Moody’s upgrades Tesla stock to investor-grade status

Yahoo Finance automotive correspondent Pras Subramanian discusses Moody's upgrading Tesla's credit profile and breaks down how it will effect Tesla's financing in the future.

Video transcript

DAVE BRIGGS: Tesla shares are driving higher today, big time, about 8% after Moody's upgrades the EV giant's bonds to investment grade status. Yahoo Finance senior reporter Pras Subramanian has been following this story. Pras, that is quite a rise today. Why so?

PRAS SUBRAMANIAN: Well, they're a blue chip company now. You know, this follows what S&P did in October, raising their credit rating to investment grade. Here, I think it's BB3 or something like that for is what Moody's calls it. So basically, S&P cited market leadership in EVs, and that's what Moody's is saying as well for Tesla in terms of cost leadership, portfolio expansion with the Cybertruck, and industry Y kind of best margins for production.

So, yeah, they're doing that upgrade there. And it kind of is a big deal because then it allows Tesla to borrow even more cheaply because they have that higher rating. And then it allows other investors to come in, like pension funds, people like that who only invest in very kind of rate sensitive bonds. So that's why they're sort of in that play there. And this is sort of happening along the backdrop of weakening financial conditions. Other automakers are having a hard time raising money, at least with a cheap rate. So Tesla kind of in the driver's seat here-- I hate to say it-- with regards to bonds right now.