Economics discussion
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Tesla.pdf
Core Business of Tesla
Tesla, Inc. is an American multinational automotive and clean energy company headquartered in Austin, Texas. Tesla designs & manufactures electric vehicles (EVs), battery energy storage from home to grid-scale, solar panels + solar roof tiles, and related products & services.
● Tesla sells luxury electric vehicles, energy storage & solar energy solutions. ● Demographic: Caucasian, household income: $146K, Age: 54 yr/old median, 71% male, 88% own a home. ● What are the main risks to Tesla’s business model? Other companies producing competitive EVs. ● Who are Tesla’s key competitors? Ford, GM, NIO, & Volkswagen.
Sources:
● 10-K & Annual Report ● Internet Research ● Discussion Boards 1 & 4
Hafeman, Emily. “Tesla, Inc..” Wikipedia. Wikimedia Foundation, September 26, 2022. https://en.wikipedia.org/wiki/Tesla,_Inc.
Team, The Investopedia. “Who Are Tesla's (TSLA) Main Competitors?” Investopedia. Investopedia, September 1, 2022. https://www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-main-competitors.asp#:~:text=Who%20Are%20Tesla's%20Top%203,over%20450%2C000%20EVs%20in%202021.
Wright, Charles. “Tesla Owner Demographics by Age, Income, Gender, Home Value.” Hedges & Company, September 1, 2022. https://hedgescompany.com/blog/2018/11/tesla-owner-demographics/.
History of Tesla
Brief History of Tesla:
● 2003 - Tesla was founded by the engineers Martin Eberhard and Marc Tarpenning in San Carlos, California.
● 2004 - Elon Musk joined the company and invested $30 million into the company and became the chairman of its board of directors.
● 2007 - Eberhard resigned as CEO. Succeeded first by Michael Marks, then Ze'ev Drori took over as Eberhard's permanent replacement in November.
● 2010 - Tesla goes public, raising $226 million in its Initial public offering (IPO). ● 2014 - Tesla announces its Nevada Gigafactory, where the company will manufacture the
batteries for all of its products. ● 2015 - The company enters the solar power market, announcing a line of products to power
homes and businesses based on a combination of solar panels and batteries. ● 2017 - Tesla Motors changes its name to Tesla, Inc.
History of Tesla Vehicles
● 2008 - The Roadster enters production (prototyped in 2006) ceased production 4 years later. ● 2012 - Tesla Model S is revealed (announced in 2009, prototyped in 2011). ● 2015 - Tesla released the Model X. ● 2017 - Tesla Motors changes its name to Tesla, Inc. & Tesla launches the Model 3. ● 2021 - Tesla releases the Model S Plaid. ● 2020 - Tesla releases the Model Y (unveiled in 2019). 2008 Tesla Roadster:
Sources:
● Cadie Thompson, Kristen Lee. “Tesla Just Celebrated Its 12th Year as a Public Company. Here Are the Most Important Moments in Its History.” Business Insider, Business Insider, https://www.businessinsider.com/most-important-moments-tesla-history-2017-2#february-2008-teslas-first-ro adster-is-delivered-5.
● Reed, Eric. “History of Tesla: Timeline and Facts.” TheStreet, TheStreet, 4 Feb. 2020, https://www.thestreet.com/technology/history-of-tesla-15088992.
● Staff, Wikimedia. “Tesla Roadster (First Generation).” Wikipedia, Wikimedia Foundation, 22 Oct. 2022, https://en.wikipedia.org/wiki/Tesla_Roadster_(first_generation).
Marc Tarpenning, Founder
● Born June 1st, 1964 in Sacramento California, Tarpenning earned his B.A. degree in computer science in 1985. Tarpenning is said to live by the maxim: "find a problem you care about and produce a product to solve it" [1].
● Tarpenning first met Eberhard in 1997 when they started an e-book company. They reunited in 2003 when they started Tesla Motors. The founder’s original business plan revolved around the desire to produce a product that wasn’t simply better for the environment, but a better all-round product. This was the pitch the two founder’s hooked Elon Musk with in 2004. By Jan. 2008, Tesla had its first production line, & was planning for the Model-S.
● Tarpenning served as CFO & vice president of engineering until 2008 when he left and Musk took over leadership of the company.
Sources: ● Discussion Board 5 ● Internet research
[1] https://innovators.berkeley.edu/spotlights/co-founder-marc-tarpenning-85-shows-off-teslas-baby-pictures/ [2] https://www.businessinsider.com/tesla-the-origin-story-2014-10
The less well known Tesla's founder Marc Tarpenning seems to have favored keeping a lower profile than his co-founder Martin Eberhard.
