S&P Global Ratings said it upgraded Tesla Inc.'s issuer credit rating and issue-level ratings on its unsecured debt to "B+" from "B-," with a stable outlook.

Tesla's improving profitability and competitive position prompted the rating, while the stable outlook reflects Ratings' expectation that the electric-car maker can maintain its financial performance and market position.

In a July 29 release, the rating agency said it expects Tesla's debt-to-EBITDA ratio to be in the range of 3.5x to 4x in 2020 and move below 3.5x in 2021.

Ratings also expects Tesla's production capacity for its Model 3 and Model Y at its Fremont, Calif., plant to increase from 400,000 vehicles to 500,000 vehicles in 2020.

California-based Tesla posted its fourth consecutive quarterly profit July 22 after its sales outperformed the wider industry.

U.S. light-vehicle sales dropped 35% year over year in the second quarter, while Tesla's sales only fell 5%, the rating agency said. Tesla's Shanghai Gigafactory will likely be able to lower its per-unit costs and offset tariff exposure on China-sourced components.

Tesla's expansion plans for a Gigafactory in Berlin and Texas will also ramp up its manufacturing capacity, Ratings said.

Ratings could upgrade Tesla's ratings if it continues to ramp up its production capacity and maintains its operational improvements. The electric-car maker could also be upgraded if its gross margins increase and if it maintains a debt-to-EBITDA ratio of below 3.0x on a sustained basis.

However, Tesla could be downgraded if it is unable to expand its manufacturing footprint or if demand for electric vehicles dwindles. The carmaker could also be downgraded if its debt-to-EBITDA ratio rises above 4.5x on a sustained basis.

On July 23, Moody's also upgraded Tesla, citing the company's strong, sustainable position in the auto industry.