Categories U.S. Markets News

Liquidity concerns will give Tesla a rough ride

Tesla (TSLA) is going through a rough patch right now. The fatal crash involving its Model X SUV and the subsequent investigation by the National Transportation Safety Board has raised questions over the reliability of its Autopilot semi-autonomous feature. Autonomous vehicles have acquired a bit of a villainous reputation post the fatal Uber crash.

Safety concerns over the Autopilot feature, along with the possibility of the electric vehicle’s battery catching fire in the event of an accident, has brought into question the vehicle’s favorability as well as Tesla’s credibility.

Tesla’s shares saw an 8% drop on Wednesday following a similar trend on Tuesday. The stock is down close to 25% so far this month, making it one of the worst downslides for Tesla.

This adds to the company’s existing troubles over the production delays of its Model 3 car. The vehicle keeps missing its targets and Tesla is unable to send out enough cars to its customers who have paid their deposits and are waiting to make a purchase. The target for producing 5,000 cars per week has now been set for the end of June.

Missing more deadlines would mean burning of more cash. This is not something Tesla can afford to continue doing as it stands due to pay over $1 billion in bonds in both November and next March.

Tesla is facing the possibility of downgrades from several analyst firms who do not seem to share the same optimism of the company’s shareholders, who recently approved a hefty pay package for their CEO Elon Musk. The compensation package which comes with performance milestones has not started out so well for Musk. Over the past two days, Tesla’s market cap dropped about $8 billion to just under $44 billion.

Tesla’s cash problems are likely to cause friction with suppliers and that is not a nice situation to be in. Some experts have gone so far as to predict that Tesla’s liquidity issues are even likely to lead the company to bankruptcy.

Tesla needs to clean up this mess and do it soon. We don’t need Roadsters out in the space; we need more Model 3s on the road. 

Most Popular

United Parcel Service (UPS) seems on track to regain lost strength

Cargo giant United Parcel Service, Inc. (NYSE: UPS) ended fiscal 2023 on a weak note, reporting lower revenues and profit for the fourth quarter. The company experienced a slowdown post-pandemic

IPO Alert: What to look for when Boundless Bio goes public

Boundless Bio is preparing to debut on the Nasdaq stock market this week, and become the latest addition to the list of biotech firms that have launched IPOs this year.

Nike (NKE) bets on innovation and partnerships to return to high growth

Sneaker giant Nike, Inc. (NYSE: NKE) has been going through a rough patch for some time, with sales coming under pressure from weak demand and rising competition. Post-pandemic, the company

Tags

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top