prepared by: victor dergunov, mba 08/07/2016 · industry analysis ... porter’s 5 forces ......

1 Tesla Motor Company

Prepared by: Victor Dergunov, MBA 08/07/2016 "If you think you can or you think you can't, you will ALWAYS be right." - Henry Ford


Table of Content Management Overview………………………………………………………………………………..3 Company Overview…………………………………………………………………………………....5 Products Evolution…………………………………………………………………………………….7 Industry Analysis………………………………………………………………………………………7 Porter’s 5 Forces………………………………………………………………………………………..8 SWOT Analysis………………………………………………………………………………………...9 Problem Area Analysis…………………………………………………………………………….......9 Recommendations……………………………………………………………………………………..10 Appendix Industry Charts……………………………………………………………………………….13 Financials……………………………………………………………………………………..14 References………………………………………………………………..…………………...20


MANAGEMENT Overview – Elon Musk (Chairman, Chief Product Architect & CEO), JB Straubel (Chief Technical Officer), Jason Wheeler (Chief Financial Officer). Tesla’s management focusses on bringing to market the most innovative, technologically advanced, 100% electric automobiles and powertrain components. The company, since inception has been relentlessly pursuing a three stage production strategy to become profitable. The company has successfully implemented the first two stages by offering the high priced, low volume Roadster and the mid-priced, mid volume Models S and X. Now management is focusing a great deal of its attention on implementing the third stage of its production strategy, releasing the low priced, high volume Model 3. Management has made it abundantly clear that in order for the company to be profitable it needs to sell approximately 500,000 cars per year, most of them Model 3s. However, in order for management to successfully achieve its primary objectives there are a few obstacles the company must overcome.

Issues Facing Company – There are a few pressing issues facing the company that have been making some investors uneasy concerning Tesla as a company and its stock. Some of the more pressing concerns are Tesla’s continuous and insatiable burn rate, safety concerns and perception regarding the safety of its vehicles, sustainable supply and demand for Tesla’s vehicle, and the company’s recent acquisition of SolarCity. Burn Rate – Tesla has been a public company for around 6 years now, yet the company has never had an annual profit. Moreover, Tesla Motors is losing capital at an alarming rate. The company’s cash flow from operations was minus $525 million in 2015 and the company lost almost a billion dollars in that same year. Burning cash has been a continuous problem at Tesla and is the primary reason the company had 5 funding rounds before going public, almost went bankrupt in 2009 and is constantly going to market to raise more capital. The company has grand goals, and has a lot of capital expenditure spending concerning the Gigafactory, R&D, its charging station infrastructure, its retail stores and so on. However, a business exists to make a profit and unless Tesla can demonstrate to investors that it can control its burn rate and can become profitable relatively soon it will start to encounter some real problems. It is possible that

Stage 1-Production of the Roadster low volume, high price.

Stage 2-Production of the Model S & Model X mid volume, mid price.

Stage 3-Production of the Model 3 high volume, low price.


if the company keeps accumulating debt and keeps diluting its stock Tesla could have its bond rating cut to CCC or CCC+ which would make borrowing more expensive and would increase Tesla’s interest payments to a level the company may not be able to keep up with payments. It is also possible that in a scenario such as this investors and holders of its stock could start losing faith in the company’s future prospects. In order to avoid such a scenario, the company must demonstrate to the market and to investors that it is able to keep its costs under control and can realistically hit its 500,000 vehicle sales target by 2020. As recent as 8/8/2016 Tesla released a statement saying it would need an additional $1.1 billion to fund operations and make debt payments in Q3 2016 (Finance.yahoo.com). Earnings Surprises, Last 4 Quarters

Period Per Share Earnings Consensus Forecast Surprise%

Jun-16 -1.54 -1.16 -32.76

Mar-16 -1.24 -0.78 -58.97

Dec-15 -1.29 -0.34 -279.41

Sep-15 -1.01 -0.71 -42.25

(Nasdaq.com) Demand & Production Concerns – Tesla’s whole argument for being in business is based on the company’s expectations that one day soon the automaker is going to be able to manufacture, deliver and sell approximately 500,000 cars a year. This might seem like a lot considering that the car company currently only sells slightly more than 10,000 vehicles per quarter. The goal does seem attainable as there were 72.37 million passenger automobiles sold by auto manufacturers in 2015 worldwide. Nevertheless, due to fully electric mainstream vehicles being a relatively new phenomenon, the cars’ expensive price tags and Tesla’s history of missing targets, this has some investors and critics doubting the company’s projections (Statista.com). For example, Tesla badly missed some sales targets in 2014 which cratered its stock short term, causing an almost 40% decline within weeks. More recently, in quarter 1 of 2016 Tesla sold 14,820 units of which only 2,240 were of its newly released Model X SUV. These figures were well short of the forecasted 16,000 total units to be sold and Tesla blamed the short fall on production constraints (Ibtimes.com). Moreover, in its most recent quarterly result released Aug 3 2016 Tesla’s revenues slightly missed targets and its EPS missed by 32% and were -$1.54 per share (Nasdaq.com).

