Tesla nears Blue-Chip status after S&P improves credit score

(Bloomberg) — Tesla Inc. is on the verge of earning global blue-chip status after S&P Global Ratings upgraded the electric vehicle maker’s credit rating to investment grade.

The Austin, Texas-based company’s rating was upgraded to BBB on Thursday, two notches above junk food, from BB+ by S&P, analysts Nishit Madlani and David Binns said in a statement.

“We now view Tesla’s credit profile more favorably as it continues to demonstrate leadership in the electric vehicle (EV) market, with strong manufacturing efficiency supporting strong EBITDA margins and cash flow of sustained positive free-running,” they wrote, referring to a profit measure. before interest, taxes, depreciation and amortization.

Tesla delivered 343,830 vehicles worldwide in the third quarter and is expected to report results on October 19. In recent quarters, it has paid off its debt while remaining the world’s largest maker of electric cars, with four car factories on three continents.

“S&P’s upgrade is the last, but not the last for Tesla,” said Joel Levington, credit analyst at Bloomberg Intelligence. “We see his ratings moving towards a high BBB level this year.”

The upgrades are the result of the automaker’s low financial leverage and best-in-class margins that should continue to stand out among its global peers, he said in an email.

The automaker now only needs one more upgrade from another major credit scorer for its debt to be widely considered investment grade. Moody’s Investors Service upgraded Tesla to Ba1, one notch below investment grade in January.

“To improve its competitive position, Tesla will need to expand its product lineup to accommodate a significantly larger number of models from established global automakers and startups by the end of 2025,” the S&P analysts wrote.

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