This document provides instructions for analyzing three different cases related to industries and companies.
1. It asks the reader to analyze the streaming video industry using PESTEL, Porter, and strategic group analyses and discuss macroenvironmental factors impacting growth.
2. It asks the reader to analyze how the coronavirus impacts industry forces for two industries using macroenvironmental and industry analyses.
3. It asks the reader to interpret Tesla's strategy as disruptive or sustaining innovation and as blue or red ocean, using company documents and financial performance.
ENGLISH 7_Q4_LESSON 2_ Employing a Variety of Strategies for Effective Interp...
Streaming Video Industry Analysis Using PESTEL, Porter & Strategic Groups Frameworks
1. 1. Read the information on the STREAMING VIDEO
INDUSTRY and apply the elements of PESTEL analysis,
PORTER analysis, and STRATEGIC GROUPS analysis.
a. What are the strategically relevant components of the
streaming video industry macro-environment? What is the
impact of these macro factors on the growth and
competitiveness of the industry.
b. Work through each of the vertical and horizontal forces in the
Porter model and draw conclusions about rivalry and industry
competition. Which of the five competitive forces is strongest?
Which is weakest? What competitive forces seem to have the
greatest effect on industry attractiveness and the potential
profitability of new entrants?
2. Read the information on the impact of the coronavirus and
apply the elements of macro environmental and industry level
analysis to understand how it impacts the industry forces
(PORTER model) for two industries. Go through the forces
model, then draw conclusion about whether this will increase or
decrease competitiveness and attractiveness in this industry
3. Read the information on Tesla (attached documents). In one
reading, Tesla is called either a disrupter or a sustaining
innovator. This article also suggests that Tesla maybe a Blue
Ocean or a Red Ocean (more traditional strategy) company.
How do you interpret Tesla’s strategy? Use information from
the articles, the most recent earnings presentation, and your
evaluation of company financial performance in supporting your
answer.
Red Ocean StrategyBlue Ocean Strategy
Compete in existing market space
Create uncontested market space.
2. Beat the competition
Make the competition irrelevant
Exploit existing demand
Create and capture new demand
Make the value-cost trade-off
Break the value-cost trade-off
Align the whole system of a firms activities with its strategic
choice of differentiation or low cost
Align the whole system of a firms activities in pursuit of
differentiation and low cost
Working Capital Management
Chapter 15
Working Capital Terminology
Working capital: current assets.
Net working capital:
current assets - current liabilities.
Net operating working capital:
current assets - (current liabilities - notes payable).
Working capital management:
controlling cash, inventories, and A/R, plus short-term liability
management.
2
3. Working Capital Financing Policies
Aggressive: Use short-term financing to finance permanent
assets.
Moderate: Match the maturity of the assets with the maturity of
the financing.
Maturity Matching, or “Self-Liquidating”, approach
Conservative: Use permanent capital for permanent assets and
temporary assets.
3
Cash Conversion Cycle
The cash conversion cycle focuses on the length of time
between when a company makes payments to its creditors and
when a company receives payments from its customers.
4
Cash Conversion Cycle
15-5
4. 5
Cash Budget
Forecasts cash inflows, outflows, and ending cash balances.
Used to plan loans needed or funds available to invest.
Can be daily, weekly, or monthly, forecasts.
Monthly for annual planning and daily for actual cash
management.
6
Cash and Marketable Securities
Currency
Demand Deposit
Marketable Securities
Inventories
Supplies
Raw materials
Work in process
5. Finished goods
Accounts Receivable: Credit Policy
Credit Period: How long to pay? Shorter period reduces days
sales outstanding (DSO) and average A/R, but it may discourage
sales.
Cash Discounts: Lowers price. Attracts new customers and
reduces DSO.
Credit Standards: Restrictive standards tend to reduce sales,
but reduce bad debt expense. Fewer bad debts reduce DSO.
Collection Policy: How tough? Restrictive policy will reduce
DSO but may damage customer relationships.
9
Accounts Payable: Trade Credit
Trade credit is credit furnished by a firm’s suppliers.
Trade credit is often the largest source of short-term credit,
especially for small firms.
Spontaneous, easy to get, but cost can be high.
10
period
7. Business Risk
Business Risk is the variation in the firm’s expected earnings
attributable to the industry in which the firm operates.
