A fatal crash. A downgrade from one of America's leading credit-rating companies. Missed delivery targets for a much-hyped electric sedan. Cash pouring out but trickling in. More than $1 billion in debt coming due.
Tesla's problems -- which have sent its stock plunging to its lowest point in a year -- are legion. But will the Palo Alto electric maker rise above them, or sink beneath the blows?
"It's one of the worst pictures in a long time," said CFRA analyst Efraim Levy. "They're getting hit with everything all at once."
Tesla did not immediately respond to a request for comment.
On Tuesday, credit-rating firm Moody's downgraded Tesla, citing missed production promises for the Model 3 sedan, negative cash flow, and nearly $1.2 billion in convertible bonds coming due by March 2019.
"Tesla's rating could be lowered further if there are shortfalls from its updated Model 3 production targets," Moody's said in a news release.
"The rating will also be pressured if the company is unable to raise sufficient new capital to cover its late-2018 and early-2019 convertible maturities, and to cover the operating cash consumption that will likely continue into 2019."
While much attention has been on the twice-delayed production of the Model 3 -- Tesla's bid to bring electric vehicles to the masses, with a starting price of $35,000 -- the firm led by CEO Elon Musk was hit with another major problem last week, when a Model X SUV burst into flames after a fatal crash on Highway 101 in Mountain View. Federal authorities are probing the crash, and are charged with determining whether Tesla's controversial "Autopilot" automated-driving system was on at the time of the accident.
By Wednesday's stock market close, Tesla's share price had plummeted to $258, its lowest level since last March.
Still, the firm's "financial shakiness" is nothing new, said Gartner analyst Michael Ramsey. "It's literally been the case that since they've been a public company that they've been in a tenuous financial situation," Ramsey said. "They have always been forgiven because the demand for their product has been so strong and the excitement for their brand has been so bulletproof.
"What could be scary for Tesla is anything that would be indicative that demand is falling or might fall for their product and that there might be an end for investors' desire to buy more shares in the company."
Salvation for Tesla can come only through bringing the Model 3 to the multitudes, analysts said. The company has said nearly a half million pre-orders for the sedan have come in, but only a few thousand cars appear to have been delivered so far.
"The biggest problem that Tesla's facing is the ability to get the Model 3 out," Levy said. "All their problems would be solved if they could produce in high volumes. It would produce a huge amount of revenue."
Bernstein analyst Max Warburton on Wednesday pointed to heavy reliance on automation at Tesla's Fremont plant as a key factor behind the troubled Model 3 production ramp-up. "Tesla is having difficulty ramping because it has attempted to reinvent totally the production line," Warburton wrote in a research note. "Automation in final assembly doesn't work."
Risks facing Tesla are considerable, but it will probably overcome its current problems, analysts said. Although Model 3 production holdups are an auto industry anomaly, "no car company generates the kind of attention and desire that Tesla does," Ramsey said.
The company was "too aggressive" in its promises for Model 3 manufacturing, but will resolve its production issues, Levy predicted. He compared the company's predicament to the classic cartoon scene of a character running off a cliff and continuing to flail through the air over a chasm.
"If you don't look down," Levy said, "you can make it to the other side."
© 2018 San Jose Mercury News under contract with NewsEdge/Acquire Media. All rights reserved.
Image credit: Courtesy of Tesla.
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