As I write, Tesla has undergone a roller-coaster ride.
It began in the end-2024 when Elon Musk, the Technoking of Tesla, accompanied Donald Trump on Trump’s US presidential campaign. As soon as Trump won the election, Tesla boomed. It has skyrocketed from US$ 200-250 levels to US$ 431.66 a share by December 2024. Then, its price fell acutely back to US$ 200-250 levels in March 2025.
So, what do we make of this?
While most in the markets are reacting to the next Elon’s tweet, most aren’t aware of Tesla when it comes to its business model, financials, and growth strategies. The fundamentals are vital and crucial to determine long-term stock returns. But, they are often ignored. Here, I would provide a quick summary of 7 things to know about Tesla after reading its latest annual report.
1. Business Model
Tesla manufactures electric vehicles in three nations: the U.S., China and Germany. Presently, it produces Model S, X, 3, and Y and Cybertruck in its plants in California and Texas, the U.S. The company manufactures Model 3 and Y in Shanghai, China and Model Y in Berlin. Collectively, in 2024, Tesla has a production capacity of 2.35 million vehicles per annum.
In addition to electric vehicles, Tesla produces lithium-ion battery storage products under brands namely, Powerwall and Megapack. Powerwall is for residential and light commercial usages. For Megapack, it is catered for commercial, industrial, utility and energy generation customers. Plus, Tesla sells retrofitted solar energy systems and solar roofs in the United States.
2. Revenue
Tesla’s revenues can be assessed in two parts: automotive and energy generation.
Automotive sales include deliveries of Tesla’s vehicles, leasing arrangements and as well as the services provided such as sales of used vehicles, non-warranty maintenance, insurance and the company’s merchandise. In 2024, Tesla reported US$ 87.6 billion in automotive revenues, which is 89.7% of its total revenues for that year and a CAGR of 30.6% for the last five years when it is based on 2019’s automotive revenues of US$ 23.0 billion. Such a growth rate was in line with its expansion of production capacity in that five-year period.
Energy generation is a smaller business unit for Tesla. But still, it serves as a main growth driver to Tesla. For the last five years, Tesla’s energy generation revenue grew at a CAGR of 45.8%. In 2019, revenues were at US$ 1.5 billion. By 2024, it hit US$ 10.1 billion. Such is mainly driven by strong sales for its Powerwall and Megapack batteries during the period.
Combined, Tesla’s revenues had grown at a CAGR of 31.8% for the last five years, up from US$ 24.6 billion in 2019 to US$ 97.7 billion in 2024.
3. Margins
Likewise, Tesla’s margins are assessed separately: automotive and energy generation.
For its automotive segment, Tesla has experienced a contraction in margin in 2023-2024. This is due to overall price reduction and attractive financing packages for Tesla’s vehicles. Thus, gross profits had declined from US$ 20.5 billion in 2022 to US$ 14.8 billion in 2024, despite it reporting higher revenues in 2023-2024.
Meanwhile, Tesla had become more cost efficient in manufacturing batteries. This had produced higher gross profits for its energy generation segment, increasing from US$ 190 million to a total of US$ 2.64 billion in 2024.
Still, Tesla had recorded lower gross profits in 2023-2024 as compared to 2022. This is because the decline in gross profits from its automotive segment is greater than the profit growth from the company’s energy generation segment in that two-year period.
In 2019, despite having US$ 4.07 billion in gross profits, Tesla was unprofitable. It recorded US$ 862 million in shareholders’ loss in that year.
In 2020, Tesla recorded its first shareholders’ earnings at US$ 721 million after a string of losses reported in 2011-2019. Then, rising revenues and gross profits, Tesla increased its earnings to a total of US$ 12.6 billion in 2022. In 2023, despite a drop in gross profits, Tesla reported a growth in earnings to US$ 15.0 billion. This is attributed by a tax benefit amounting to US$ 5.0 billion for that year. Subsequently, in 2024, Tesla’s earnings had fallen to US$ 7.1 billion, which was in line with its decline in gross profits in that year.
4. Balance Sheet Strength
On 31 December 2024, Tesla has US$ 58.36 billion in current assets. It owes US$ 28.8 billion in current liabilities. So, its current ratio is 2.0. In addition, Tesla owes US$ 16.3 billion in long-term debt and other liabilities. Based on US$ 14.9 billion in operating cash flows in 2024, Tesla would be able to pay off these debts within 1.1 years. As such, Tesla has ample liquidity to continue on its operations and expansion activities.
5. Capital Allocation Strategy
In 2019-2024, Tesla generated US$ 62.7 billion in operating cash flows. In addition, it raised US$ 17.2 billion from investors via equity. As such, Tesla’s total cash inflows amounted to US$ 79.9 billion in that six-year period.
Of which, Tesla spent all these cash inflows mainly on capital expenditures (48.3%) and buying short-term investments (25.5%). These have reflected on its production capacity expansion in the U.S., China and Germany in that period.
6. Growth Strategies
Tesla has several electric vehicles in its development pipeline. They include Cybercab, Roadster and Tesla Semi. Cybercab is a robotaxi developed at its plant in Texas. Tesla Semi is an electric semi truck that is now in pilot production at its plant at Nevada. Roadster is an electric sports car where its development remains “to-be-determined” at this point.
At present, Tesla completed the development of Cortex at Gigafactory Texas. Cortex would help to enable V13 of Full Self-Driving (FSD) (Supervised), which boosted safety and comfort. Today, FSD can now start from park, perform unpark, reverse and park capabilities. It is now one of the key developments of Tesla’s AI software and hardware.
For its energy generation segment, Tesla constructed the Shanghai Megafactory to manufacture Megapack batteries. Production began in Q1 2025.
7. Valuation
Tesla poses a challenge to investors on its valuation. It is not exactly a company that has a track record of earnings growth for the last 10-20 years. But yet, from Elon Musk, its technoking to the talent pool it possesses, coupled with its patents and technological advancements, it is really up to investors to guess or estimate Tesla’s future and the future it will bring to the civilised world. In the present, Tesla has revealed its plans to increase production capacity and product ranges. As such, what sort of P/E Ratio or valuation tools should we use to value Tesla.
Really, I don’t have an answer.
Conclusion
Despite a fall in earnings in 2024, Tesla is still best assessed based on the future. This would be inclusive of Cybercab, Tesla Semi, Roadster, and its developments in AI. Conventional methods on valuation may not be helpful to evaluate Tesla. Rather, it is up to our own convictions on what values and impact Tesla would bring to the future that matters. The worst reason to purchase its shares is to base it on emotions or Elon’s tweet. Regardless of what reasons which might trigger a buy in Tesla, one must be prepared to handle larger share price fluctuation with it.
After all, you are owning a business led by a genius who also happens to be very out-of-the-box or unconventional in ideas, insights, comments and lifestyle.
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