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Tesla1

1. INTRODUCTION

Tesla Inc. is an energy and car manufacturer founded in 2003 at USA, under the name of

Tesla Motors. Not only does the company focus on the manufacturing electric cars, but also

on the production and sales of solar panels. By creating new technologies for their products

such as self driving cars, the company is being disruptive compared to the rest of the market.

In recent times, Tesla has faced some production and financial problems that could jeopardize

the future of the company.

2. HISTORY

Founded by Martin Eberhard and Marc Tarpenning and nowadays run by Elon Musk (co-

founder of Tesla) as current CEO, the company has always aimed at offering electric cars at

prices affordable to the average consumers. In its early days, Tesla started by offering sport

cars, followed then by mass market vehicles all with the purpose of accelerating the

introduction and implementation of electric vehicles. The Tesla Roadster, was the first

automobile to use lithium-ion battery cells, able to increase the endurance of the vehicle.

During the financial crisis of 2008, Tesla was struggling to survive, and managed to avoid

bankruptcy, thanks to investment funding obtained by venture capitalists such as Google,

Daimler, Toyota and even Elon Musk himself. Shortly after that, the company launched its

IPO on Nasdaq, raising 226 million of US dollars.

In the following years, the company launched new car models. In 2012, the first Tesla Model

S, was introduced into the market, becoming only one year later the first electric car to top

1 Case written by Elena Cacciapaglia, Marc Solé, Alessio Matrone and Ruggero Giordano,

and supervised by Oriol Amat, Barcelona School of Management, 2019.

2

the monthly new car sales ranking in any country. In 2015 the first crossover utility vehicle or

SUV under the name of Model X was launched. Both models have achieved the expected

sales target set by the company. The year after, Tesla agreed to acquire SolarCity Corp., the

largest installer of rooftop solar system in the United States, for a transaction worth 2.6

billion of dollars in stocks. As a consequence of this acquisition, Tesla stopped using door to

door sales methods and started to directly sell its products at stores.

In 2016, after the company announced the release of the new Tesla Model 3, global

reservations have reached an amount of 325,000 units in a week, inducing Tesla to advance

its annual unit build plan, in order to meet the demand.

The year 2017 represented a really successful year for the company, which has managed to

become one of the most valuable American automaker briefly surpassing Ford and General

Motors in terms of market capitalization. However in the same year, Tesla’s stock value lost

more than $12 Billion, for a series of factors that disappointed investors. Nowadays, there’s

an ongoing discussion of the possibility of Tesla going private.

Mostly because of the pressure posed by investors on the decisions taken by the company

which might be optimal for the present, but not necessarily for long term growth. However,

Elon Musk and the board of directors have excluded this option, meaning that for the moment

Tesla should remain public.

3. INDUSTRY

Tesla has two different product portfolios, which are the electric vehicles and the sustainable

energy business. Both products go alongside with Tesla’s mission that is “accelerating the

transition to sustainable energy”2. Right now, Tesla’s main business is the electric transport

industry.

Car Industry

Since Tesla started manufacturing electric cars in 2003, the demand has risen exponentially

due to the point that most of classical car manufacturers are changing their strategy.

Nowadays, people are more environmental friendly than before and that is one of the reason

2 Source: Tesla Official Website.

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that explains this increasing tendency. According to Unilever (2017)3, 33% of the customers

prefer to buy sustainable products.

Source: http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/

Figure 1. Sales of EVS Worldwide in thousands (2013-2017)

Over the last five years as it is seen in Figure 1, the average growth of the industry has been

58% per year. However, fuel cars are still leading in terms of sales.

One of the reasons that this is still happening is that this type of cars are still more affordable

than electric cars. Of course this is going to change and according to Hodges (2018)4, electric

cars are going to be cheaper than gasoline cars in 2024.

SWOT of the industry

Strengths

● Aspect of technological development: lower costs of

use and servicing

● Environmentally friendly, high energy efficiency

● Social awareness

● Seen as a luxury product (higher price compared to

regular cars)

Weaknesses

● Higher cost of production, higher barriers to entry

● EV sales amount to only 1% globally

● Low margin (even negative), no economies of scale

● Limited travel range (battery life), long charging

time

● Danger for pedestrian traffic (sound)

3 Unilever (2017): Reports show a third of the customers prefer sustainable brands.

https://www.unilever.com/news/press-releases/2017/report-shows-a-third-of-consumers-

prefer-sustainable-brands.html 4 Hodges, Jermey (2018): Electric Cars may be cheaper than gas guzzlers in seven years,

Bloomberg.

