The Silicon Valley electric-car company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by The Wall Street Journal that was sent to a supplier last week. 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.
Tesla made the following statement:
Not the clearest of statements, but it sounds like they are trying to force some of their key suppliers to renegotiate existing contacts to improve Tesla cash flow by postponing rather than reducing payments; a loan, in other words.
Negotiation is a standard part at 2 points, when the contract is signed, and when the contract is up.
unpack this:
10 capex projects… they signed a contract for buildings and/or equipment in 2016, they are now asking to reduce spending 2 years later, how much of a reduction remains to be seen, but it also means that these projects will both cost more to complete, and take longer. If I was a supplier for one of these projects, I’d probably be checking to make sure that they are paid up to current for what is being spent, and looking at the loss policy on their insurance, in the event that they don’t get paid for future spending and work.
as for the other suppliers, if they are requesting changes to parts/design, then the upfront cost will be greater, which I’m sure these companies will want to make sure is covered, before any price reduction occurs, and price reductions will only occur if the vendor sees that he can make up his profit per unit by increased volume. Which when it comes to bespoke vehicles, there isn’t much point unless you can get production up, which tesla seems to be struggling with.
Just think about what the resale value of a used Tesla will be if it goes down.
Er…when it goes down.
I had a debate in The Guardian a few years ago saying that Tesla was precisely the type of stock I prefer not to own. Some of the true believers attacked this rather vigorously, apparently not understanding that their fanaticism was one of the reasons I would have nothing to do with Tesla.
Faith is for religion. Bring only healthy skepticism to the stock market.
I’m sure others have heard of this popular Tesla bumper sticker – “What do you think of my coal burning car?”
They won’t see yearend 2018.
“Can YOU say ‘Tits Up’, Boys & Girls?”
When you’re deeply in debt and leaking cash at a prodigious rate, it doesn’t take much to turn a pleasure cruise into the Titanic.
That’s why some of Musk’s recent comments are so bizarre. His company is on a knife’s edge, and he is seemingly inviting panic.
Killer, the sumbitch is bi-polar……off the wall stupid is normal for them when they are in depressive mod
Once a part is “qualified” for use in manufacturing and especially if it is only purchased from a single source, it becomes very difficult to change it out in production.
If I am the only supplier for some critical part, I can ignore Tesla’s request to lower my prices as they have no other option.
Imagine that I stop supplying Tesla parts, and their production line grinds to a halt.
Also, if you are small supplier, and Tesla is slow in paying you, you might be slow in providing additional parts…
Okay unless Tesla is your only source of income, and the parts you make are useless to other buyers.
That’s when you start looking at diversifying.
A mistake common among (now failed) suppliers to Walmart.
Vulture capitalists will start showing up soon. Significant asset and intellectual property value. I imagine they’re circling even now.
It’s likely other car manufacturers who are circling in the skies, most of whom have healthy balance sheets, a use for Tesla technology, and are better at this “manufacturing” thingy.
Electric cars been under continuous development since 1832. Electric cars predate internal combustion cars.
Always hillarious to see the cult fanatics, saying once again, “this time for sure”.
Tesla has always been an intellectual property company, not a car manufacturing company.
I will never own Tesla stock, but I keep it filed under my miscellaneous Watchlist, just to see how bad things are with the company. The signs are there that this company is going to ruin. A year an a half ago, Tesla was losing $0.50 a share. Now they are losing $3.00 plus a share. They have an erratic, goofy CEO. They have production problems. They are up to their eyeballs in debt — this with interest rates rising. Only fools would own this stock.
Now it would be amusing to Mitt Romney swoop in and scoop up Tesla. Not going to happen.
David…hahahahahaha…that was my exact thought. And the greenies and libtards would accuse him of destroying another company:-)))
S.T.E.M., eh?
let em fold.
Annual car running costs Courier Mail (Brisbane Queensland Australia 23 July)
Most expensive running costs per year
1. Mercedes Benz E 200 $A 22,600
2. Tesla Model X750D $A 21,500
3. Toyota Landcruiser GXL $A 19,500
well that’s a new one.
go begging to the suppliers.
reminds me of a scene in a goofy animated series about dinosaurs, the mother dinosaur is miffed about a purchase and requests a refund.
https://www.imdb.com/title/tt0101081/?ref_=fn_al_tt_1
the store clerks are at a loss what to do, “interesting concept” bewildered at this woman who doesn’t seem to understand that THEY give her a product and SHE gives them the cash. the end. ie the normal retail transaction.
watch how goddamn FAST this thing goes over the cliff. damn sight faster than the ‘computer of wheels’ they tried to foist with the hype. get the celebs onboard eh musk, like tommy cruise wheeling around.
heh-heh.
historybuff- actually, the dinosaurs died out because they suffered from a reptile dysfunction. Now we have the Teslasaurus to watch…
I’m watching to see which suppliers are stupid enough to do this…..
