Tesla responded on Monday to a Wall Street Journal report that it asked some suppliers to rebate payments going back to 2016, saying that it asked fewer than 10 suppliers for reductions in total capital expenditure spending on projects that began in 2016 but are still not complete.
A Tesla spokesman declined to provide MarketWatch with a copy of the memo reportedly sent to some vendors that was referenced in the report. But he said the company is focused on reaching a “more sustainable” long-term cost basis with suppliers, including pushing for future cost reductions.
The Wall Street Journal reported late on Sunday that some suppliers had been asked to rebate payments going back to 2016, sending Tesla shares down 5% in early trading on Monday.
Tesla TSLA, +2.75% shares have lost 2.7% so far this year, and more than 7% in the past 12 months, which contrasts with S&P 500 index’s SPX, +0.49% gains of more than 5% for the year and 13% in the last 12 months.
“Negotiation is a standard part of the procurement process, and now that we’re in a stronger position with Model 3 production ramping, it is a good time to improve our competitive advantage in this area,” the spokesman said in emailed comments.
“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.”
Any changes with suppliers would improve Tesla’s future cash flows “but not impact our ability to achieve profitability in Q3,” said the spokesman. Discussions with suppliers are focused entirely on future parts price and design or process changes, he said, intended to lower costs in the future rather than make prior period adjustments of capital expenditure projects, according to the spokesman.
Tesla shares were down 3.5% in late Monday trade.
