Tesla, Car Critics Fire Back After 'Junk' Rating From S&P

Credit ratings company Standard & Poor's announced an unsolicited review of Elon Musk's Tesla and rated the company six levels below investment grade.
Posted at 6:25 PM, May 28, 2014

​Standard & Poor's thinks Elon Musk's sleek electric car is more like a pile of "junk." Well, not exactly. 

His Model S, the car that seems to have recharged the electric car concept, received a rare negative review when S&P labeled its manufacturer Tesla's debt as B- or a "junk bond."  The risk rating was based on the company's current $2.2 billion debt, small-scale production and limited audience.

Tesla responded to the news Wednesday saying, "This is an unsolicited rating from S&P that was developed independently by their analysts without any feedback from Tesla on our growth plans." (Via Bloomberg)

And a survey of the Web finds many critics in Tesla's corner. According to Forbes, some of those growth plans could include a brand-new assembly line dubbed the "gigafactory," new European dealerships, and soon its first Model S on Chinese roads, where: (Via Flickr / cdorobek)

"Management has already stated that the demand is so high that if [Tesla] tried to fulfill it, there would be no vehicles left to sell elsewhere." (Via Forbes)

That remains to be seen. S&P also warned Tesla's long-term outlook isn't as certain when compared to big brands like Ford and General Motors, which will bring more money and more competition to the EV market.

But Investment firm Morgan Stanley disagrees and suggests Tesla is already outpacing its rivals. Barron's has its statement. (Via Flickr / Edsel Little)

"Tesla aside, the auto industry's push into EVs has fallen far short of expectations. Fiat-Chrysler CEO [has] recently said he loses $14,000 on every Fiat 500e, adding 'I hope you don't buy it.' Chevrolet Volt sales are down 7%. ... The Ford Focus EV accounted for 0.07% of Ford's 1Q US volume." (Via Barron's)

CNN is another believer. It says the Model S is hardly an "electric lemon" and compares Musk's innovative idea to another empire economists doubted.

"This is really like the Amazon of the automotive industry. People doubted Jeff Bezos for a long time. They talked about how the stock was overvalued. Guess what? The stock's been overvalued for 15 years. So people who want to doubt Elon Musk, they are doing so at their own peril."

An analyst for Fox Business suggests Tesla's technology faces some short-term setbacks. He puts it practically: The automotive environment isn't ready for the Model S yet.

"The fact of the matter is, it costs more and there are two major issues. It's not an interstate car. Second, takes a long time to power up when you're out of battery."

Currently, Tesla rolls out about 500 cars every week. Musk has hinted he plans to take production higher and introduce new economy models under the Tesla name.