S&P isn’t buying Tesla’s profitability outlook for the rest of the year, predicting only limited improvement after the automaker sank back into the red in the first quarter.

Tesla’s $702 million loss was the fourth-worst since it went public in 2010. In the previous two quarters, it had posted back-to-back profits for the first time ever.

Looking ahead, the company said it expected to return to profitability in the third quarter and “significantly reduce our loss” in the second as “the impact of higher deliveries and cost reduction take[s] full effect.”

S&P, however, said profitability improvement for the remainder of 2019 “is likely to be limited,” citing several headwinds in addition to the reduction of the $7,500 federal tax benefit in the U.S. for Tesla buyers.

“We assume ongoing downside risks to profitability from tariffs on Chinese-sourced components, uncertainty around import duties on vehicle deliveries in China, high commodity costs, and lower-priced model variants in the U.S.,” the credit rating agency said in a news release.

Tesla has set a non-GAAP gross margin target of 25% on its Model S, Model X, and Model 3 cars. It is now offering a lower-priced, $35,000 version of the Model 3.

But S&P noted that achieving the margin target will be “highly dependent on customers choosing the more expensive variants (with longer range, superior performance, and full self-driving capabilities). The company will also face intense global competition, as most major automakers plan to launch battery electric vehicles beyond 2019.”

According to S&P, Tesla’s cash position should improve by the end of the year, with free operating cash flow climbing back to break-even from negative $919.5 million in the first quarter. More than $900 million in cash went toward repaying debt earlier this year.

Another $566 million in debt comes due in November, however.

“Given likely headwinds to profitability growth in 2019, this adds some downside risk to the company’s ability to fund its requirements internally on a sustained basis, while keeping a liquidity cushion of $1.5 billion,” S&P warned.

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