Management’s Assessment of Tesla’s Prospects
Challenges for Tesla:
● Had to recall some of its vehicles due to safety concerns that resulted in pinched fingers by automatic windows.
● Lawsuits for false advertisement negligence, fraud, & deceit laws about their autopilot system where Musk promised Tesla vehicles would be able to perform a fully autonomous cross-country drive in 2016 & again in 2019.
● Long wait times on delivering vehicles.
Success of Tesla:
● Vehicle Model S that premiered in 2013 was named: “best car ever tested”. ● Become the leader of electronic car market with a marked capitalization of over $900 billion. ● First to produce an electric vehicle in 2008 that could achieve 245 miles on a single charge.
Management’s Assessment of Challenges & Opportunities for The Future:
● Keep Tesla as the leading producer of EVs in the future. The market is growing with other big car manufacturers like Mercedes Benz & BMW producing electric vehicles.
● Expand on their current leading technology to keep producing the best EVs ● Produce vehicles on time to keep customers satisfied & not choosing another EV brand. ● Be on top of safety in their vehicles to avoid recall products & thereby less customers satisfaction.
Sources:
● Manager’s/founder’s/board’s letter ● Discussion Board 1 ● Team, TopGear. “Tesla Model Y Review 2022.” Top Gear, 1 Mar. 2022, https://www.topgear.com/car-reviews/tesla/model-y. ● Wu, A. (March 14, 2022(. The Story Behind Tesla’s Success (TSLA). Investopedia,
https://www.investopedia.com/articles/personal-finance/061915/story-behind-teslas-success.asp ● Makinson, R. (April 21, 2022), Secrets Of Success: How Did Elon Musk’s Tesla Make It To The Top?. CEO TODAY.
https://www.ceotodaymagazine.com/2022/04/secrets-of-success-how-did-elon-musks-tesla-make-it-to-the-top/
Tesla Model Y SUV Photo Source: TopGear
Balance Sheet Consolidated Balance Sheet:
- Total Assets: $62,131 (2021) $52,148 (2020) - Total Liabilities: $30,548 (2021) $28,418 (2020) - Total Liabilities & Equity: $62,131 (2021) $52,148 (2020)
Solar Energy:
- $1,187m in 2021 - $955m in 2020
Property, Plant, & Equipment Net Accumulated:
- $6,731m in 2021 - $5,117m in 2020
● Balance increased after COVID. ● All products increased due to
manufacturing.
Sources:
● Discussion Board 2 ● https://www.sec.gov/Archives/edgar/data/1318605/000095017022000796/tsla-20211231.htm
The Bottom Line Bottom Line: The net income of a company.
2021 Tesla net income: $5.644B
- Tesla was highly profitable in the year of 2021 making over $5 billion.
Sources of Profits in 2021: Sources of Losses in 2021:
1) Automotive sales & Leasing (+$12.374B) 1) Misc. Services (-$0.104B) 2) Regulatory credits (Governmental Incentives) (+$1.465B) 2) Energy Generation/Storage (-$0.129B)
***The 4 Major Sources of Revenue for Tesla***
The Net Income of Tesla has increased dramatically from 2019 to 2021:
- Tesla has been increasing its overall profitability over time. - Automotive sales, leasing, & regulatory credit profits have consistently increased. - Energy Generation/Storage & Miscellaneous Services have varied in profitability (appears to becoming slowly profitable).
Sources: [1] Discussion Board 3 [2] Tesla Annual Report and 10-K [3] https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income [4] https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue
Ratios Quick Ratio (Tesla) = (Total Current Assets - Total Inventories) / Current Liabilities = 1.04
The Quick Ratio indicates the company’s short-term liquidity position. It shows a company’s liquidity Tesla’s quick ratio is above 1 (which is considered normal), which indicates that their short-term financial state is good. When compared to other companies in the automotive industry such as Hyzon Motors Inc (QR = 14.10) or Fisker Inc (QR = 10.52), Tesla falls short, but is good-standing nonetheless.
Debt Ratio (Tesla) = Total Debt / Total Assets = 0.079B
Compared to other companies in the automotive industry like Phoenix Motor Inc (Total Debt = 147.3 M), Tesla’s total debt is high (2.874 B). However, because the their total assets are high and increasing with every year, their debt ratio continues to constantly decrease.
Current Ratio (Tesla) = Current Assets / Current Liabilities = 1.375
A current ratio above 1.000 shows that Tesla’s current assets are greater than their liabilities, or what they owe. However, 1.375 does imply a smaller margin of Tesla being able to pay off their most pressing obligations. Ultimately, a current ratio 2.000 is the goal.