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Opportunities

● Market growth and development, competition

● Government support, funding (& tax breaks for

purchasing)

● Free parking service and charging in some countries

● Increased public social awareness

● Technology development, further reduction of costs

Threats

● Little competition given % global sales EV (cross-

market: cannot compare to gas powered vehicles

market)

● Lack of cooperation between manufacturers

● Charging mostly limited and complex

● Charging infrastructure in countries

● Seen as a luxury product still (given price)

● Price uncertainty in secondary market

Figure 2. SWOT Analysis of the Industry

Competitors and Sales Ranking

Source: http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/

Figure 3. Top 6 companies in terms of EV sales worldwide (2016)

As it can be seen in Figure 3, Tesla’s main competitors include the American Ford Motor

Company, General Motors, Asian Honda Motor Company, Nissan Motor Company, BYD

Auto Co, BAIC Motor, and European car manufacturers, primarily Renault, BMW and

Volkswagen, along with others that are starting to explore the electric vehicle industry such

as Audi, Jaguar, Porsche and Mercedes.

However, right now Tesla seems to have no type of strong competition. According to the

Financial Times (2018)5, all the electric vehicle manufacturers have fallen short to surpass

Tesla. But it is important to consider that there are going to be new competitors in the future.

5 Campbell, Peter (2018): Electric car rivals revved up to challenge Tesla, Financial Times.

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As Elon Musk (2016) said “There have been so many announcements of autonomous and ev

startups...I am waiting for my mom to announce one” (2016)6.

Big tech companies have shown some interest in producing electric cars. It was reported by

Griffin (2018) that Apple might be investing a lot of resources to compete in the sustainable

transport business7 (2018).

3. QUALITATIVE ANALYSIS

Who?

There are a lot of factors that could explain the success of Tesla inside the electric car market.

However, there is one factor that people always mention and that is Elon Musk.

Elon Musk is a successful entrepreneur who has revolutionized the financial industry

(creating Paypal), the private aerospace industry (with SpaceX) and the transport industry

(with Tesla, Boring Company and Hyperloop). At only 47 years old, Elon has achieved more

than somebody could ever imagine in their whole life. So the question to make is, what

makes Elon so special?

1. “Work like every waking hour”- Elon Musk (2014)8

It was reported that Elon spends between 80 to 100 hours working on different projects9. Not

only the CEO of the company is doing it, but also employees are dedicating a lot of efforts to

6 Musk, Elon (2016): Elon Musk- Full interview- Code Conference 2016, Youtube. 7 Griffin, Andrew (2018): Apple Car: iPhone company could be working on new electric

vehicle after all, new hire suggests, Independent. 8 Musk, Elon (2015): Elon Musk USC Commencement Speech. 9 Vator TV (2010): Interview with Elon Musk- Elon Musk:“Work twice as hard as others.

Figure 4: Elon Musk’s Tweet (2018)-Twitter

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accelerate the transition to sustainable energy. Ashlee Vance, who wrote an authorized

biography about Elon, explained that there were a lot of Tesla’s employees working on the

weekends10. Elon always try to acknowledge that the success of Tesla has come by having a

“phenomenal team”. It was reported by Payscale11, that Tesla was the second biggest tech

company in the world where employees think that they are actually making huge

contributions to the society. This amount of hours dedicated, allows Tesla to do breakthrough

innovations before the competitors can do it.

2. “Failure is an option here. If things are not failing, you're not innovating

enough”- Elon Musk (2015)12

It could be seen that Elon’s religion is innovation. According to the Forbes ranking, Tesla is

considered to be 4th most innovative company in the world13.

For customers perspective, it is a blessing that a company is always thinking different ways to

improve their product. Tesla has launched trailblazing innovations such as: self-driving cars,

beautiful designs and high autonomy in their batteries. However, innovations are costly and

difficult to establish.

3. “With Elon, what you see is what you get”- Kara Schwisser14

The most admirable attribute that people value from Elon, is his vision of helping the world

by making great products. He is not driven by materialistic motivations, he just wants to

make great contributions to the world. However, shareholders have another aim which is

profitability, and sometimes it generates a problem with Elon’s personality. Elon doesn’t

worry too much about Tesla stock price fluctuations. Also, he has expressed that there are

some inconveniences of being a public company. This mentality doesn’t go alongside with

some of the shareholders or investors of the company. His transparent view of a possible

privatization of the company, cost him to renounce his position of President of the Company.

