more than $100 billion.
Cars

From rugged wagons to hot sports cars, the 2019 NY Auto Show brought it all

From city cars to supercars, anything goes at the New York Auto Show. Automakers from all over the globe traveled to the 2019 show to unveil their newest concept cars and production models.
Digital Trends Live

Digital Trends Live: Samsung Galaxy Fold woes, zombie pigs, and more

Today's topics: Samsung Galaxy Fold, Facebook A.I. voice assistants, YouTube comes to Fire TV, facial recognition on airline flights, the SpaceX DART program, Yale's zombie pigs, and much more!
Cars

Electric car buying guide: What you need to know before you buy

EVs are better than they've ever been, but buying your first battery-powered car can be an intimidating experience. Digital Trends has compiled a comprehensive guide that walks you through the process of buying an EV.
Cars

Carbuying can be tiring: Here are the best used car websites to make it easier

Shopping for a used car isn't easy, especially when the salesman is looking to make a quick sale. Thankfully, there are plenty of sites aimed at the prospective buyer, whether you're looking for a sedan or a newfangled hybrid.
Cars

Apple’s interest in self-driving cars reported to be revving up

A new report suggests that Apple is in talks with a number of suppliers to purchase lidar sensors, an essential tool for self-driving cars. The news is once again spiking rumors that Apple might be building vehicles.
Emerging Tech

Awesome Tech You Can’t Buy Yet: Robots that eat landmines and clean your floors

Check out our roundup of the best new crowdfunding projects and product announcements that hit the web this week. You may not be able to buy this stuff yet, but it's fun to gawk!
Cars

Café racer-inspired ebike hits 28 mph quickly and quietly with carbon belt drive

Ebike manufacturer Electra launched the Café Moto Go, an advanced ebike. The Café Moto Go's step-over frame was inspired by café racers. The Café Moto Go is a premium performance ebike built to run smoothly and extra quietly.