Tesla Motors Inc. (NASDAQ:TSLA) the reputed manufacturer of electric cars that saw a fourfold growth in its stock last year has surprisingly been rated as junk by Standard & Poor’s because the long term prospects of the company are of ‘considerable uncertainty,’ believe the rating agency.

“We believe there is considerable uncertainty in Tesla’s long-term prospects,” S&P analysts wrote in the report. Compared with larger, more established automakers, the Palo Alto company is less likely “to successfully adapt to competitive and technological displacement risks over the medium to long term,” they said.

Rating below the investment grade

The current ranking of B-minus lies six levels below the investment grade, and is a reflection of a business that is “constrained by Tesla’s niche and independent market position,” S&P said. According to S&P, there are certain issues with Tesla such as its scale that is smaller in relation with the peers, the product focus is very narrow and its products have a limited demand.

Bloomberg has compiled a data revealing that Tesla Motors Inc. (NASDAQ:TSLA) is the youngest publicly traded automaker, and without the allocation of a rank from any major rating company it has been able to tap the debt markets. The company wishes to make new car models that are much more affordable than the existing ones and for this purpose it is setting up a battery factory. To fund this factory the company sold convertible debt in March and raised about $2.3 billion.

The rating was “developed independently by their analysts without any feedback from Tesla on our growth plans,” Tesla Motors Inc. (NASDAQ:TSLA) spokeswoman Liz Jarvis-Shean said in a statement.

More cash needs

A credit analyst with S&P, Nishit Madlani, said that the investments undertaken by Tesla in 2014 and 2015 will use up more cash than it will be able to generate through sales. Certain activities undertaken by the company such as construction of a giant battery factory, showrooms and service facilities, Supercharger stations, and developing of new car models including Model X SUV and some smaller cars will incur huge capital expenses by the company.

The positives of Tesla Motors Inc. (NASDAQ:TSLA), as highlighted by S&P are that the company’s brand recognition, premium pricing, improving operating performance and growing sales will enable the company in higher cash generation and improved outlook.

On Tuesday, a rise of 2% i.e. $4.26 was noted in shares, which is now priced at $211.56. A rise of 41% has been noted this year in the shares.