10 Vancee, Ashlee (2015): Elon Musk: Tesla, Spacex and the Quest for a fantastic future. 11 Payscale (2016): Payscale compares top tech companies. 12 Musk, Elon (2005): Hondas in Space, Interview with Fast Company. 13 Forbes (2018): The world most innovative companies. 14 Scwisher, Kara (2018): Elon Musk is “What you see is what you get”, says Recode’s Kara

Schwisher, CNBC.

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What?

Tesla’s strategy aims at offering high-performance electric cars, in order to be perceived as a

green and technology advanced brand. The first car launched by Tesla was the Roadster,

which unveiled Tesla’s cutting-edge battery technology and electric powertrain. Indeed, the

Roadster was the first all-electric car to use lithium-ion battery cells and the first all-electric

car to travel more than 320 kilometers per charge.

The original production of Tesla’s Roadster has ceased in 2012. Nowadays, the company’s

car product line is composed by 5 models:

1. Model S

On June 2012, Tesla launched Model S, the world’s first ever premium sedan, designing it

from the ground up. Moreover, it is characterized by the longest range of any electric

vehicle, over-the-air software updates that make it better over time, and a record 0-60 mph

acceleration time of 2.28 seconds as measured by Motor Trend. As of September 2018, the

Model S, with global sales of 250,000 units, ranks as the world's second best-selling plug-in

electric car in history after the Nissan Leaf.

2. Model X

In 2015, Tesla expanded its product line by introducing Model X, a full-size crossover SUV.

Model X is characterized by a lightweight aluminum body and passenger doors with “falcon-

wing” designs that open vertically. It comes in three configurations for 5, 6 or 7 passengers.

The Tesla Model S was the top selling plug-in electric car worldwide in 2015 and 2016 and

in September 2016, the Tesla Model X was voted in Norway as the top selling plug-in

electric car. Previously, the Model S had been the top selling new car four times.

3. Model 3

Tesla’s third creation is the Model 3, a low-priced high-volume electric car. Model 3 comes

in two configurations: the standard model delivers an EPA-rated all-electric range of 350 km,

while the long-range model delivers 500km. Tesla introduced Model 3 on March 31st 2016

and it immediately had an incredible success: only one week later Tesla registered over

325,000 reservations, representing sales of over 14 billion dollars, and in July 2017 the

number of reservations was about 500,000. Since the beginning of 2018, Tesla Model 3 sales

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have been the highest in the United States for each month and since August 2018 Tesla

Model 3 has become the world’s top-selling plug-in car of the year 2018.

4. Tesla Roadster Next Gen

The aim of this model is to prove that electric cars could be even more faster and efficient

than fossil fuel cars. This car was presented in 2017 and it will be delivered around 2020.

According to Elon, this model will be faster than any other commercial car ever presented. It

goes from 0 to 60 mph with only 1.9 seconds. This car’s price is $200,000, only affordable

for high-income customers.

5. Tesla Semi-Truck

The point here is to prove that not only cars could go electric. According to Elon, every

transport could be electric except rockets.

The launch of this truck/lorry was able to answer multiple doubts about electric trucks:

1. Autonomy: it has a capacity to drive 804 km without stopping

2. Speed: this truck has the ability to do 104 km per hour, compared to the best diesel

trucks that could drive 73 km per hour.

3. Affordability: low operating costs compared to conventional cars. Because of that,

companies such as DHL, Budweiser, Walmart or Pepsico had done big orders of

this model in order to save costs in the future.

Customers

Initially, with the introduction of Model S, Tesla aimed to target individuals looking for a

high performance electric car. Indeed, the original target group of the company included

mainly wealthy people in the upper-middle class, mostly business executives and

entrepreneurs and early adopters. However, with time Tesla started to expand its target to

increase its customer base, by focusing on younger people (between 20 and 40 years old) that

are eco-friendly and are looking for their first luxury car. Indeed, we can say that Tesla’s

target group is divided in three categories: the eco-friendly, the tech-savvy and the entry-level

luxury buyers.

