Moody’s dropped Tesla’s credit rating Tuesday and changed the company’s outlook to negative as the fledgling Model 3’s production dwindles while the automaker’s financial situation grows dim.
Tesla will need to raise more money in the near future to meet its cash needs, the credit rating agency claimed. Moody’s labeled the electric car marker a substantial risk for investors willing to dive headfirst into the auto market.
Tesla has not responded to questions about Moody’s downgrade, according to a CNBC report. S&P adjusted the company’s credit down to a negative B rating in April 2017 — it also holds a negative outlook for Tesla going forward.
“Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle,” Moody’s wrote in a press release Tuesday night. “Tesla’s rating could be lowered further if there are shortfalls from its updated Model 3 production targets.”
Elon Musk’s electric car company initially planned to produce 5,000 Model 3 sedans a week by the end of 2017, but that number was quickly revised as the inexpensive vehicle’s production began faltering.
Tesla is currently making only around 975 Model 3s a week — well short of the 2,500-unit rate target by the end of this quarter. Concern is growing over the Silicon Valley company’s poor production performance.
It managed to build a mere 260 Model 3s between July and September of 2017. That number is well below the 1,500 Tesla promised before the end of the fourth quarter of said year. Total orders for the wallet-friendly vehicle tumbled from a high of 518,000 to 455,000.
Production on the highly touted vehicle was expected to expand from 100 cars in August to 1,500 in September then plateau to 20,000 per month in December 2017. CEO Elon Musk promised to eventually produce 20,000 cars per month. Analysts are also taking notice of the company’s problems, especially its chronic inability to turn a profit.
“If you are losing a ton of money and you keep losing money, it’s like driving your car without a seatbelt,” Vilas Capital Management founder John Thompson told The Daily Caller News Foundation on Tuesday. His group is shorting sales of the 14-year-old electric vehicle company. “If you hit something, then you are dead. They are finding themselves in an unstable position.”
Tesla’s shares fell as much as 8.2 percent Tuesday to the lowest in nearly one year, while its debt is setting new all-time lows. Tesla’s stock and bonds are declining as analysts doubt the electric-car maker can reach production targets for the Model 3. A deadly Uber accident on March 19 also hurt the Tesla brand, which is inextricably tied to self-driving technology.
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