SolarCity Acquisition – In June 2016 Tesla agreed to buy SolarCity in a $2.6 billion all stock deal. Tesla’s stock took an immediate hit, declining around 15% over a 3 day period and naturally; there were lots of questions from investors and critics alike. For one, Tesla is a car company, what’s it doing buying a residential solar panel manufacturer and installer? Another thing that’s perplexing people is why Tesla, a company with such an insatiable appetite for burning cash would acquire another company which is burning through cash at a similar alarming rate. Then there’s an additional question concerning Elon Musk’s relationship with


SolarCity of which he is the chairman of. Some even have inferred that this acquisition was in a way a bailout of SolarCity which has been bleeding cash since its inception. In 2015 SolarCity had an operating loss of $648 million up from a loss of $335 million the prior year and up from a loss of $150 million in 2013. Together the two companies had operating losses totaling $1.35 billion in 2015. The main question now is where is the profit or the funding going to come from to cover such enormous losses of the combined companies. COMPANY OVERVIEW Profile - Tesla Motors was founded in 2003, is headquartered in Palo Alto California and primarily designs, develops, manufactures and sells electric vehicles, energy storage devices and electric vehicle powertrain components in the U.S. as well as internationally. Currently the car manufacturer offers two models, the Model S premium class sports sedan and the Model X premium class SUV. The company sells its vehicles exclusively through its Tesla stores and through its site on the internet. Also, the car company uses very little traditional advertising, relying more on word of mouth, social networking and other forms of viral advertising. History & Origin – Contrary to popular belief Tesla Motors is not the brain child and creation of charismatic CEO Elon Musk. Although, Mr. Musk has played an instrumental role in Tesla’s development the company was founded by a pair of engineers who were working on creating a serious electric automobile since the 1990s. Martin Eberhhard and Marc Tarpenning incorporated Tesla Motors in 2003 and personally financed the company until the series A around of funding in 2004. Around this time, they pitched their business idea to Elon Musk who had a similar vision concerning the future of electric cars and the successful entrepreneur decided to invest $7.5 million of his own money into the company which also got him a seat on the company’s board. In May 2007 a fourth round of financing commenced which brought the total investments concerning Tesla Motors to $105 million. Amongst prominent holders were Google’s cofounders Sergey Brin and Larry Page. Initial Production - During this period Tesla was able to sign a contract with Lotus, a British boutique automaker which enabled the two companies to collaborate on a project to produce an all-electric sports performance vehicle known as the Roadster. Under the agreement Lotus would produce complete cars minus the powertrain. Tesla would then use the Lotus “shells” to incorporate its electric technology into. The contract ran from 2005 to 2011 and agreed upon a minimum of 2,400 units. Final Stages of Financing & Going Public – Regardless of early successes the company was looking increasingly financially strained by 2007. An inability to control costs had brought the burn rate to an unsustainable level according to Elon Musk, and the company was forced to go through another round of financing which raised an additional $40 million to avoid bankruptcy in 2008. By this time the company had raised $187 million of which $70 came directly from Elon Musk and had delivered a total of only 147 cars. In 2009 Daimler Mercedes Benz acquired a less than 10% stake in the company for $50 million, also that year the company was approved to receive a government low interest loan in the amount of $465 million and in 2010 Tesla went public offering 13,300,000 at a price of $17 per share that raised $226 million for the company. Operations as a Public Company – In 2010 Tesla did something incredible, it was the first