Distribution Channels

The amazing innovation of Tesla is also evident in terms of distribution channels. In fact,

Tesla introduced a completely new approach, much different from the one used by traditional

automakers that sell their cars through car dealerships, which means having a large inventory

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of cars. Instead, Tesla only has a sample of each car in a showroom where customers can

make their purchasing decision. Customers will then order a car over the Internet and they

will have to wait for the product to be manufactured and shipped. This strategy not only helps

Tesla to improve consumer experience, but also to reduce inventory as well as increase turns.

Moreover, Tesla’s strategy to differentiate itself from the market also includes the fact that

the company has ownership of distribution and repairs, which allows it to keep greater

control over local sales and services.

4. PRESENT SITUATION OF THE COMPANY

Right now, Tesla has nearly 50.000 employees and has shops/galleries around 27 different

countries in four different continents. As of September 2018, Tesla is the top selling luxury

brand in the United States. Indeed, in the last September, Tesla has demonstrated an

extraordinary growth in sales, reaching a market share of 35% in the US, surpassing

Mercedes-Benz, BMW, Lexus, Jaguar Land Rover and Audi, as reported by Shahan (2018)15.

According to recent news by Fred Lambert (2018), Tesla also dominates the luxury segment

in Europe thanks to the sales of the Model S and the Model X. The sales of this model are a

key aspect to finance future investments. Tesla aims to produce an electric car affordable to

the mass market and expand its supercharging network all around the world.

Tesla’s strategy was defined by Peter Thiel (2015)16 as “complex coordination” because it

involves creating many innovative pieces that fit together in order to challenge and change

the automotive industry.

Tesla’s production is focused on the exploitation of economies of scale, as it operates many

large factories, and on a high degree of vertical integration, which requires the company to

excel in multiple technology domains such as batteries, electric motors, sensors and artificial

intelligence.

As it has already been said, Tesla is a public company performing inside the Nasdaq Stock

Exchange. Some problems the company had with some of their investors are notoriously

known. Part of their investors considers Tesla as a risky investment. Also, it is important to

consider that the company does not pay any dividends to the shareholders because the

15 Shahan, Zachary (2018): Yep, Tesla is Gobbling USA Luxury Car Market- 8 charts and

Graphs, Clean Technica. 16 Thiel, Peter (2015): Zero to one. Notes on Startups or How to build the future.

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company is not generating a positive net income in annual terms. To evaluate the current

situation, it is important to look at the performance of Tesla share price in the lasts 12

months: 21% increase against a decline in the main competitors Ford (-28%), GM (-15%) ...

Most of the critiques Tesla had towards its stock performance are being reduced because of

the profitability and achievements of the company compared to other auto manufacturers.

Even companies such as JMP Securities have recommended to buy Tesla’s shares, as it was

reported by Sheetz (2018).17 Of course, it is quite volatile compared to other companies.

So stock performance is not the main issue of Tesla. The main present issue of Tesla is to

understand when the company will start generating a net income and paying back to their

shareholders. In the 3rd trimester, the company generated a net profit of $311,5 million.

It is important to mention that the company is still expanding and investing resources in

R&D. That hardens the possibilities of having a positive net profit next year.

As it was reported by Lambert (2018)18, the company announced that it will increase its

network of superchargers around the world which, according to Elon, “it will cover between

the 95% to 100% of the population”.

Not a long time ago, to facilitate the transition to sustainable cars, the service of

supercharging was free for all Tesla cars. However, in order to facilitate their expansion,

recently the company started to charge a price per kwh.

Right now, Tesla is preparing the expansion of the Model 3 through Europe.

As will be mentioned later, the company is offering this model for at least 59.100€. This price

is still far off compared to a price that most people could and would be willing to afford. To

minimize costs of logistics, the company is looking for possible locations to place a new

factory of cars and batteries.

The company has announced that they will enter to new markets such as India, Turkey and

different countries of South America.

So the strategy or vision of Tesla is based on growing their infrastructures (also points of sale

and factories around the world) in order to sell more cars. With more cars produced, the

company could benefit more of economies of scale and be more competitive compared to the

classic auto manufacturers. Economies of scale and technology improvements would help

Tesla to produce an electric car affordable to the mass market.

17 Sheetz, Michael (2018): Tesla gets a new buy recommendation ahead of Earnings”- CNBC 18 Lambert, Fred (2018): Tesla plans to double Supercharger Network, V3 Delayed to early

next year, says Elon Musk, Electrek.

