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Tesla Financial Statement Analysis
Karen Seather–Brady
Samuel Sutanto
Tsien White
August 23, 2014
Sal Elaameir
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Tesla
Tesla Motors (Tesla) is a global enterprise that designs, develops, manufactures and sells
high–performance fully electric vehicles and advanced electric vehicle powertrain components.
Tesla has established a unique business model by building their own network of direct sales and
services instead of selling through dealerships. To combat the issue of finding convenient places
to recharge the battery, Tesla is also building Supercharger stations globally. Their business
model which focuses on sleek eco-friendly design, high margin and direct sales is often
compared to Apple Computer’s business model, while their vehicles, electric vehicle engineering
expertise, and operation structure differentiates them even further from other automobile
manufacturers. The lack of research in electric powered vehicles technology, marketing and
business strategy allowed Tesla to make its own advancements in electric vehicle technology,
business model and marketing approach. The company has capitalized on this unique market
environment and expanded upon the available opportunities.
Tesla is currently producing and selling their second vehicle, the Model S sedan, a four–
door, five-passenger luxury sedan. Much of its technology was inherited from its first vehicle,
the Tesla Roadster, a fully electric two–seat convertible sports car that was commercially
produced and launched in 2008. The Model S’s 60kWh battery pack offers up to 244 miles range
on a single charge, while the 85 kWh battery pack offers up to 306 miles range. Tesla ceased the
Roadster production and launched the model S in 2012. Two years later, in 2014, Tesla has
received high customer satisfaction, multiple industries’ awards, and increased their presence in
several international markets such as China, Japan, UK, and Australia. They expect to launch
their third vehicle, the Model X, in 2015 and launch the third generation of electric vehicle
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dubbed as “Gen III” in 2018, which is intended to be a lower price point and produced in higher
volume.
In addition to all electric vehicles, Tesla designs, develops, manufactures and sells
advanced electric vehicle powertrain components to other automotive manufacturers, such as
Daimler and Toyota. The electric powertrain consists of a battery pack, power electronics, motor,
gearbox, and its control software.
As part of their business advancement, Tesla built Supercharger stations in the United
States and Europe, to boost electric vehicle’s infrastructure and to enable drivers cover long
distance with minimal stops. Much like a gas station for petroleum based cars, Superchargers all
Tesla drivers to recharge their cars but unlike a typical gas station, the charge is free. Tesla
continues to add Supercharger stations in US, Europe, an Asia, with expectation that more
drivers can utilize this network once they launch the Model X.
Another business approach that differentiates Tesla from the incumbent automobile
manufacturers, is the sale and service of their electric vehicles independently through company–
owned sales and service network. In contrast, typical automobile sales take place through
dealerships that are much like a franchise. With Tesla, customers can test–drive Tesla vehicles
with Tesla-employed salespersons who are highly trained and knowledgeable sales and service
staff. Most Tesla vehicles are sold online, so the stores do not carry large vehicle inventories,
further lowering operational cost and creating a differentiated buying experience.
Tesla is currently looking to build their Gigafactory, a large–scale factory that allows
them to increase production and reduce cost on their lithium ion batteries. An agreement between
Tesla and Panasonic was reached in July 31, 2014, where Tesla will prepare, provide and
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manage the land, buildings and utilities and Panasonic will manufacture and supply cylindrical
lithium–ion cells and invest in the associated equipment, machinery, and other manufacturing
tools based on their mutual approval (Teslamotors, 2014). The Gigafactory is an essential step to
fulfill the capacity needed for Tesla’s Gen III mass production.
Corporate Responsibility
Tesla does not officially produce a Corporate Social Responsibility Report. There are
seven pillars of Corporate Responsibility according to Council for Corporate Responsibility:
Diversity and Inclusion, Environmental Sustainability, Governance, Global Enrichment,
Organizational Health, Philanthropy, and Supply Chain Integrity. Out of the seven pillars, Tesla
is better known for its environmental sustainability because of their commitment to develop
alternative fuel sources for cars and allow it to travel emissions-free. Their goal of reducing
transportation’s dependence on petroleum means increasing demand for alternative energy. In
this case, electricity will eventually increase the power plant and renewable energy’s efficiency.
Although many power plants get their energy from coal, United States has increased its
electricity generation from renewables and less from coal over the past five years, making
electric vehicles cleaner.
Reuse and Recycle are key parts of Tesla’s philosophy. Thus, Tesla is committed to
create a closed loop battery recycling system that involves manufacturing of battery cells,
assembly into battery packs, then vehicles, and finally recycling into raw materials for future use
(Kelty, 2011). Additionally the tires and the battery of every Tesla Motors are recyclable. The
cost of recycling is built into the purchase price of the car.
In a further effort to be environmentally competent, Tesla’s Lithium Ion cells do not
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contain heavy metals or any toxic materials such as lead and mercury. In other words, the lithium
ion cells could be disposed of by putting them in a landfill. However Tesla doesn’t intent to put
them into landfill. When the Energy Storage System (ESS) capacity decreases, it can be used as a
power source for off–grid backup or load leveling since the battery requirements for such
application are not as demanding as a vehicle battery. When the ESS has died completely, Tesla
made sure that the recycling plan maximized the amount of materials that can be reused,
maximized the amount of materials that can be recycled, and minimized the energy consumption
utilized during the transportation and recycling process (Kelty, 2008). Fully, 10% of the battery
pack can be reused, while 60% of the battery pack can be recycled.
Tesla is also careful to bring on partners to extend their ability to be environmentally
