Tesla manufactures electric vehicles (EVs) under the Tesla brand, energy storage products under Powerwall and Megapack brands and solar panel and solar roof and offer services related to its products. Here, in this article, I’ll summarise the company’s key operating and financial data so that one could decide on Tesla as an investment independently. Thus, the 5 things to know are as follows:
#1: Production Facilities
Today, Tesla manufactures EVs in four production facilities:
Facility 1: The Fremont Factory
Tesla launched the Model S in June 2012 and Model X in September 2015 in the Fremont Factory. These two models contributed to Tesla’s automotive revenues substantially in 2012-2016. Then, Tesla launched Model 3 in July 2017 and most recently, Model Y in September 2020. Today, Tesla manufactures all 4 models of its EVs at the Fremont Factory. Its current annual production capacity is:
- Model S/X = 100,000 vehicles.
- Model 3/Y = 500,000 vehicles.
Factory 2: Gigafactory Shanghai
Tesla started to produce Model 3 in Shanghai in December 2019 and Model Y in late 2020. As such, it only began to contribute to Tesla’s financial results in 2020 onwards. Presently, its annual production capacity is:
- Model 3/Y = >750,000 vehicles.
Factory 3: Gigafactory Berlin-Brandenburg
Tesla began to produce Model Y in Berlin in late 2022. Its production capacity in this facility on an annual basis is:
- Model Y = 375,000 vehicles
Factory 4: Gigafactory Texas
Tesla began to produce Model Y in Texas in late 2022. This facility has an annual production capacity as follows:
- Model Y = >250,000 vehicles
#2: Financial Results
With the introduction of Model 3 & Model Y and the launch of Tesla’s factory in China, Tesla had reported continuous revenue growth in the last 10 years. After a string of losses and operating cash outflows, Tesla began to record earnings in 2020 and operating cash inflows in 2018.
Source: Tesla Inc
#3: Balance Sheet
In Q1 2023, Tesla’s current ratio is 1.56. Its non-current liabilities were US$ 10.2 billion, which is 21.1% of its stockholders’ equity of US$ 48.1 billion. So, gearing ratio of Tesla is 21.1% in Q1 2023. Maintaining a strong balance sheet is vital for Tesla has revealed several growth initiatives as stated in our next point.
#4: Growth Initiatives
Tesla’s Gigafactory Texas is installing equipment to produce Cybertruck. Looking ahead, Tesla revealed its manufacturing plans for the Tesla Semi in Nevada. This plant, known as Gigafactory Nevada, is now under pilot production. In addition, Tesla is looking to design and develop Tesla Roadster, Robotaxi and others.
Source: Tesla Inc
Tesla offers value investors a unique case where typical valuation metrics which include P/E Ratio, dividend yields and P/OCF ratio don’t apply. This is because in Tesla’s case, the company had generated:
- Most of its financial resources in 2011-2017 on Model S/X.
- Strings of losses in 2011-2019: P/E Ratio is not helpful.
- Strings of operating cash outflows in 2011-2018. P/OCF is not useful.
- Zero dividend payments to shareholders since its listing.
Tesla’s sources of revenue growth, profitability, and operating cash flows for the last 3 years (2020-2022) were primarily from Model 3/Y. Presently, both models account for 90+% of Tesla’s total EV yearly production capacity of 1.8 million. To add on, Tesla plans to move into Semi, Roadster, and Robotaxi in the immediate future. So for investors, it is more meaningful to evaluate Tesla based on what’s its future potential than its past results.
Tesla had proven itself to be profitable and cash flow positive since 2020. This is contributed mainly by Model 3/Y and they now account for 90+% of its total EV production capacity on an annual basis. As stated, conventional methods which include P/E Ratio, dividend yields, and P/OCF would not be helpful in evaluating Tesla’s valuation. Hence, one’s decision to invest in Tesla would be based on the views on Tesla’s:
- Business model.
- Growth trajectory.
- Technology capabilities + intellectual properties.
- Role and dominance in the global EV market.
- Founder: Elon Musk.
There you go, the 5 things to know about Tesla before investing in it.
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