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5. SPECIAL ISSUES

Production Delays

One of the most notoriously known problems of Tesla are production delays. As an example,

in March of 2016 Tesla presented the Model 3, which became the most affordable car that the

company has offered. The lowest price of the car (with tax incentives) was $35,000. This

version was a huge success for Tesla even to the point that demand was over 325,000 cars

with only one week. The company promised that the deliveries of this car would start

between late 2017 and early 2018. However, there was a delay between 6 to 9 months and the

demand was delivered in July of 2018. The company was expecting to produce over 5,000

cars per week. However, at the early stages of production the company was capable of

producing only 1.500 cars. According to Musk (2018), this problem was due to “putting too

much technology at once”19. Delays was a such a big problem, even to the point that the

company was in 3 weeks of default or bankruptcy20.

It is also described that the company was losing 100 million dollars per week because of the

bottlenecks of the Model’s 3 production. Delays also allowed for some customers to cancel

their orders and generated the whole problem.

Costs

One of the struggles that consumers face regarding whether to buy an electric car or not is the

cost. It is known that most of the electric cars are more expensive than conventional or fossil

fuel cars. The average price of a conventional car in 2016 in the European Union was

28.114€, according to Stadista (2017). As previously stated, the most affordable Tesla costs

$35.000 in the USA. However, the current price of the Model 3 in Spain is at least 59.100€,

far from the average price in the European Union.

As it can be seen, Tesla prices are above the average prices for a car. Moreover, it is

important to consider that insurance costs for an electric car is 60% above compared to a

fossil fuel car, as claimed by Smith (2018)21.

19 Musk, Elon (2018): Tesla CEO Elon Musk offers a rare look inside Model 3 Factory, CBS

This Morning. 20 Musk, Elon (2018): Axios: HBO, HBO Documentaries. 21 Smith, Luke Johnh (2018): Electric car SHOCK- The surprising hidden cost of ownership,

Express.

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According to a study conducted by Deloitte22, most customers are willing to pay less than

$30.000 for an electric car. So in order to have high sales, the company must break down the

barrier of 30.000€ price.

If Tesla wants to accelerate the transition to sustainable energy, it is necessary to produce an

electric car that costs less than 30.000€. However, Tesla has to go through many

improvements in order to break down this barrier.

Right now, for every order of the standard version of the Model 3 ($35.000) Tesla is losing

$3.000 on the sale. The company is struggling to lower costs mainly for two reasons. As the

company has low production, they cannot benefit from economies of scale as other

competitors do. Moreover, the technology of batteries has to be improved in order to lower

costs. Another thing that could incentivize the consumption of electric cars is tax subsidies.

However, governments do not yet provide significant incentives to buy this type of personal

transport. In the European Region, there are only six countries who are offering incentives to

buy electric vehicles. Moreover, in USA there was a tax credit of $7.500 that has been

reduced to $3.500. To sum up, if Tesla wants to be competitive against fossil fuel cars, they

have to do cost improvements and not be dependent of external incentives.

Financial Instability

There has been a lot of doubts about the solvency of Tesla. As it was mentioned before, in

2018 the company was weeks away from disappearing due to production delays. From

suppliers to investors have expressed their doubts about the longevity of the organization.

Even newspapers such as the Fortune made an article saying that the company might go

bankrupt in the near future. Out of all parameters and ratios used to evaluate Tesla, the one

with the most impacting results is undoubtedly the Z-score. As it is known, is a measure

which combine liquidity, capital structure, assets and equity profitability of a company to

assess its proximity of default. As stated the result for Tesla is extremely low (-4,9), meaning

that in the near future the company might be facing bankruptcy.

This potential danger that Tesla is facing might be caused partially by the losses generated

during the last years. By other hand, due to not generating a positive net income, the

22 Deloitte (2018): Unplugged: Electric Vehicle realities versus consumer expectations,

Deloitte.

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company is highly leveraged. All this generate a lot of doubts about the future survival of the

company.

6 . QUESTIONS FOR DISCUSSION

1. Describe the key success factors of Tesla.

2. Identify the financial strengths and weaknesses of Tesla. Which are the three main

problems?

3. Design a cause and effect diagram.

4. Propose recommendations for Tesla and prepare a budget for the next two years including

these recommendations (you can use the templates proposed at the end of the Annex).

Hint: To forecast the future years, it is recommendable to use the growth rate

between 2017 and 2018.

