Tesla Asks Suppliers for Refunds

Tesla Inc. has asked at least some of its suppliers to give it retroactive price cuts on payments they received over the past two years in an effort to make itself profitable.

In a memo quoted by The Wall Street Journal, Tesla calls the paybacks an investment to ensure long-term growth for Tesla and its suppliers. The electric car company confirms it is asking for price reductions on programs that date to 2016.

Tesla is trying to avoid the need to raise additional cash as it strives to become cash-flow positive in the second half of 2018. Achieving that goal depends heavily on the company’s ability to hike output of its Model 3 electric sedan.

The company reached a one-week production high of 5,000 vehicles at the end of June. That elevated output to 41,000 Model 3s since the car was launched a year ago. At that time, the company predicted it would build 400,000 of the cars in 2018.

The Journal notes that Tesla has been consuming cash at a rate of $1 billion per quarter, and began the April-June period with $2.7 billion in cash. The company will report its second-quarter results on Aug. 1.