Tesla was confronted with a series of mishaps and reality checks this week at the tail end of its worst month ever on the market.
The electric car manufacturer’s stock dropped 8 percent on Tuesday, and then again on Wednesday, its biggest two-day decline since 2016. Tesla’s shares have lost nearly a quarter of their value within three weeks.
There are a number of shareholder anxieties about car safety that could be setting off this decline and extending it into the future. The National Transportation Safety Board launched an investigation last week into a fatal Model X crash in California that resulted in a fire; authorities have not determined the cause of the crash or if autopilot was involved.
Then, on Thursday, Tesla voluntarily recalled 123,000 Model S cars, which accounts for almost half the cars it’s ever sold. The manufacturer claimed that it had seen evidence of “excessive corrosion” in its power-steering bolts in cold climates. Though there is no indication that the defect has caused any accidents, Tesla will be retrofitting the component.
Tesla has also been struggling with manufacturing delays for the Model 3, which is supposed to be a more affordable and widely available version of its higher end electric cars. CEO Elon Musk has consistently overestimated the production volume for the new vehicle. His initial ballpark figure for the second half of last year was 100,000 to 200,000 units, but the company ended up only selling 1,770. Musk then assured the public that Tesla would be producing 20,000 units per month by December, but when that didn’t happen, the company said that it aimed to produce 2,500 per week by the end of March and 5,000 per week by the end of June. These production bottlenecks have fueled speculation that Tesla was trying to cut costs by laying off hundreds of people in the fall, though the company has claimed that these employees were fired for poor performance.
The missed targets led Moody’s to downgrade Tesla’s outlook from stable to negative and to also lower its corporate family rating and senior notes rating. “Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle,” Moody’s release on the decision read in part. These lower rankings make it more expensive for Tesla to borrow funds. The organization further stated that Tesla needed to raise more than $2 billion from investors to keep afloat and pay its steep debts.
Tesla is currently valued at around $59 billion, and just recently managed to raise $1.8 billion during its first junk bond offering in August. However, the Wall Street Journal reported this week that the company had spent $3.4 billion just last year, stoking concerns that the company may soon run out of cash.