American car company to go public since Ford Motor Company went public in 1956. Since 2012 and until late 2015 Tesla was solely producing the Model S, a performance, all electric sports sedan that had a starting price of around $70,000, but could easily get into the $100,000 plus area once options were included. As of December 2015 global Model S sales passed the 100,000 car milestone. In September 2015 Tesla introduced its third automobile (second if counting complete production) the Model X, a luxury, all electric, performance SUV of which the company has sold just under 10,000 as of August 2016. Tesla’s stock currently trades at around $230 a share and has a market value of about $34 billion, which is approximately 70% of Ford’s or GM’s value which are both valued at just slightly below $50 billion each. Current & Future Production – Tesla’s production facility is located in Freemont California and is a massive 370 acre (16,000,000 sq ft) factory. The company has a very interesting yet simple sales and production strategy. Tesla planned to first demonstrate to the world that the production of a 100% electric vehicle was not only possible but that the vehicle could be stylish, fun to drive, safe, quick and extremely capable. Tesla Motors accomplished this by introducing the low volume high priced Roadster which sold only 2,450 units and started at $109,000 ($120,000s/$130,000s once options were factored in). Next, the car company introduced its mid volume, mid-priced automobiles, the Model S and the Model X which start at around $70,000 for the Model S, and $65,000 for the Model X (most basic model). Now, the company is preparing to unveil its third level of production, which will introduce a high volume, low priced automobile. The Model 3, scheduled for production in late 2017 will have a starting cost of around $35,000 and the company should be able to mass produce this vehicle. Tesla Motors has received close to 400,000 reservations for its new Model 3 sedan and is preparing to produce no less than 500,000 total vehicles (mostly Model 3s) by 2020 (Finance.yahoo.com). Other Projects & Developments Tesla Gigafactory – Gigafactory 1 is a massive $5 billion cooperative project between Tesla and Panasonic which was initiated in 2014 to ensure enough lithium ion battery production for Tesla’s mass volume Model 3. Tesla plans to produce and sell 500,000 automobiles per year in the latter half of this decade and it would require approximately all lithium ion battery production in the world (2014) to support production. In order to reach projected production targets Tesla decided it was necessary to build its own lithium ion production facility that would fully support its production capacity. The factory is expected to come online in 2017 and is predicted to deliver enough lithium ion batteries to power 500,000 Tesla vehicles per year by 2020 (Finance.yahoo.com). SolarCity – In June 2016 Tesla acquired SolarCity, a relatively large solar and energy solutions designer, manufacturer and installer. The deal that cost Tesla $2.6 billion in an all stock bid is the company’s attempt to become an enormous one stop shop for the most innovative energy solutions in the world. Incidentally, Elon Musk, the principal shareholder and CEO of Tesla also has extremely close ties to solar city and is the chairman of its board.


Products Evolution - Past, Current &Future

2011 Roadster 2.5 S – Power: 288 hp, torque: 295 lb-ft, 0-60 time: 3.7 seconds, electric range: 244 mi, price (starting 2010): $109,000.

2013 Model S Performance – Power: 417 hp, torque: 485 lb-ft, 0-60 time: 3.9 seconds, electric range: 265 mi, price (starting 2013): $82,000. 2015 Model S P90D – Power: 762 hp, torque: 713 lb-ft, 0-60 time: 2.8 seconds, electric range: 310 mi, price (starting): $119,200.

2016 Model X P90D – Power: 762 hp, torque: 713 lb-ft, 0-60 time: 3.2 seconds, electric range: 310 mi, price (starting): $142,000. Basie and other Models – Other basic models concerning Model S and Model X are available and start at $72,000 for the Model S and $65,000 for the

Model X.

2017 Model 3 – Power: unknown, torque: unknown, 0-60 time: under 6 seconds (expected), electric range: 215 and higher, price: $35,000 (expected).


INDUSTRY ANALYSIS Industry Overview – The automotive industry is a huge segment with sales in excess of 72 million passenger vehicles in 2015. The 3 largest producers in the passenger segment Volkswagen, Toyota, and Daimler had combined sales of over $550 billion in 2015. Major production occurs in several countries such as Japan, Germany and the U.S. However, the most productive country in relation to manufacturing passenger vehicles is China, which created 21.08 million units in 2015, approximately as much as Japan, Germany, the U.S. and South Korea combined. Growth in the industry year over year (yoy) 2015 to 2016 is expected to be roughly 3%. With over 74 million cars expected to sell worldwide in 2016, Tesla’s ambitions to successfully integrate 500,000 cars per year by 2020 doesn’t seem so farfetched, provided the company can handle production. Tesla’s automobile production at this stage would only represent approximately .75 of 1% of total world car sales. (Statista.com).