What’s going on up there??….
Man with knife stopped as he tried to attack Ceremonial Guard on Parliament Hill
https://ottawacitizen.com/news/national/defence-watch/man-with-knife-stopped-as-he-tried-to-attack-ceremonial-guard-on-parliament-hill
Diversity.
More like idiocy. Until Justin gets a diversity strengthening on the house of commons floor, nothing is going to change.
These guards should be holding the doors for these asylum seekers. Not hate crime stopping them like haters…
As more jurisdictions cancel the buyer rebates (most recently, Ontario’s $14,000) Tesla sales will stall and begin to fall. As I recall, both Denmark and Hong Kong also pulled the pin and sales in those jurisdictions fell to zip. Simple law of economics.
Tesla always was a technological Ponzi scheme — promising new products before the existing ones had become profitable and financing the production of the existing ones with advanced sales of the new. Once the inverted pyramid stops expanding, the entire entity collapses. The inverted pyramid just stopped expanding.
No to mention SJW fad boredom. Electric car? Yawn. I have a color blind pygmy unicorn, rescued from a alcoholic family, that lost a leg to a landmine.
And it’s transgender as well.
Dear Tesla,
Check Musk’s pockets.
Concerned investor.
When do you think Bombardier will announce their buy in? Which includes unlimited loans from the Canadian government that never have to be paid back.
We need a bigger hole to incinerate our cash in. This looks like a winner.
Yah,Bombardier can call it the Justin Time,electric unicorn..
For sure the current government will buy into the made in Canada electric car.
And relocated to Queerbec!
Ultimately I blame the Canadian authorities who allowed Elon to flee a still free South Africa to dodge the draft.
I look forward to the happy day Elon is deported to a free and prosperous Afrikaner Republic—so he can finally be shot for cowardice.
I served in that draft. Let me tell you, it was no effin’ joke. But I am reminded of a line the movie “Platoon” (SADF troopies couldn’t get enough of that movie) where King says to Taylor: “ain’t no such thing as a coward out here”.
National Service was not for everybody, and I cannot speak for the decisions some folks made on that front. The majority of us sucked it up, bled, cried, fell, got back up and found a way to somehow just make it.
I hate a lot of things about Musk and his corporate behaviour, but not the man, and not his decisions around the draft. We are all at some level haunted by our own demons, and we cope with this world as best we can.
Many of his ardent fans however, I definitely DO hate.
Whither the electric “semi-hauler”?
Tesla will be bankrupt before year end, so if you own stock dump it now while you still have the chance.
Tesla will not go bankrupt. Not for awhile. Most people look to the losses of the company and not to the gross revenue. For the government, tens of billions of dollars in revenue is more important than billions of dollars in losses. This is a precursor to another financing. “We are getting there, increasing production, reducing our losses…” is what will be said in the coming days. They will finance again. Shouldn’t happen but it will.
I don’t think the federal government will intervene should Tesla become distressed. Instead Tesla may get bought out by one of the other auto companies. The stocks holders will take a horrendous beating.
And we thought Bernie Madoff was a con man, compared to Musk he was a beginner.
As we speak the Climate Crusader and Gerry Butts are planning a bailout for Tesla. But they want to rename the cars; Model S will become Le Pierre, Model X will become La Justin, and the Model 3 will become La Sophie.
I’m neutral about Tesla (OK except for their manufacturing capability which isn’t there) but here are a couple of interesting articles I read yesterday:
“Engineering Firm That Tore Down Tesla Model 3 Says It’s Very Profitable”
“Manufacturing expert Sandy Munro, CEO of a Michigan-based engineering firm that dismantles and studies cars, has changed his tune when it comes to the Tesla Model 3. He had criticized the car’s build quality, comparing it to that of a “Kia in the ’90s.” But now, after Munro & Associates completed a full teardown and analysis, Sandy is “eating crow.” The Model 3, he says, is the most profitable EV out there.
In his recent interview with Autoline’s John McElroy, Sandy Munro doesn’t backpedal on his previous statements about fit and finish. “I thought that this was one of the worst fit and finishes I’ve seen in decades,” he says.
