Tesla reportedly asks suppliers for cash back to gain profit

Tesla wants to increase production of its Model 3 car in order to turn a profit

When asked by WSJ, Tesla denied the memo, however confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven't been completed. The note stated all suppliers had been asked to help the Californian company become profitable.

Chief executive Elon Musk has dismissed worries that the firm will run out of cash and needs to raise more money. Musk has pushed back on naysayers, arguing that the company will be profitable this quarter and next.

"It's troubling", David Whiston, an analyst with Morningstar in Chicago, said in an interview on Monday as Tesla's stock declined, closing off 3.3 percent.

Tesla Motors has reportedly asked some of its parts suppliers for financial support, including a partial refund of supply deals. The plea is said to have been framed as a way to help Tesla achieve profitability. It is spending about $1 billion a quarter as it ramps up manufacturing of the Model 3 sedan, a lower-priced vehicle that is key to Tesla's plans of becoming a major mass-market automaker. 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. As investors started to get restless, Musk kept on making grand promises for future Tesla models and new Model 3 versions, which probably only added investor annoyance.

Tesla did not respond to a BBC request for comment. The electric carmaker has been burning through cash as it speeds up production of its Model 3 sedan.

The cost of insuring $100 of Tesla debt hit $6.58 around 10:30 am Tuesday, according to data from Bloomberg, amid fresh fears over Tesla's cash position.

Tesla in late June finally hit an important production target for the Model 3, its most accessibly priced electric vehicle.

The company's shares dropped as much as 5.9 percent on Monday following the report. Musk marked the occasion by saying the milestone finally made Tesla "a real company".

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