(Statista.com) Porter’s Five Forces Analysis – Tesla & the Car Industry Threat of New Entrants – The threat of new entrants is relatively small due to the enormously high barriers to entry. This industry requires a large amount of capital to set up manufacturing and distribution networks which makes it an unlikely area for entrepreneurs to venture into. Furthermore, most existing players in this industry are extremely well established and enjoy the benefits economies of scale provide, making the threat of new entrants even more remote. In addition, although Tesla operates in the auto industry, it does so in a blue ocean segment as it is the only company in the world able to deliver fully electric performance, luxury cars. Threat of Substitutes – Currently, there are no substitutes for Tesla automobiles. Other auto makers, even the largest ones such as Daimler, Volkswagen, Toyota, Ford and others cannot offer similar automobiles primarily due to their lack of technological advancement concerning electric vehicle (EV) production. Companies such as GM, Nissan, BMW and other EV vehicle producers such as the Chevy Volt, Nissan Leaf and the BMW I3. However, these automobiles are not nearly as advanced, and refined in terms of

224.73208.85

144.15143

132106.65

96.9689.2488

7559.5

45.5739.57

23.5223.05

16.924.04

Volkswagen

Daimler

Ford

Honda

Nissan

Peugeot

Kia

Mazda

Tesla

Auto Industry Sales in Billions of Dollars


EV technology as the cars Tesla offers. It is widely believed that the technology that Tesla employs is a few years (3-5) ahead of the competition. Nonetheless, it is conceivable that in the future (2-5 years) large car manufacturers might develop similar technology that would enable them to better compete with Tesla in the EV segment of the auto industry. Bargaining Power of Buyers – Buyers have some bargaining power when it comes to purchasing conventional, hybrid, or relatively low tech EV vehicles. They enjoy this bargaining power due to increased competition in all of these sectors. However, in the 100% EV, luxury, performance market where Tesla cars sell, there isn’t much bargaining power for the buyer because there are no real alternatives. Bargaining Power of Suppliers - Bargaining power of suppliers is relatively low due to the sheer number of possible suppliers, competition, and the wide use of raw materials associated with automobile production. It is preferable to build relationships with multiple suppliers to always provide possible options for the company. Switching suppliers could lead to unintended costs, especially if done on short notice. Rivalry Among Competitors – Like in any mature industry, rivalry amongst competitors in the auto industry is intense as everyone attempts to cut costs and grow revenues. However, Tesla has no real competitors in the luxury, performance EV segment and the only rivalry it sees is from such automobiles as the Chevy Volt, and the Nissan Leaf which cannot be considered direct competitors to the Model S or Model X. Nevertheless, rivalry is likely to increase as Tesla releases its Model 3 in 2017 and other manufacturers increase production of EVs, such as the BMW I3 and others. Still, by the time Tesla’s Model 3 comes to market it is projected to be the most technologically advanced and by far most capable EV vehicle on the market. TESLA SWOT ANALYSIS Strengths – Tesla is the only automobile manufacturer to successfully produce fully electric luxury, sports sedans, SUVs and sports cars. It is a supplier of technologically advanced parts and powertrain products to companies such as Daimler. The company has strong expertise concerning electric technology and engineering. It also has the ability to design, develop, and manufacture whole vehicles in house. Tesla also has a perfect 100 safety rating from Car & Driver in regards to the Model S vehicle. Weaknesses – High costs associated with production as economies of scale are not yet achieved. Higher prices concerning products when compared to internal combustion engine cars in similar classes. Relatively low oil and gas prices make it less attractive for consumers to purchase EV vehicles. Some negative PR in relation to car safety due to a series of post-accident fires that received a lot of news coverage. Some states are not able to host Tesla’s retail stores due to laws that only allow dealerships to sell cars. Opportunities – Growing support for EV vehicles by governments and society as a whole offer companies such as Tesla support and other incentives. Tesla supports Mercedes and other automobile manufacturers providing possible opportunities for future cooperation and learning prospects. The ability to mass produce the Model 3 will unlock cost advantages associated with economies of scale for Tesla. Threats – The acquisition of SolarCity will further put pressure on the company to become profitable or raise capital to absorb losses. Breakthroughs in EV technology from competitors in the coming years could increase competition in Tesla’s dominant area of fully electric performance, luxury sector. Tesla’s inability to control costs and form a truly profitable business soon could discourage investors and increase uncertainty in regards to the company’s prospects.


