Tesla In Trouble As Bonds Downgraded After Failed Production Targets

Tesla officially started Model 3 deliveries in July last year. However, in reality, the $35,000 car promised to the world is still yet to arrive in customer hands.

The electric automaker will report its first quarter numbers next week and they are expected to reveal that Model 3 deliveries are still well below its original targets.

In fact, production has been tracked through the identification numbers issued to the NTSB and they reveal that just 1026 units are being produced per week, CNN Money reports. Tesla intended on building 2500 a week by the end of the first quarter, set to conclude on Saturday.

In response, Moody’s Investors Service has downgraded Tesla’s debt deeper into junk bond status and has warned of further downgrades. Tesla faces a deadline of paying $230 million in bonds in November and $920 million in bonds in March 2019.

“We’re not drawing a line in the sand by any means,” said Moody’s credit analyst Bruce Clark. “But part of the issue is reestablishing credibility with constituents. At the end of the day, the company’s credibility will be significantly impacted by how close they are to that 2,500 run rate.”

Production numbers are still short of what’s been promised

When Tesla launched the Model 3, it said it would be producing 5000 units every week by the end of fourth quarter in 2017. In reality, it only delivered 1764 units in the third and fourth quarters combined.

While Tesla fans continue to order and purchase the brand’s vehicles, Clark isn’t so sure that suppliers will be so forgiving of the brand’s missed production targets.

“Why did Toys ‘R’ Us go bankrupt? Its suppliers cut it off. You can have altruistic equity holders, you can have altruistic bond holders, altruistic customers. But suppliers are cold and calculating from my experience.”