Determinants of business risk:
The stability of the domestic economy
The exposure to, and stability of, foreign economies
Sensitivity to the business cycle
Competitive pressures in the firm’s industry
Operating Risk
Operating risk is the variation in the firm’s operating earnings
that results from firm’s cost structure (mix of fixed and variable
operating costs).
Earnings of firms with higher proportion of fixed operating
costs are more vulnerable to change in revenues.
5
Operating Leverage
Operating leverage is the change in EBIT caused by a change in
quantity sold.
The higher the proportion of fixed costs relative to variable
costs, the greater the operating leverage.
6
Higher operating leverage leads to more business risk: small
8. sales decline causes a larger EBIT decline.
Sales
$
Rev.
TC
F
QBE
EBIT
}
$
Rev.
TC
F
QBE
Sales
9. 7
Operating Breakeven
Q is quantity sold, F is total fixed cost, V is variable cost per
unit, TC is total cost, and P is price per unit.
Operating breakeven = QBE
Let EBIT=PQ-VQ-F= 0
QBE = F / (P – V)
Example: F=$200, P=$15, and V=$10:
QBE = $200 / ($15 – $10) = 40.
Financial Risk
Financial Risk is the variation in earnings as a result of firm’s
financing mix or proportion of financing that requires a fixed
return.
Additional business risk concentrated on common stockholders
when financial leverage is used.
10. Capital Structure Theory
MM theory
Zero taxes
Corporate taxes
Corporate and personal taxes
Trade-off theory
Signaling theory
Pecking order
Debt financing as a managerial constraint
Modigliani-Miller (MM) Theory: Zero TaxesFirm UFirm
LEBIT $3,000$3,000Interest 0 1,200NI
$3,000$1,800CF to shareholder$3,000$1,800CF to
debtholder 0$1,200Total CF$3,000$3,000Notice that the
total CF are identical for both firms.
MM Results: Zero Taxes
MM assume: (1) no transactions costs; (2) no restrictions or
costs to short sales; and (3) individuals can borrow at the same
rate as corporations.
MM prove that if the total CF to investors of Firm U and Firm L
are equal, then arbitrage is possible unless the total values of
Firm U and Firm L are equal:
VL = VU.
Because FCF and values of firms L and U are equal, their
11. WACCs are equal.
Therefore, capital structure is irrelevant.
12
MM Theory: Corporate Taxes
Corporate tax laws allow interest to be deducted, which reduces
taxes paid by levered firms.
Therefore, more CF goes to investors and less to taxes when
leverage is used.
In other words, the debt “shields” some of the firm’s CF from
taxes.
13
MM Result: Corporate Taxes
MM show that the total value to Firm L’s investors (VL )is
equal to the total value to Firm U’s investor (VU )plus an
additional amount due to interest deductibility (t*D).
Tax shield of debt= t*D, t=corporate tax rate, D=total debt
VL = VU + t*D
14
Value of Firm, V
12. 0
Debt
VL
VU
Under MM with corporate taxes, the firm’s value increases
continuously as more and more debt is used.
TD
MM relationship between value and debt when corporate taxes
are considered.
Miller’s Theory: Corporate and Personal Taxes
Personal taxes lessen the advantage of corporate debt:
Corporate taxes favor debt financing since corporations can
deduct interest expenses.
Personal taxes favor equity financing, since no gain is reported
until stock is sold, and long-term gains are taxed at a lower rate.
16
Trade-off Theory
Capital structure is based on a trade-off between the tax
advantage of debt and the costs of financial distress.
MM theory ignores bankruptcy (financial distress) costs, which
increase as more leverage is used.
At low leverage levels, tax benefits outweigh bankruptcy costs.
At high levels, bankruptcy costs outweigh tax benefits.
An optimal capital structure exists that balances these costs and
13. benefits.
17
Costs of Financial Distress
What is financial distress?
Bankruptcy
Ch 7: Liquidation
Ch 11: Reorganization
Cost of Financial Distress
Direct Costs
Legal and administrative costs
Indirect Costs
Impaired ability to conduct business
Agency Costs
17
18
Tax Shield vs. Cost of Financial Distress
Value of Firm, V
0
Debt
V = Actual value of firm
VU =Value of firm with no debt
Tax Shield=t*D
14. Distress Costs
VL=Value of firm with corporate
taxes and debt
VL = VU + t*D
19
Signaling Theory
MM assumed that investors and managers have the same
information.