PROBLEM AREA ANALYSIS Cash Burn - One of Tesla’s most obvious problems, its inability to make a profit. Furthermore, the company’s four most recent quarters all had significant misses in regards to earnings, exacerbating the company’s burn rate. On top of these developments, Tesla’s recent acquisition of SolarCity will increase the company’s losses in the short term making it more crucial for the company to become profitable sooner than later. With SolarCity integrated into Tesla the combined company is projected to show a loss of around $1.2 billion and have a cash flow of - $1.5 billion in 2016. These cash flow and profitability problems are staggering in their numbers; however, with such new types of technologies with whole industries that need to be built around them they are somewhat understandable. Tesla needs an enormous amount of capital to forge itself into a sustainable car company. Its vehicles require lots funding for R&D, and to retain top engineers. The company further requires capital to build its extensive infrastructure network concerning production, sales, distribution and charging. Tesla needs further capital to construct its Gigafactory to support production of its Model 3 vehicles, so far most investors show themselves to be understanding of these issues. SolarCity Acquisition - SolarCity faces similar issues. It is also a relatively new company, operating in a fairly new sector, providing solar technology and solutions to consumers and businesses. This company also requires lots of funding to support its development, production, sales and distribution network. Although right now the combined company has an alarmingly large cash burn rate, it is conceivable that in the future Tesla and SolarCity combined could be one of the most innovative and perhaps profitable companies in the world. Together the two companies had combined revenues of around $4.5 billion in 2015, SolarCity had yoy revenue growth of 81% and Tesla had yoy revenue growth of 33%. These are impressive numbers and indicate that the combined company will grow revenues quickly, especially when compared with the mature auto sector which has a combined revenue growth rate of only 3%. Growth will be compounded when the Gigafactory is finished and Model 3 production comes online. Tesla’s revenue growth should skyrocket towards the end of 2017 and into 2018 as it begins the mass production of its Model 3 vehicle. In fact, revenues from Tesla automobiles alone are projected to increase to $25 billion by 2020, indicating a 400% plus increase from where the company’s revenues are today (Finance.yahoo.com). Production & Demand Concerns – In recent quarters Tesla has had some issues with production as it missed Model S and Model X sales targets. This seems to be an ongoing issue at Tesla due to construction restraints. The company has claimed that production delays have occurred due to an insufficient amount of lithium ion batteries, recalibration delays of its machinery and other issues. Critics of the company have also expressed concerns about possible demand issues due to new technology and very public problems concerning post-accident fires which have occurred on a few occasions in Tesla automobiles. Nevertheless, demand seems relatively strong as the company vigorously defends its products, providing statistics that indicate that internal combustion engine cars on average have a much higher rate of post-accident fire. In 2013 three Tesla cars caught fire after accidents in a 7 week period in which no one was killed. The mainstream media was all over the story questioning the cars’ safety. However, when put in to context, between 2006 and 2010 more than 150,000 internal combustion engine


cars caught on fire annually (that’s more than 17 per hour), which killed an average of 209 people per year in the U.S. (businessinsider.com). Demand for Tesla Automobiles has never been stronger. In fact, the company’s shortcomings in terms of sales targets indicate that the company often cannot make enough cars to meet the demand. Furthermore, the company already has more than 370,000 orders for its Model 3 sedan which will not be out for at least another year (end of 2017). These preorders are not simply people that would maybe like to buy the Model 3 when it comes but are based on a $1,000 prepayment to secure them one of the first Model 3 cars produced. RECOMMENDATIONS Cash Burn – For Tesla (the combined company of Tesla and SolarCity) to decrease its cash burn, and to transform itself into a profitable business, a few things must happen. First, the company needs to make a successful integration of SolarCity, which would make it much more than simply a car a company. The new combined company is something of a clean energy conglomerate, a company that develops, produces, sells, and supports 100% emission free cars, batteries, energy storage devices and solar panels. However, as beautiful and innovative as this sounds the company needs to cut costs. It needs to become a more cost efficient enterprise by cutting access jobs, projects, units and departments, even if some of these areas have great potential down the road but are extremely burdensome on the company right now. Tesla needs to concentrate on its core businesses and competences and this means focusing on cars, batteries, storage devices and now solar panels. All really ambitious, expensive, futuristic projects that require lots of R&D and other funding and are not part of Tesla’s core units can wait, and can always be restarted in the future when the company has more free capital. Once the company finishes production of its Gigafactory and successfully brings production of its Model 3 online Tesla will experience a great influx of cash flow. This new found capital can go towards further developing SolarCity businesses, even if those businesses are scaled down right now to avoid cash burn. In the future SolarCity will benefit greatly from being a part of Tesla, as a large company with lots of revenues can provide a great deal of capital for expenditure spending. If Tesla comes close to making its 500,000 car annual production goal its revenues should be no less than $25 billion per year and this kind of money will unlock a great deal of cash flow for the combined company to further develop its business units. SolarCity Acquisition – Tesla’s SolarCity acquisition may look perplexing to some investors right now, especially on paper, however, if Tesla can effectively cut costs associated with the units and keep those costs down for the next year the investment could pay off in the future. It is true that SolarCity is burning through cash at an exorbitant rate, -$789 million in 2015, more than 2 times revenues. However, just like Tesla it is a fairly new business which is growing extremely quickly, 81% revenue growth yoy, and has enormous potential in the future. In order to not alarm investors and to ensure smooth funding in the near future Tesla needs to demonstrate to the market that SolarCity’s integration has no significant chance of having detrimental effects on Tesla’s business. It can do this in a few ways. First, Tesla should cut some costs in regards to SolarCity to demonstrate to investors that it is on the right track regarding improving its burn rate. Second, the company needs to make sure that its Gigafactory and its production of the Model 3 are ready on time and are able to deliver. Third, Tesla needs to deliver the 500,000 cars or close to it by the end of 2019 or 2020 at the latest. Fourth, the company needs to exhibit the ability to make real profits for its shareholders. If Tesla is able to deliver on these points it can use its future free cash flow to develop SolarCity businesses as well as its own, and truly become a systemically important company for the world’s energy needs.


