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Tesla pushes suppliers to return payments

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

A memo provided to The Wall Street Journal shows the electric auto maker asked a supplier to return what it calls a meaningful amount of money on its payments since 2016.

Telsa took another financial hit on Monday, with shares in the company dropping nearly 5% after the electric automaker was reported to have asked some United States suppliers to return payments to the money-losing company.

The electric vehicle company declined to comment on the specific memo but confirmed that it is seeking price reductions from suppliers for projects, some of which date back that far.

The appeal was reportedly made as part of a wider effort to make Tesla profitable.

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

Tesla's rally call was aimed at all suppliers, although in the memo it was not made clear how they were expected to comply with the company's request for refunds.

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"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's cash position is a concern because the company has burnt through billions of dollars to step up production of the Model 3, its first mass-market auto.

The company's rapidly weakening cash position has spooked investors, and comes despite the claims of founder Elon Musk that Tesla is now a "real" carmaker after hitting a weekly goal of producing more than 5,000 mass-market Model 3s, the rate of production that the manufacturer hopes will turn the company's economic position around.

It is unclear how much cash back Tesla has requested, or how many of its suppliers have received this request. "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 race to get the Model 3 going may have added unexpected costs in the second quarter.

According to the Journal, Tesla is facing payments on $230 million in debt in November if its stock price doesn't reach a conversion price of $560.6 per share.

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