Sources: Discussion Board 6
https://www.gurufocus.com/term/quick_ratio/TSLA/Quick-Ratio/Tesla
https://finbox.com/NASDAQGS:TSLA/explorer/total_debt
https://www.cnn.com/2019/11/22/cars/tesla-cybertruck-electric-pickup-truck/index.html
https://abcnews.go.com/Business/twitters-verification-plan-works-facing-criticism/story?id=92794983
Shareholders What makes Tesla so different from many other publicly traded companies?
● No intention of paying dividends ○ “Tesla is still very much in hyper-growth mode, & we expect any dividend
that may be paid to be many years away.” [1] ● Stock splits over the last two year have brought the cost of trading single shares
down dramatically while keeping the overall valuation of the company sky high.” [2] ○ With extremely low debt to revenue ratio, stock splits have left the
company’s financial standing with a very strong valuation & extremely affordable share prices.
● Delivery of new vehicles fell short of expectations causing investors to sell. [2] ○ Delays of new vehicles, supply chain issues & the push back of the rollout
for the cyber truck + semi truck vehicle lines have damaged credibility with investors for the fledgling company.
● CEO & long term investor in Tesla Cathie Wood bolstered Tesla’s financial position by purchasing $13.7 million in Tesla shares after Elon Musk’s sale of shares in order to purchase twitter. [1]
[1] Business Insider. (n.d.). Does Tesla (TSLA) stock pay dividends? Business Insider. Retrieved November 12, 2022, from https://markets.businessinsider.com/news/stocks/does-tesla-tsla-stock-pay-dividends-1031316295
[2] CNBC. (n.d.). Check out Tesla's stock price (TSLA) in Real time. CNBC. Retrieved November 12, 2022, from https://www.cnbc.com/quotes/TSLA?tab=news
Employment Opportunities Opportunities for Internships & Careers:
There are many internships & internship types available. The internship opportunities range from departments including Environmental, Health & Safety, HR, Engineering, Information Technology, Design, Finance, Supply Chain, & more. The majority of these internships are based in San Diego & Fremont California. There are also opportunities in Texas & remote positions available.
Tesla has a 12-week capstone program offered to undergraduates who are interested in a career working with Tesla.
Is Tesla a Good Place to Work?
Tesla ranks #150 in "World's Best Employers," topping other automobile companies like Hyundai & Toyota, but falling far below others like Honda at 34 or Ford at 55.
Users on Glassdoor rate working for Tesla an average of a 3.6/5, with 73% approving of the CEO & 65% would recommend a friend.
Common Cons: Stressful, high turnover rate, poor management, long hours.
Common Pros: Health insurance, paid parental leave, retirement plans, paid time off.
References:
● Tesla Careers ● World's Best Employers
2022 (forbes.com) ● Working at Tesla | Glassdoor ● Tesla Benefits
(careerkarma.com)
Source: Glassdoor
Corporate Citizenship
In addition to being the right thing to do, being a good corporate citizen is good for business.
● Is this company considered a good corporate citizen? ○ Environmental stewardship, treatment of workers and suppliers, human rights, customer privacy, etc.
● Has the company had to weather any scandals? ○ How did they respond? ○ Have they succeeded in restoring confidence on the part of the public, customers, governments?
Sources:
● Internet research ○ Outside assessments of this particular topic are very important
● Annual Report/10-K (Scandals will be mentioned in “Risk Factors”) ○ Be cautious with company’s self-reported “grade” for citizenship.
● Discussion Board 4
References go here (use small font).
Concluding Remarks Tesla is definitely an admirable company, they‘re the industry leader for this segment of EVs, solar panels, batteries & more. We would definitely consider owning shares for Tesla as the stock has always proved doubters wrong & has performed phenomenally due to their outstanding sales performance. Year after year the demand for Tesla is higher. And no matter the amount of competition, Tesla is positioned well in its segments & is poised for long-term success.
Pros:
● Tesla is a segment leader with their products. ● Great customer retention & media coverage. ● Unbeatable autonomous technology.
Cons:
● Increasing competition. ● Unreliable build quality. ● CEO is controversial: stock drops every time he tweets. ● Autonomy system draws controversy.
Sources:
Schreiber, Barbara A. “Tesla, Inc..” Encyclopædia Britannica. Encyclopædia Britannica, inc., November 1, 2022. https://www.britannica.com/topic/Tesla-Motors.
Staff, 1,000 Logos. “History of the Tesla Logo.” 1000 Logos The Famous Brands and Company Logos in the World Tesla Logo Comments, November 1, 2022. https://1000logos.net/tesla-logo/.
Staff, Tesla. “Model 3.” Tesla, November 15, 2022. https://www.tesla.com/en_gb/model3.
(Pictured Above): Tesla Model 3
Tesla’s most affordable vehicle yet, starting at $47,000+.
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