Production and Demand Concerns – Production and demand concerns do exist amongst investors and critics alike. To alleviate any potential concerns associated with production the company needs to make sure it meets all its near future sales targets. Furthermore, Tesla has to make sure that its Gigafactory is finished in time (2017). The Gigafactory is the most important element in ensuring enough lithium ion batteries for Tesla’s mass model 3 production. The timely development and recalibration of Tesla’s assembly lines to cater properly to the production of Model 3 sedans is the next crucial element in eliminating any potential concerns regarding production. If the company is able to execute on the following points investors and critics will have no more anxieties in regards to production capabilities concerning Tesla. Demand has not been a real concern for believers in Tesla in a long time. There have been a few hiccups and some negative publicity along the way, but perhaps nothing worse than the 3 fires within a 7 week period which drew the skepticism of multiple media platforms and countless critics. However, since these incidents Tesla has vowed to reinforce the compartment in which the fires occurred in and the Model S still has the highest safety rating of any car ever tested by Consumer Reports, a reputable source for auto enthusiasts. Tesla needs to continue to combat any negative press effectively and professionally in order to keep its positive safety image alive and well. The bottom line is that consumers love their Tesla’s. The Model S not only scored the highest safety rating ever but it is the only car to ever get a score of 100 in consumer reports (consumerreports.org). Demand for Tesla products are further validated by the 370,000 plus preorders for its Model 3 sedan which will still keep consumers waiting at least another year.


Appendix

(Statista.com)

Volkswagen

Hyundai

Honda

Ford

PSA

BMW

Daimler AG

Mazda

9,766,2908,788,020

7,628,7806,643,030

4,478,1204,279,030

3,230,8402,543,0802,521,830

2,398,5602,165,570

1,904,6201,808,1301,769,840

1,261,52035,000

2014 Auto Industry Sales by Units

Volkswagen

Toyota

Daimler AG

Honda

G.M.

Ford

Nissan

Mazda

Mitsubishi

Tesla

74.2

177

74.9

53

49.59

49.81

40.7

9.25

4.07

33.3

Market Cap of Major Auto Manufacturers in U.S. Dollars


(Finance.yahoo.com) Tesla Income Statement All numbers in thousands

Revenue 12/31/2015 12/31/2014 12/31/2013 Total Revenue 4,046,025 3,198,356 2,013,496 Cost of Revenue 3,122,522 2,316,685 1,557,234 Gross Profit 923,503 881,671 456,262 Operating Expenses Research Development 717,900 464,700 231,976 Selling General and Administrative 922,232 603,660 285,569 Non Recurring - - - Others - - - Total Operating Expenses - - - Operating Income or Loss -716,629 -186,689 -61,283 Income from Continuing Operations Total Other Income/Expenses Net -40,144 2,939 22,791 Earnings Before Interest and Taxes -756,773 -183,750 -38,492 Interest Expense 118,851 100,886 32,934 Income Before Tax -875,624 -284,636 -71,426 Income Tax Expense 13,039 9,404 2,588 Minority Interest - - - Net Income From Continuing Ops -888,663 -294,040 -74,014 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income Net Income -888,663 -294,040 -74,014 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares -888,663 -294,040 -74,014 (Finance.yahoo.com) SolarCity Income Statement All numbers in thousands Revenue 12/31/2015 12/31/2014 12/31/2013