7. REFERENCES

Bibliography

Campbell, Peter (2018): “Electric car rivals revved up to challenge Tesla”- Financial Times

Denning, Liam (2018): “Tesla’s Cash Back Request Sends a Worrsiome Message”-

Bloomberg

Deloitte (2011): “Unplugged: Electric Vehicle realities versus consumer expectations”

Griffin, Andrew (2018): “Apple Car: iPhone company could be working on new electric

vehicle after all, new hire suggests”-Independent

Hawkins, Andrew J. and Warren, Tamara (2017): “Tesla’s new second-generation Roadster

will be the quickest car ever production ever made”- The Verge

Hodges, Jermey (2018): “Electric Cars may be cheaper than gas guzzlers in seven years”-

Bloomberg

Lambert, Fred (2018): “Tesla plans to double Supercharger Network, V3 Delayed to early

next year, says Elon Musk”- Electrek

Leno, Jay (2012): “2012 Tesla Model S – Jay Leno’s Garage”- Youtube

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Musk, Elon (2018): “Axios: HBO”-HBO DocumentariesMusk, Elon (2018)-“Elon Musk-

Full interview- Code Conference 2016”- Youtube

Musk, Elon (2015): “Elon Musk USC Commencement Speech”-Youtube

Musk, Elon (2005): “Hondas in Space”- Interview with Fast Company

Musk, Elon (2018): “Tesla CEO Elon Musk offers a rare look inside Model 3 Factory”-CBS

This Morning

Musk, Elon (2010): “Vator TV- Interview with Elon Musk”- Elon Musk:“Work twice as hard

as others”-Vator TV

Payscale (2016): “Payscale compares top tech companies”

Thiel, Peter (2015): “Zero to one. Notes on Startups or How to build the future”

Unilever (2017): “Reports show a third of the customers prefer sustainable brands”

Scwisher, Kara (2018): “Elon Musk is “What you see is what you get”, says Recode’s Kara

Schwisher”-CNBC

Shahan, Zachary (2018): “Yep, Tesla is Gobbling USA Luxury Car Market- 8 charts and

Graphs”- Clean Technica

Sheetz, Michael (2018): “Tesla gets a new buy recommendation ahead of Earnings”- CNBC

Smith, Luke John (2018): “Electric car SHOCK- The surprising hidden cost of ownership”-

Express

Sparks, Daniel (2014): “1 mind Boggling Chart Everyone Following Tesla Motors, Inc

Should See”- The Motley Fool

Vancee, Ashlee (2015): “Elon Musk: Tesla, Spacex and the Quest for a fantastic future”

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8. ANNEX23

Tesla Income Statement 2014-2018 (data in $ thousands)

The data of 2018 includes only 9 months

2018 (till Sept) 2017 % 2016 % 2015 % 2014 %

Total revenues 21.270.222 11.758.751 100% 7.000.132 100% 4.046.025 100% 3.198.356 100%

Total cost of revenues 17.016.178 9.536.264 81,10% 5.400.875 77,15% 3.122.522 77,18%

Gross profit 4.254.044 2.222.487 18,90% 1.599.257 22,85% 923.503 22,82% 881.671 27,57%

Research and development 1.938.843 1.378.073 11,72% 834.408 11,92% 717.900 17,74% 464.700 14,53%

Selling, general and admin. 3.484.246 2.476.500 21,06% 1.432.189 20,46% 922.232 22,79% 603.660 18,87%

Total operating expenses 5.423.090,81 3.854.573 32,78% 2.266.597 32,38% 1.640.132 40,54% 1.068.360 33,40%

Loss from operations (EBIT) -1.169.046 -1.632.086 -13,88% -667.340 -9,53% -716.629 -17,71% -186.689 -5,84%

Interest income 58.707 19.686 0,17% 8.530 0,12% 1.508 0,04% 1.126 0,04%

Interest expense -952.689 -471.259 -4,01% -198.810 -2,84% -118.851 -2,94% -100.886 -3,15%

Other (expense) income, net -125.373 -125.373 -1,07% 111.272 1,59% -41.652 -1,03% 1.813 0,06%

Loss before income taxes

(EBT) -2.188.401

-2.209.032 -18,79% -746.348 -10,66% -875.624 -21,64% -284.636 -8,90%

Provision for income taxes 31.251 31.546 0,27% 26.698 0,38% 13.039 0,32% 9.404 0,29%

Net loss -2.157.149 -2.240.578 -19,05% -773.046 -11,04% -888.663 -21,96% -294.040 -9,19%

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Data from the Security Exchange Commission

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Tesla Balance Sheet 2014-2018 (data in thousands of dollars)

