Tesla's Model 3 Presents 'Considerable' Credit Risks, These Non-Believers Say

Moody's cautions investors that short-term risks encompass the newly introduced car, most notably production.
By Giovanni Bruno ,

Credit rating agency Moody's assigned Telsa (TSLA) - Get Report  a B2 Corporate Family Rating, considered speculative and are subject to high credit risk, over "considerable" concerns stemming from the electric automaker's recently unveiled Model 3.

The Model 3 is Tesla's $35,000 car intended to bring electric vehicles to the masses. But, Moody's cautions investors that short-term risks encompass the newly introduced car, most notably production.

"The major challenge facing the company during the next twelve months will largely be the considerable execution risks associated with the rapid ramp up in production of a totally new vehicle," Moody's noted.

Given said ramp up, Moody's expects Tesla to remain free cash flow negative into 2019.

Additionally, "Tesla will also have to contend with what will likely be an accelerated competitive response from both auto OEMs as well as technology firms that are targeting the automotive mobility market," Moody's suggested.

That could spell more trouble for Tesla as efficiency and timely production give it the advantage over the traditional automakers as well as tech giants like Alphabet (GOOGL) - Get Report and Apple (AAPL) - Get Report looking to infiltrate the space.

The next ratings upgrade or downgrade hinges on production results for the Model 3, as well as quality of the vehicle and consumer acceptance, Moody's concluded. 

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