Tesla’s stock prices dropped nearly 4% yesterday amid reports that the company had reached out to longtime suppliers via memo asking them to refund payments that had already been made. Payments that had already been made, it should be noted, going back to 2016.
In case you’ve been hearing nothing but sunshine and happy music from your TSLA news sources, you should know: this is not a normal thing. “Automakers often have brutal pricing demands on suppliers for future work, but retroactive rebates is not something we hear much about, and this is troubling for us to hear,” explains David Whiston, an analyst with brokerage firm, Morningstar.
The refunds are part of an ongoing effort by Elon Musk to make Tesla appear profitable. That’s a tough enough ask these days, with cancellation rates on Model 3 orders reportedly increasing. Even so, there is some language in the aforementioned memo that should have the TSLA bulls especially worried. That’s because the momo reportedly mentions that the cash back rebates requested are necessary for Tesla’s “continued operation”. (Fortune’s words)
If the WSJ’s reports are accurate, this seems like it can only be a bad move for Tesla. That thinking is echoed by manufacturing consultant Dennis Virag, who told The WSJ that Tesla’s request shows that Musk is “desperate right now,” and that Tesla is, “worried about their profitability but they don’t care about their suppliers’ profitability.”
Someone should tell Ol’ Musky that that’s not how you win friends at influence people. But, hey, I guess it’s better than locking out all your contractors and calling a British diving hero a pedophile on a globally visible public forum, right?