Sep. 30, 2018 % Dec. 31, 2017 % Dec. 31, 2016 % Dec. 31, 2015 % Dec. 31,

2014 %

Cash and cash equivalents 2.967.504 10,14% 3.367.914 11,75% 3.393.216 14,97% 1.196.908 14,79% 1.905.713 32,58%

Restricted cash 158.627 0,54% 155.323 0,54% 105.519 0,47% 22.628 0,28% 17.947 0,31%

Accounts receivable, net 1.155.001 3,95% 515.381 1,80% 499.142 2,20% 168.965 2,09% 226.604 3,87%

Inventory 3.314.127 11,33% 2.263.537 7,90% 2.067.454 9,12% 1.277.838 15,79% 953.675 16,30%

Prepaid expenses and other current assets 325.232 1,11% 268.365 0,94% 194.465 0,86% 125.229 1,55% 94.718 1,62%

Total current assets 7.920.491 27,07% 6.570.520 22,93% 6.259.796 27,62% 2.791.568 34,50% 3.198.657 54,68%

Property, plant and equipment, net 11.246.295 38,43% 10.027.522 34,99% 5.982.957 26,40% 3.403.334 42,06% 1.829.267 31,27%

Solar energy systems, leased and to be leased, net 0,00% 6.347.490 22,15% 5.919.880 26,12%

Intangible assets, net 291.476 1,00% 361.502 1,26% 376.145 1,66%

Operating lease vehicles, net 0,00% 4.116.600 14,37% 3134080 13,83% 1.791.403 22,14% 766.744 13,11%

Goodwill 65.226 0,22% 60.237 0,21%

MyPower customer notes receivable 422.897 1,45% 456.652 1,59% 506.302 2,23%

Restricted cash, net of current portion 396.835 1,36% 441.722 1,54% 268.165 1,18% 31.522 0,39% 11.374 0,19%

Other assets 431.819 1,48% 273.123 0,95% 216.751 0,96% 74.633 0,92% 43.209 0,74%

Total assets 29.262.713 100,00% 28.655.372 100,00% 22.664.076 100% 8.092.460 100% 5.849.251 100%

Accounts payable 3.596.984 12,29% 2.390.250 8,34% 1.860.341 8,21% 916.148 11,32% 777.946 15,94%

Accrued liabilities and other 1.990.095 6,80% 1.731.366 6,04% 1.210.028 5,34% 422.798 5,22% 268.884 5,51%

Deferred revenue 570.920 1,95% 1.015.253 3,54% 763.126 3,37% 423.961 5,24% 191.651 3,93%

Capital lease obligations, current portion 0,00% 0,00% 0,00% 0,00% 9.532 0,20%

Resale value guarantees 604.949 2,07% 787.333 2,75% 179.504 0,79% 136.831 1,69%

Customer deposits 905.838 3,10% 853.919 2,98% 663.859 2,93% 283.370 3,50% 257.587 5,28%

Current portion of long-term debt and capital leases 2.106.538 7,20% 796.549 2,78% 984.211 4,34%

Convertible senior notes 0,00% 601.566 12,33%

Total current liabilities 9.775.324 33,41% 7.674.670 26,78% 5.827.005 25,71% 2.040.375 25,21% 2.107.166 43,19%

Long-term debt and capital leases

9.669.879

33,05% 9.415.700 32,86% 5.860.049 25,86%

Convertible senior notes issued to related parties 2.634

0,01% 2.519 0,01% 10.287 0,05% 1.806.518 37,02%

Deferred revenue, net of current portion 950.126 3,25% 1.177.799 4,11% 851.790 3,76% 446.105 5,51% 292.271 5,99%

Resale value guarantees, net of current portion 455.762

1,56% 2.309.222 8,06% 2.210.423 9,75% 1.293.741 15,99% 487.879 10,00%

Other long-term liabilities 2.555.319 8,73% 2.442.970 8,53% 1.891.449 8,35% 364.976 4,51% 173.244 3,55%

Total liabilities 23.409.144

80,00% 23.022.980 80,34% 16.750.167 73,91% 6.961.471 86,02% 4.879.345 100%

Redeemable noncontrolling interests in subsidiaries 551.264 1,88% 397.734 1,39% 367.039 1,62%

Convertible senior notes (Note 13) 0,00% 70 0,00% 8.784 0,04% 42.045 58.196

Common stock 171 0,00% 169 0,00% 161 $ 131 126

Additional paid-in capital 9.957.711 34,03% 9.178.024 32,03% 7.773.727 34,30% 3.414.692 42,20% 2.345.266

