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Trefis analysis shows Tesla’s stock could potentially drop to $0 from its current level of over $500, as a counter analysis to our Tesla upside case of Tesla Stock Upside: $2,000?We outline how Tesla could reach a default situation on its ~$13 billion in debt and finance leases, a meaningful portion of which matures over the next 5 years. What's the trigger? We first consider the case of recession or a soft economy as a trigger to lower revenues, margins and a cash crunch. Then we highlight how there are other possible triggers that could lead to a similar set of events.Deeper insights on Tesla revenues and Tesla expenses as well as Tesla P/S multiple, are also available separately as context to this analysis.
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Mercedes U.S. Deliveries Over 2008 Crisis
How Battery Costs Impact Tesla's MarginsTesla Expenses: How Does Tesla Spend Its Money?
Recession the only possible trigger? No - there are other risks
The above events leading to Tesla default can be triggered by many types of risks. We outline some below
Increase in accident rate: While currently considered one of the safest, glitches in self-driving auto-pilot technology or fires related to battery packs can trigger negative publicity, and loss of consumer confidence resulting in a sharp drop in deliveriesEscalation of the U.S. trade war with China: This could hurt the company's prospects in the growing market. China is a key market for Tesla at this timeSuccession and corporate governance issues: Tesla's fortunes have remained heavily tied to CEO Elon Musk, who has a track record of being unpredictable and combative. Tesla might fall victim to its own creator's follies
If the company were to face one or more of these issues independently or alongside a recession, its possible that financing could dry up for Tesla at the time when it has to pay its debts.
Tesla's stock has a track record of reacting very strongly to newsBetween December 2018 and May 2019, Tesla stock declined by about 50%, on account of weaker-than-expected earnings and deliveries.Events such as a default could significantly hurt the stock price, potentially wiping our much of Tesla's value
Tesla Stock Price
View our complete set of analyses on Tesla