Total Revenue 399,619 255,031 163,837 Cost of Revenue 280,791 176,432 124,468 Gross Profit 118,828 78,599 39,369 Operating Expenses Research Development 64,925 19,162 1,520 Selling General and Administrative 701,693 395,034 187,227 Non Recurring - - - Others - - - Total Operating Expenses - - - Operating Income or Loss -647,790 -335,597 -149,378 Income from Continuing Operations Total Other Income/Expenses Net -25,767 -10,611 -1,441 Earnings Before Interest and Taxes -673,557 -346,208 -150,819 Interest Expense 91,939 55,758 25,738 Income Before Tax -765,496 -401,966 -176,557 Income Tax Expense 3,326 -26,736 -24,799 Minority Interest 535,062 409,942 186,817 Net Income From Continuing Ops -58,330 -56,034 -55,790 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income Net Income -58,330 -56,034 -55,790 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares -58,330 -56,034 -55,790 (Finance.yahoo.com) Tesla Cash Flow All numbers in thousands Period Ending 12/31/2015 12/31/2014 12/31/2013 Net Income -888,663 -294,040 -74,014 Operating Activities, Cash Flows Provided By or Used In Depreciation 494,653 301,665 120,784 Adjustments To Net Income 362,800 191,863 69,076 Changes In Accounts Receivables 46,267 -183,658 -21,705


Changes In Liabilities 1,088,261 1,042,227 649,191 Changes In Inventories -1,573,860 -1,050,264 -460,561 Changes In Other Operating Activities -53,957 -65,130 -17,967 Total Cash Flow From Operating Activities -524,499 -57,337 264,804 Investing Activities, Cash Flows Provided By or Used In Capital Expenditures -1,634,850 -969,885 -264,224 Investments - -16,710 -16,710 Other Cash flows from Investing Activities -38,701 -3,849 14,807 Total Cash Flows From Investing Activities -1,673,551 -990,444 -249,417 Financing Activities, Cash Flows Provided By or Used In Dividends Paid - - - Sale Purchase of Stock 839,586 454,466 613,724 Net Borrowings 683,937 2,292,092 199,238 Other Cash Flows from Financing Activities - - - Total Cash Flows From Financing Activities 1,523,523 2,143,130 635,422 Effect Of Exchange Rate Changes -34,278 -35,525 -6,810 Change In Cash and Cash Equivalents -708,805 1,059,824 643,999 (Finance.yahoo.com) SolarCity Cash Flow All numbers in thousands Period Ending 12/31/2015 12/31/2014 12/31/2013 Net Income -58,330 -56,034 -55,790 Operating Activities, Cash Flows Provided By or Used In Depreciation 166,653 97,880 41,448 Adjustments To Net Income -3,949 9,613 -26,033 Changes In Accounts Receivables 7,427 -8,945 281 Changes In Liabilities 280,194 229,477 369,748 Changes In Inventories -125,337 -97,347 -19,954 Changes In Other Operating Activities -346,050 -73,297 -39,217 Total Cash Flow From Operating Activities -789,884 -217,849 174,515 Investing Activities, Cash Flows Provided By or Used In Capital Expenditures -176,540 -22,892 -9,126 Investments 124,956 -160,833 -160,833 Other Cash flows from Investing Activities -1,675,150 -1,161,089 -720,773 Total Cash Flows From Investing Activities -1,726,734 -1,344,814 -729,899 Financing Activities, Cash Flows Provided By or Used In


