Tesla Wins Fastest Green Car from AAA - Analyst Blog

Tesla Motors, Inc.'s TSLA Model S has received top points from the Automobile Association of America's Green Car Guide along with Toyota Motor Corp.'s TM RAV4 EV. These vehicles surpassed the scores of the Audi A7 TDI, the Lexus GS and Nissan Motor Co. Ltd.'s NSANY Leaf.

The Automobile Association of America conducts a review of alternative fuel vehicles every year. The study is conducted by the automobile club's Automotive Research Center on 80 hybrids vehicles, electric cars, CNG-powered cars, clean diesels and partial zero emissions vehicles. The association considers the Tesla S vehicle the fastest green car, though they are concerned about the low 265-mile range and long charging time.

However, Tesla S did not achieve the highest rating for value. General Motors Co's GM Chevrolet Spark won the tag of the best green car value vehicle for 2014. Chevrolet Spark was followed by Hyundai Elantra GLS, the Nissan Versa SV, the Scion iQ and the Nissan Versa Note SV.

Separately, Car and Driver magazine recognized Model S as one of the slipperiest cars on the road. In the recent publication of the magazine, there was a comparison between 5 vehicles with low drag areas. Model S was declared the winner based on the analysis using wind tunnels to determine the cars' drag and lift properties. The vehicles compared were Toyota Prius, the Nissan LEAF, the Chevy Volt and the Mercedes-Benz CLA250, apart from Tesla's Model S.

Recently, Tesla received a “B-” credit rating from Standard & Poor's Ratings Services. The rating is six notches below investment grade and falls in the junk category. Meanwhile, S&P assigned a stable outlook to the rating, based on the projections that gross margins of Tesla will continue to improve over the next year as the company works to fulfill the demand for Model S.

The low credit rating is a result of Tesla's limited market share, small operating scale compared with other automakers, focus on a niche product segment and uncertainty related to demand in the long term. Moreover, the electric carmaker might face difficulty in managing risks related to future technological displacement and competition.

A number of players in the field of green vehicles is expected to increase in the future, which will hamper Tesla's prospects. According to S&P, these factors raise doubts about long-term prospects, despite the positive aspects of the company.

Tesla currently carries a Zacks Rank #4 (Sell).