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Shadow-a-Company

Group 2 : Tesla Inc.

K. Cameron, P. Edwards, S. Eom, W. Eisenhut

BUS 2000 STE / Fall 2021 / Pf. Yang Wang

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Contents

Introduction
Management Practices
Products
Financial Performance
Competitor Analysis
Marketing Practices
Current Issues
1-year Stock Price Analysis
Buy/Hold/Sell

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Introduction

Tesla Inc.

“Our mission is to accelerate the world’s transition to sustainable energy”

Formerly Tesla Motors
Established in 2003
Elon Musk became CEO in 2008

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2. The Company & Management Practices

Established in Palo Alto, CA
Gigafactories in Nevada and New York
70,757 employees around the globe

Tesla Inc. was established in Palo Alto, CA where their main headquarters remains today.

However, they have expanded all over the world and have offices and factories in California, Nevada, New York, Texas, Shanghai China, and Germany.

They have two main factories in Nevada and New York, where the majority of Tesla products are made and assembled called Gigafactories

These large-scale factories are state of the art and run completely off solar energy and will have capability to produce 500,000 cars per year along with batteries and solar power equipment upon full completion of construction

The Gigafactory in Nevada is still in the process of being built with only 30% completion.

They currently are constructing sections of the factory and utilizing each section after it is finished to utilize all the operating space they can

The current completed space of the factory that is in operation is 5.3 million square feet, and when the Gigafactory is completely built, it will be the largest building in the world

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Tesla GigaFactory Mock-up in Nevada

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3. Products

2008- The Roadster
2012- Model S & Supercharging Stations
2015- Solar Products

Original 2008 Roadster

2021 Model X SUV

The “Roadster”was released in 2008, which matched the capabilities and performance of a gas-powered car with a lithium-ion cell battery that is usually found in a computer or cellphone.

this accomplishment and success was a major turning point for the company, there was still a lot of progress to be made, as the production cost for one vehicle was $109,000.

With such a high price point, the consumer market for this car would only be for higher income classes, which limits the range and amount of customers Tesla could reach.

In 2012, Tesla released the Model S, a sedan style car, and alongside built supercharging stations across the United States where Tesla owners could charge their car for free. This was the main model of car that took off and what made tesla popular and known to many.

Then came the Model X, a SUV style vehicle in 2015, and the Model 3 in 2017, which became the best-selling electric vehicle for its low price point starting at just $35,000

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4.

Financial Performance (2018-2020)

4.1. Income Statement Analysis

4.2. Sales: Segment Breakdown

4.3. Balance Sheet Analysis

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4.1 Income Statement Analysis

0

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4.2 Sales by Segment

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4.3 Balance Sheet Analysis

<Debt-to-Equity Ratio>

2018 : 3.7

2020 : 1.2

When we look at the Balance Sheet, it’s clear that its financial structure had improved, along with the successful performance in sales.

The total assets colored in blue/ had increased from about $30,000 million in 2018, up to $52,000 million in 2020.

Thinking about the fact that Tesla’s Net Income had turned a profit in 2020, which only counts for $700 million, where did the magnificent increase in Total Assets come from?

Definitely not Liabilities, which is colored in green - it hasn’t increased that much since 2018.

The answer was that it was from the increase in the Stockholders Equity /colored in pink, which had nearly quadrupled from $6,300 million to $24,000 million in 2020, resulted from the rise in company’s stock price which will be discussed later.

As a result, the debt-to equity ratio had decreased from 3.7 to 1.2 in 2020.

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5. Competitor Analysis

Tesla:

Sells vehicles directly to customers
premium buyers
total revenue increase of 56.85% during 2020
ranked #1 in worldwide electric vehicle sales in 2020

Top competitors: Nio, Ford Motors, & Volkswagen

Sell vehicles to customers via franchised dealerships
cheaper vehicles: low-price buyers
total revenue decrease of -27.73% during 2020
Volkswagen was ranked behind Tesla at #2 in worldwide electric vehicle sales in 2020

The electric vehicle market is expected to grow at a CAGR (compound annual growth rate) of 26.8% between 2021 & 2030

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6.

