Finance

Tesla’s shares drop on leak of embarrassing memo asking for money back

Tesla’s shares drop on leak of embarrassing memo asking for money back

However, a spokesperson at the company did confirm that Tesla has been seeking price reductions from suppliers for projects, some of which date back as far as 2016.

The reasoning behind Tesla's request is to help the company become profitable.

Tesla has said the company will be profitable in the third and fourth quarters of the year.

"If there are any one-time windfalls that aid in Tesla achieving its profit goals, we expect the market would view that as unsustainable", said Jamie Albertine, senior automotive analyst for Consumer Edge.

Tesla may be ramping up its production schedule for the Model 3, but it's apparently coming with pretty serious costs.

Tesla Motors has reportedly asked some of its parts suppliers for financial support, including a partial refund of supply deals.

It's not so unusual for carmakers to ask suppliers for discounts retroactively, and some Japanese automakers have done it before, said Tatsuo Yoshida, an analyst at Sawakami Asset Management Inc.in Tokyo, who worked at Nissan Motor Co. between 1983 and 1999.

Tesla had about $3.2 billion in cash as of the first quarter ended March 31, after spending about $1 billion in the quarter. The remainder of supplier discussions focus on future parts price or other changes that will help lower costs, he said.

Initially, Tesla shares dropped by more than 5% on Monday morning as investors responded to the report, although they recovered some ground later.

The request indicates more struggles for Tesla in its quest to reverse losses.

The race to get the Model 3 going may have added unexpected costs in the second quarter.

All of that has to happen while Tesla carries $10.5 billion in debt.

Tesla may have finally hit its production target of the Model 3, but the company is not yet out of the woods. "It's simply ludicrous and it just shows that Tesla is desperate right now", Dennis Virag, a manufacturing consultant, told The Wall Street Journal.

The company's shares dropped as much as 5.9 percent on Monday following the report.

Tesla's stock declined 6 per cent in about 20 minutes after his tirade.