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Moody’s is downgrading Tesla’s corporate family rating to B3 from B2 and cutting its outlook on the company to Negative from Neutral in a blow made more severe by the launch of an investigation into a fatal Tesla crash, sending the stock down 8-percent yesterday.
Moody’s cited what it called a “significant shortfall” in the production rate of its most promising car so far, the Model 3, as well as lack of sufficient funding. A further downgrade is also on the table if Tesla fails to stick to its updated production targets for the Model 3.
In the second quarter, the company plans to be making 5,000 Model 3s weekly but doubts are mounting over its ability to stick to these targets.
Bloomberg warns that, according to its Model 3 tracker, Tesla was making 805 Model 3s a week as of last week, but there were indications that this rate was picking up. This week, Bloomberg says, the tracker estimated a weekly production rate of 975 Model 3s a week. This is way below the 2,500-per-week target to be hit before the end of the month.
On top of this, the U.S. National Transportation Safety Board yesterday started an investigation into the fatal crash that occurred last week in California.
It is as of yet unclear whether the Tesla involved in the crash along with two other cars was in Autopilot mode and it does not matter particularly--not for Tesla’s share price, at least. Once there is an investigation, the shares will plunge.
This is the second recent investigation into a fatality involving a self-driving system, after an autonomous Uber vehicle killed a woman in Arizona.
Tesla was already found responsible for a 2016 crash that ended with the death of the driver.
The company will release first-quarter financial figures next week.
One hedge fund manager, who has been short on Tesla for several years, predicted the company will crash and burn within months because, Vilas Capital Management’s John Thomson told MarketWatch, “Companies eventually have to make a profit, and I don’t ever see that happening here.”
Tesla’s Q1 report will certainly be watched very closely by a lot of people, not just in Shortville.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.