But compared to that initial negative review of the Model 3 (which we shared in February), Sandy is now much more positive about the car after his team finished its analysis and figured out that the Model 3 has an impressive profit margin of about 30 percent.
https://jalopnik.com/engineering-firm-that-said-tesla-model-3-quality-was-li-1827632866
“Munro Teardown Shows Tesla Model 3 Solidly Profitable”
https://www.youtube.com/watch?v=pAS-yjWj9DY&feature=youtu.be
Because he knows what Tesla pays for components. The guy’s not smart enough to steal accomplished manufacturing engineers from mainstream carmakers, what possible reason is there to believe he can manage a supply chain effectively?
Last I heard, engineers don’t do financials. They could likely reverse engineer the car and model a proforma for a hypothetical manufacturer but looking at Tesla’s actual numbers, all that’s visible is lots of debt and red ink. It’s a cult stock with short interest in the billions meaning there are institutions betting on a declining stock price. Obama would have likely bailed him out but I don’t see Trump doing so. I’m thinking, the next DeLorean?
Like I said above, Teslas’ manufacturing capability isn’t there (they are currently partially assembling in tents for God’s sake). Also, the gross profitability doesn’t mean much if Tesla can’t produce sufficient volume to pay for overhead and development costs.
Reminds me of “We lose money on every one we make but we’ll make it up on volume!” Sure….let’s go with that.
“Many of his ardent fans however, I definitely DO hate”
Hate is a strong word. Pity more like it. Read some of the comments at the Tesla blog site and you have to just shake your head.
For example one guy thinks a diesel electric locomotive moves down the track powered by electricity.
When you try to correct them their stock response is “you have your lips wrapped around the tailpipe of your gasoline powered dinosaurs”.
Interestingly I dropped this in tips a few nights ago:
https://www.zerohedge.com/news/2018-07-19/why-are-thousands-teslas-sitting-field-california-0
Tonight I took a few minutes to examine this location. 5 minutes into it I discover that this location is a serviced rail yard. These cars won’t sit there for long. So thousands ARE on their way. Whether they work or not is a whole other issue but it makes spectating a bit interesting.
Revisionist profitability.
1832, first electric car.
The date of the first commercially viable electric car?
Hasn’t happened yet. In nearly 200 years. There ain’t no vultures circling Tesla. There ain’t nothing to eat.
Anyone involved with Tesla in anyway, is guaranteed to lose.
EIGHTEEN THIRTY TWO. Electric cars predate the ICE. Can all of you, please just STFU about any pretense that Musk ever did anything other than farm subsidies?
There is no business.
There is no technology.
There is no smoke.
There is no fire.
There is nothing there.
Tesla is the Elon Musk version of Mueller’s investigation.
Maybe it is more appropriate to say Mueller’s investigation is the legal performance art version of Tesla.
They’re operating at a loss but will make it up in volume when they make 5000 cars per week.
The Tesla cars are amazing tech, but in my opinion a dead end on the automotive evolutionary tree.
Cars need an available fuel supply on board that can be refreshed in minutes not hours.
All electric is for golf courses.
An internal combustion engine or small turbine burning hydrogen or a fuel cell is the future.
A relative in the auto business in New Zealand says the motors for EV’s are desired more for hook-up to solar panels than use in actual vehicles .
Poor people subsidizing rich people to the tune of about $14,000 bucks per $130,000 luxury Electric car seemed a bit non-sustainable.
There’s going to be a civil war you know.
A lot of rather wealthy people who got suckered into the virtue signaling of this coal burner are going to be stuck with it forever … deteriorating toxic giant battery and all.
Tesla will become a mathom. A ‘mathom’ in is an object that appears to have value, but is in reality, a piece of junk … that is from the Hobbit. Mathoms are often given as gifts. We call that ‘palming off’.
This world, at this time in history, couldn’t be more entertaining.
I am guessing that the charging stations will have to be re-purposed, maybe to recycling stations where one can take his old soup cans, cardboard and plastic. And Teslas…
I wonder just how many of the charging stations were financed by the taxpayers? “My friend says ALL OF THEM!”
Here is a sample of Great Tesla news for today.
Tesla’s top sales executive bails ahead of 2nd quarter results. LOL
https://www.businessinsider.com/tesla-ganesh-srivats-sales-executive-resigns-2018-7
Telsa can’t fix their own cars LOL
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/tesla-has-proven-it-can-sell-cars-fixing-them-not-so-much/articleshow/65116847.cms
China goes into business against Tesla.
https://www.forbes.com/sites/jimcollins/2018/07/23/tesla-now-has-competition-for-customers-and-capital-in-chinas-nio/#7e8c3ea12456
…and if they ever DO hit 40% penetration in the EV fleet, Ontarian’s Hydro bill will be, er,…. Ummm…Mmmmm… BOoorrring…!