Accumulated other comprehensive gain (loss) 8.271 0,03% 33.348 0,12% -23.740 -0,10% -3.556 -0,04%

Accumulated deficit -5.457.315 -18,65% -4.974.299 -17,36% -2.997.237 -13,22% -2.322.323 -28,70% -1.433.682 -24,51%

Total stockholders' equity 4.508.838 15,41% 4.237.242 14,79% 4.752.911 20,97% 1.088.944 13,46% 911.710 15,59%

Noncontrolling interests in subsidiaries 793.467 2,71% 997.346 3,48% 785.175 3,46%

Total liabilities and equity 29.262.713 100,00% 28.655.372 100,00% 22.664.076 100% 8.092.460 100% 5.849.251 100%

17

Tesla Cash flow Statement 2014-2017 (data in thousands of dollars)

2017 2016 2015 2014

Cash flow from operations -60.654 -123.829 -524.499 -57.337

Cash flow from investing activities -4.418.967 -1.141.430 -1.673.551 -990.444

Cash flow from financing activities 4.414.864 3.743.976 1.523.529 2.143.130

Tesla Cash Cycle 2015-2017

2017 2016 2015

Days Inventory (1) 86,64 139,72 115,28

Days Receivable (2) 9,22 26,03 15,24

Days Payable (3) 91,49 125,72 107,09

Cash Cycle (1 + 2 -3) 4,37 40,02 23,43

Tesla Financial Ratios 2014-2017 compared with the average of the industry

2017 2016 2015 2014 Average Industry

(2017)24

Current assets / Current liabilities 0,856 1,074 1,368 1,518 1,45

Debt/Assets 0,852 0,79 0,865 0,83

Sales/Assets 41,04% 30,89% 50,00% 54,58% 64%

ROE (Net profit / Equity) -52,88% -16,26% -81,61% -32,25% 117%

ROA (EBIT / Assets) -7,82% -3,41% -10,98% -5,03% 41%

Financial Leverage

(EBT / EBIT x Assets / Equity) 9,15 5,33 9,08 9,78

24 Source: CSI Market.

18

Template to prepare the budgets for 2019 and 2020

2017 2018

(since Sept.)

2019 (without

measures) Measure 1 Measure 2

2019 (combined

measures)

2020 (with all

measures)

Total revenues

$11.758.751,00

$21.270.222,70

Total cost of

revenues $9.536.264,00

$17.016.178,16

Gross profit $2.222.487,00 $4.254.044,54

Research and

development $1.378.073,00 $1.938.843,81

Selling, general

and administrative $2.476.500,00 $3.484.246,99

Total operating

expenses $3.854.573,00 $5.423.090,81

Loss/Gain from

operations (EBIT) $-1.632.086,00 $-1.169.046,27

Interest income $19.686,00 $58.707,13

Interest expense $-471.259,00 $-952.689,09

Other (expense)

income, net $-125.373,00 $-125.373,00

Loss before

income taxes

(EBT)

$-2.209.032,00 $-2.188.401,23

Provision for

income taxes $31.546,00 $31.251,38

Net loss $-2.240.578,00 $-2.157.149,85

19

2017 % of change

(2017-2018)

2018 (since

Sept.)

2019

(without

measures)

Measure 1 Measure 2 2019 (combined

measures)

% of change

(2018-2019)

2020 (combined

measures)

% of

weight

compared

to total

assets

Cash 3.367.914 -13,49% 2.967.504

Inventories 2.263.537 31,70% 3.314.127

Accounts

receivable, net 515.381 55,38% 1.155.001

Others 423.688 12,44% 483.859

Total Current

Assets 6.570.520 17,04% 7.920.491

Total Non

Current

Assets

22.084.852 -3,48% 21.342.222

Total Assets 28.655.372 2,08% 29.262.713

Accounts

Payable 2.390.250 33,55% 3.596.984

Others 5.284.420 14,47% 6.178.340

Total Current

Liabilities 7.674.670 21,49% 9.775.324

Total Non

Current

Liabilities

15.348.310 -12,58% 13.633.820

Total

Liabilities 23.022.980 1,65% 23.409.144

Total Equity 5.632.392 -24,92% 4.508.838

Total Equity

and

Liabilities

28.655.372 2,08% 29.262.713