Dividends Paid -109,511 -117,125 -137,005 Sale Purchase of Stock 1,109,137 798,560 687,830 Net Borrowings 1,335,881 875,940 424,941 Other Cash Flows from Financing Activities -3,747 -2,206 -3,382 Total Cash Flows From Financing Activities 2,394,779 1,489,966 972,384 Effect Of Exchange Rate Changes - - - Change In Cash and Cash Equivalents -121,839 -72,697 417,000 (Finance.yahoo.com) Tesla Balance Sheet All numbers in thousands Period Ending 12/31/2015 12/31/2014 12/31/2013 Current Assets Cash And Cash Equivalents 1,219,536 1,923,660 848,901 Short Term Investments - - - Net Receivables 168,965 226,604 49,109 Inventory 1,277,838 953,675 340,355 Other Current Assets 125,229 76,134 27,574 Total Current Assets 2,791,568 3,180,073 1,265,939 Long Term Investments - - - Property Plant and Equipment 5,194,737 2,596,011 1,120,919 Goodwill - - - Intangible Assets - - - Accumulated Amortization - - - Other Assets 106,155 54,583 30,072 Deferred Long Term Asset Charges - - - Total Assets 8,092,460 5,830,667 2,416,930 Current Liabilities Accounts Payable 1,338,946 1,046,829 412,221 Short/Current Long Term Debt 633,166 611,099 7,904 Other Current Liabilities 844,162 449,238 255,035 Total Current Liabilities 2,816,274 2,107,166 675,160 Long Term Debt 2,040,375 1,818,785 598,974 Other Liabilities 1,658,717 642,539 294,496 Deferred Long Term Liability Charges 446,105 292,271 181,180 Minority Interest - - - Negative Goodwill - - -


Total Liabilities 6,961,471 4,860,761 1,749,810 Stockholders' Equity Misc. Stocks Options Warrants 42,045 58,196 58,196 Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 131 126 123 Retained Earnings -2,322,323 -1,433,660 -1,139,620 Treasury Stock - - - Capital Surplus 3,414,692 2,345,266 1,806,617 Other Stockholder Equity -3,556 -22 -22 Total Stockholder Equity 1,088,944 911,710 667,120 Net Tangible Assets 1,088,944 911,710 667,120 (Finance.yahoo.com) SolarCity Balance Sheet All numbers in thousands Period Ending 12/31/2015 12/31/2014 12/31/2013 Current Assets Cash And Cash Equivalents 422,408 525,258 596,262 Short Term Investments 11,311 138,311 138,311 Net Receivables 45,543 65,878 52,987 Inventory 342,951 217,223 111,394 Other Current Assets 79,925 50,946 27,020 Total Current Assets 902,138 997,616 787,663 Long Term Investments 488,461 34,544 34,544 Property Plant and Equipment 262,387 75,464 22,407 Goodwill - - - Intangible Assets 517,109 539,557 278,169 Accumulated Amortization - - - Other Assets 4,901,315 2,890,891 1,721,295 Deferred Long Term Asset Charges 215,708 13,147 13,147 Total Assets 7,287,118 4,551,219 2,809,534 Current Liabilities Accounts Payable 661,926 398,769 214,103 Short/Current Long Term Debt 393,511 54,957 40,036 Other Current Liabilities 137,925 112,787 84,067 Total Current Liabilities 1,193,362 566,513 338,206


Long Term Debt 2,365,862 1,427,309 596,897 Other Liabilities 981,467 644,423 605,908 Deferred Long Term Liability Charges 1,011,864 570,602 419,399 Minority Interest 535,062 409,942 186,817 Negative Goodwill - - - Total Liabilities 6,087,617 3,618,789 2,147,227 Stockholders' Equity Misc. Stocks Options Warrants 320,935 186,788 44,709 Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 10 10 10 Retained Earnings -316,690 -258,360 -202,326 Treasury Stock - - - Capital Surplus 1,195,246 1,003,992 819,914 Other Stockholder Equity - - - Total Stockholder Equity 878,566 745,642 617,598 Net Tangible Assets 361,457 206,085 339,429 (Finance.yahoo.com)


References Businessinsider.com. (11.11.2013). Davis, A. One Statistic Shows Why Everyone Needs To Relax About The Recent Tesla Fires. Retrieved from: http://www.businessinsider.com/17-cars-catch-on-fire-every-hour-in-the-us-2013-11 Consumerreports.com. (n.d.). Retrieved from: http://www.consumerreports.org/cro/tesla-model-s.htm Finance.yahoo.com. (n.d). Retrieved from: https://finance.yahoo.com/m/2a497534-01c2-3b96-ad91-0bcfe8631c7d/ss_tesla-(tsla)-stock-falls%2C.html Ibtimes.com. (4.4.16). Retrieved from: http://www.ibtimes.com/tesla-motors-tsla-1q-2016-sales-14820-model-s-model-x-cars-were-delivered-first-three-2348000 Nasdaq.com. (n.d.). Retrieved from: http://www.nasdaq.com/earnings/report/tsla Statista.com. (n.d). Retrieved from: http://www.statista.com/statistics/200002/international-car-sales-since-1990/

prepared by: victor dergunov, mba 08/07/2016 · industry analysis ... porter’s 5 forces ......

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