Marketing Practices

Tesla spends relatively little on marketing compared to its competition.
In 2015, for example Tesla spent $58.3 million on marketing while Audi and BMW spent $195 million and $196.6 million respectively.

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Tesla’s Referral Program

What Tesla offers for a referral is always changing. Towards the end of 2015 the referral program enabled customers who referred someone to get $1,000 in credit towards a new Tesla or Tesla accessory.
Tesla got a lot of free publicity by doing this.
Youtuber, Bjorne Nyland received a $10,000 bonus in addition to the $10,000 he had already earned through the referrals, plus a tour of the Tesla Gigafactory, and a free Founder Edition Model X.

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Tesla’s Referral Program

Youtuber, Ben Sullins, also generated $12 million in sales for Tesla and received two free Roadsters.
Tesla had to tone down generous rewards
Giving away free vehicles got too expensive when in 2019 they gave away 80 new Roadsters for free.
The list of rewards is long but it includes having your picture launched into space.

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Tesla’s Referral Program

Tesla’s referral program is a good example of one of the kind of marketing strategies that they employ. Although the referral program ended up costing them quite a lot of money in the end it was still costing less than what many companies pay for marketing.
Tesla was in a unique position in its early stages. It was the best electric car on the market and they were able to capitalize on the “wow” factor of their car to generate a lot of word of mouth publicity and media buzz about their product.

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7.

Current Issues

Tesla founder Elon Musk has developed a cult-like following and is no stranger to controversy.
Whether consumers like his takes or not it's definitely behavior that most CEOs do not engage in for fear of making their shareholders uncomfortable.

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Current Issues

Recently, Musk took to Twitter to poll his followers on whether or not he should sell his Tesla stock.
“The Big Short” investor Michael Burry have theorized that Musk is selling Tesla stock to pay off personal loans that he has backed with around 88 million shares of Tesla.
Regardless of Elon Musk's true motivations, it’s abundantly clear that the billionaire entrepreneur has no problem with throwing a little gas on the fire from time to time.

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Current Issues

In the past he has caused Tesla’s stock to tank, wiping over $3 billion off its total valuation by smoking cannabis on Joe Rogan’s podcast. He has also tweeted questionable things about the Coronavirus pandemic as well as gender pronouns.
Controversy sells and one may argue that Elon Musk’s unorthodox habit of constantly inhabiting the public consciousness is what has made the Tesla so incredibly successful.

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8.

1-Year Stock Price Analysis

(Nov 2020 - Nov 2021)

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Tesla : 1-year Stock Price Analysis

Nov 18, 2021

: $1,096

Tesla has about 1 Billion outstanding stocks publicly traded in NASDAQ under the ticker TSLA.
As one of the most volatile growth stocks, the price has been fluctuating over the past 52 weeks, ranging from $401 at the lowest to the highest at $1,243
Last year November, the stock price started from about $410.
From then to January 2021, the price had soared up to $880,
After the first peak, the price had plummeted by nearly 30% this March.
The stock price was slowly recovering from March to May this year, except for the little drop during May/ with drop in orders in China
After May, the stock price had been constantly rising from around $580 since May to $790 in October.
During October, the price skyrocketed once again reaching $1,243 per share, which is almost triple the price a year ago.
However, the stock price started to fall again, after the issue on whether Musk will sell his stocks,
: as of Nov 18, 2021, its current price is $1,096.

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9. Buy/Hold/Sell

Tesla Inc. is entering new territory as a company. They have been around for nearly two decades and their direct competitors as well as other established auto manufacturers are starting to catch up.

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Buy/Hold/Sell

Dominance in battery technology : will it last?
Speculation on stock - PER : 328

incredibly high even from an innovation/growth perspective.

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Buy/Hold/Sell

ARK Invest founder Cathie Wood :
Sold her chunk recently, but still bullish on TSLA
Charlie Munger vice chairman of Berkshire Hathaway:
“Overvalued”
Bitcoin v. TSLA - “I don’t know which is worse.”
Michael Burry, another titan of the hedge fund world:

- bearish on Tesla.

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Conclusion

Remarkable progress as a company, but
Cautious in short term investment
constantly changing sentiment
rising competition
rampant speculation