By Ruth Park
Electric automaker Tesla, Inc. has had a rough March, which included a deadly Model X crash, threat of increased Chinese tariffs, lower credit rating, voluntary Model S recall, and lawsuit from shareholders challenging its SolarCity acquisition. Tesla’s shares fell 22 percent in the span of March’s 31 days, with a 12 percent plunge in just the last week of the month. Nevertheless, despite increasingly negative expectations, Tesla looks to be starting April in good spirits—CEO Elon Musk humorously announced bankruptcy through an April Fools’ tweet—and stock has been up 13 percent this week.
However, Tesla’s slew of March troubles remain ongoing concerns. The National Transportation Safety Board just launched its investigation into Tesla’s March 23rd Autopilot fatality, a Model X crash into a barrier near Mountain View, California. Moreover, Musk’s Twitter bankruptcy joke has not been received very lightly by investors and analysts. On March 27th, Moody’s Investor Service downgraded Tesla’s corporate family rating from B2 to B3, pushing the car manufacturer further into junk-bond territory. Moody’s has explained its re-evaluation to be a result of continued production delays and decreasing liquidity. This Tuesday, Tesla announced that it had missed its self-defined production target of 2,500 Model 3s per week, once again pushing back its lofty 2017 goal. Although Tesla also addressed liquidity worries this week, emphasizing that it will not need additional debt or equity this year, the carmaker’s financial health remains a point of concern, as investors press forward with a suit against the $2.6 billion acquisition of debt-ridden SolarCity, founded by Musk’s cousins.
Additionally, Tesla has just begun the process of carrying out its largest-ever recall of 123,000 Model S sedans, and must remain wary of increasing trade tensions between China and the U.S.; China accounted for 17% of the company’s 2017 revenues, and Tesla is one of the few U.S. automakers that would be significantly affected by the Chinese Commerce Ministry’s proposed retaliation tariffs.
Like Tesla, many companies in the self-driving car space have experienced turbulence in recent weeks. Uber Technologies, Inc.’s March 18 pedestrian fatality in Tempe, Arizona, has led to a temporary state suspension of its driverless-car program. With increasing public scrutiny, it will be interesting to see how autonomous vehicle technologies, and the companies that develop them, progress going forward. The commercialization of driverless cars promises safer, cheaper, and more efficient transportation; according to regulators, human error causes 94% of vehicle crashes, and autonomous features on regular cars, such as automatic braking, have yielded positive results in preventing fatal accidents. As President Trump waits for Senate approval to nominate the National Highway Traffic Safety Administration’s acting chief as head administrator, the public and private sector will be looking to see how current passive regulation will change, and how proper safety oversight can be enacted without discouraging for-profit endeavors.