German subsidy decision a spot of good news in a bad week for Tesla
Frankfurt — A German government agency has agreed to offer car buyers subsidies for Tesla vehicles again, ending a dispute with the US company over whether the Model S was too expensive to qualify for the scheme.
This is a piece of good news for the car maker, whose shares have been battered this week by federal probes of a fatal crash involving one of its cars, a Moody’s downgrade and concern about Model 3 production.
Tesla shares tumbled 9% on Wednesday before ending down 7.7% at $257.78. On Tuesday, Tesla tumbled 8.2% to its lowest close in almost a year after the US National Transportation Safety Board opened a field investigation into a fatal crash and vehicle fire in California on March 23.
On Wednesday, a second federal regulator, the National Highway Transportation Safety Administration, said it was sending a team to California to investigate the crash.
Late on Tuesday, Moody’s Investors Service downgraded Tesla’s credit rating to B3 from B2, citing "the significant shortfall in the production rate of the company’s Model 3 electric vehicle".
It also noted "liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds".
Tesla has $230m in convertible bonds maturing in November 2018 and $920m in March 2019.
Moody’s said its negative outlook "reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity shortfall".
It said Tesla’s weekly production target was now 2,500 Model 3 vehicles by the end of March, down sharply from its year-earlier target of 5,000 a week by the end of 2017.
Tesla’s weekly target for the end of June is 5,000.
Tesla declined to comment on the downgrade. The company plans to provide an update on Model 3 production next week.
Tesla shares have experienced big swings in the past, as worries about losses have vied with enthusiasm for CEO Elon Musk’s ambitious plans.
The sell-off has left Tesla’s stock market value at $44bn, below General Motors Co’s $49bn.
Since the end of February, the median analyst price target for Tesla has dipped by $10 to $356, about 37% higher than Wednesday’s price, according to Thomson Reuters data.
Nomura Securities analyst Romit Shah has the highest Tesla price target, $500, or nearly double the current price.
All the targets were set before the March 23 crash.
In last week’s accident, in which the Tesla struck a highway median, it was unclear whether the vehicle’s automated control system, called Autopilot, was driving, the National Transportation Safety Board and police said.
The 38-year-old driver of the Tesla died at a nearby hospital shortly after the crash.
Late on Tuesday, Tesla said in a blog post it did "not yet know what happened in the moments leading up to the crash", but data showed Tesla owners had driven the same stretch of highway with Autopilot engaged "roughly 85,000 times … and there has never been an accident that we know of".
The statement did not say whether the crashed vehicle was in Autopilot mode.
In Germany, the Federal Office for Economic Affairs and Export Controls, known as Bafa, said on its website it had returned Tesla to the list of electric cars eligible for subsidies on March 6.
The agency had taken the car maker’s vehicles off the list in December, citing as the reason that customers could not order the Model S base version without extra features that pushed the car above the €60,000 price limit.
Tesla denied at the time that no-frills versions of the Model S were not available.
In 2016 Germany launched the incentive scheme worth about €1bn, partly financed by the German car industry, to boost electric car usage. A price cap was included to exempt premium models.
Under the subsidy scheme, buyers get €4,000 off their all-electric vehicle purchase and €3,000 off plug-in hybrids.
"The manufacturer proved with an independent assessment that a base version of the Model S is available on the market for less than €60,000," German daily newspaper Die Welt on Thursday quoted Bafa as saying.
It said, however, that the agency was reviewing previously approved applications for subsidies as it was unclear whether Tesla had stuck with the price limit in the past.