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Moody’s upgrades Tesla’s corporate family rating to Ba3, shows positive outlook

The Bond credit rating company Moody’s investor service rates Tesla this year and shows that Tesla will continue to stay at the top in the EV industry. The corporate family rating of Telsa is upgraded to Ba3 from B2, probability of default rating, Upgraded to Ba3-PD from B2-PD, and  Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-2. It shows that Tesla is expected to continue a positive outlook. Also, continue to increase its scale rapidly and improve its profitability notably.

Moody's upgrades Tesla's rating to Ba1, says outlook positive

Image credits- The Economic Times

Moody’s stated, “The growing scale of Tesla’s BEV operations will support gradual improvement in the company’s automotive profitability and margins, excluding the contribution from its sale of regulatory credits.”

Furthermore points out that the company has been successful with its global expansion and production rate. Interestingly Moody’s also talks about how emissions credit has been an advantage for Tesla so far. With absent credit sales, Tesla too could have losses with operations. This is what happened with many traditional automakers in the US. The bond credit rating company adds that the advantage of having EV credits would decline eventually as the industry is shifting towards electric vehicles. However, overall the company is reflected to have a positive outlook.

Challenges

As Tesla is expanding globally, there have been many challenges. So far its sales included exports, which amounted to large numbers. Now, as Giga Berlin is also expected to start production, the export number will be reduced in the US factories. In addition to this, more BEVs are expected to be launched into the market which is much cheaper. Leading to Tesla losing its competitive edge and pricing position by 2%.

As many challenges are there, there is also ample potential for Tesla’s growth. As it already has an all-electric lineup, unlike traditional automakers. It would not challenge its existing lineup. Furthermore, Moody’s stated, “Tesla faces moderate risk in its corporate governance structure. This risk relates principally to the considerable latitude afforded to the company’s CEO, Elon Musk, who owns about 20% of the company. He also has close personal ties with various directors, and the board has not demonstrated meaningful oversight over the activities of the CEO. In addition, Mr. Musk’s focus on Tesla must compete with his responsibilities for outside ventures such as SpaceX.”

The EV maker has overcome many challenges over years, however, there was not that much competition compared to the upcoming scenario. Every automaker entering the EV market from startup to traditional automaker competes with Tesla. The upcoming electric up, Cybertruck is expected to enter the market by early 2023. It is being strongly compared to Ford’s F-150 Lightning, Rivian R1T, and GMC EV Hummer as well.

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