But, managers often have better information. Thus, they would:
Sell stock if stock is overvalued.
Sell bonds if stock is undervalued.
Investors understand this, so view new stock sales as a negative
signal.
Pecking Order Theory
Theory stating that firms prefer to issue debt rather than equity
if internal finance is insufficient
Internal equity is first choice, external equity is last
Based on asymmetric information
Rules
Use internal financing
Issue the safest security first (debt before external equity)
15. 20
21
Pecking Order Theory
Consider the following story:
The announcement of a stock issue drives down the stock price
because investors believe managers are more likely to issue
when shares are overpriced.
Therefore firms prefer internal finance since funds can be raised
without sending adverse signals.
If external finance is required, firms issue debt first and equity
as a last resort.
The most profitable firms borrow less not because they have
lower target debt ratios but because they don't need external
finance.
21
Pecking Order Theory
Implications
Internal equity is “better” than external equity
Debt is preferred to external equity
Financial slack is valuable
No target debt/equity ratio
16. 22
Debt Financing and Agency Costs
One agency problem is that managers can use corporate funds
for non-value maximizing purposes.
The use of financial leverage:
Bonds “free cash flow.”
Forces discipline on managers to avoid perks and non-value
adding acquisitions.
A second agency problem is the potential for
“underinvestment”.
Debt increases risk of financial distress.
Therefore, managers may avoid risky projects even if they have
positive NPVs.
Capital Structure Theory – Modigliani and Miller (MM)
Approach
The Modigliani and Miller approach to capital theory, devised
in the 1950s, advocates the capital
structure irrelevancy theory. This suggests that the valuation of
a firm is irrelevant to the capital structure
of a company. Whether a firm is highly leveraged or has a lower
debt component has no bearing on its
17. market value. Rather, the market value of a firm is solely
dependent on the operating profits of the
company.
The capital structure of a company is the way a company
finances its assets. A company can finance its
operations by either equity or different combinations of debt
and equity. The capital structure of a
company can have a majority of the debt component or a
majority of equity, or an even mix of both debt
and equity. Each approach has its own set of advantages and
disadvantages. There are various capital
structure theories that attempt to establish a relationship
between the financial leverage of a company
(the proportion of debt in the company’s capital structure) with
its market value. One such approach is
the Modigliani and Miller Approach.
ASSUMPTIONS OF MODIGLIANI AND MILLER APPROACH
the bankruptcy cost, is nil.
18. investor will have access to the same
information that a corporation would and investors will thus
behave rationally.
companies.
commission, payment to merchant bankers,
advertisement expenses, etc.
The Modigliani and Miller Approach indicates that the value of
a leveraged firm (a firm that has a mix
of debt and equity) is the same as the value of an unleveraged
firm (a firm that is wholly financed by
equity) if the operating profits and future prospects are same.
That is, if an investor purchases shares of
a leveraged firm, it would cost him the same as buying the
shares of an unleveraged firm.
https://efinancemanagement.com/financial-leverage/capital-
structure-and-its-theories
https://efinancemanagement.com/financial-leverage/capital-
structure-and-its-theories
https://efinancemanagement.com/investment-decisions/value-of-
a-firm
https://efinancemanagement.com/financial-leverage/capital-
structure-and-its-theories
19. https://efinancemanagement.com/financial-leverage
https://efinancemanagement.com/financial-
accounting/corporation
MODIGLIANI AND MILLER APPROACH: TWO
PROPOSITIONS WITHOUT TAXES
PROPOSITION 1
With the above assumptions of “no taxes”, the capital structure
does not influence the valuation of a
firm. In other words, leveraging the company does not increase
the market value of the company. It also
suggests that debt holders in the company and equity
shareholders have the same priority, i.e., earnings
are split equally amongst them.
MODIGLIANI AND MILLER APPROACH: PROPOSITIONS
WITH TAXES
M&M Theory 1’s assumption that there are no taxes is
unrealistic. Taxes exist, and interest expense is
tax deductible i.e. the ultimate tax burden of a company with
debt in its capital structure is lower than a
company with zero or lower debt. This brings us to M&M
20. Theory 2 which relaxes the zero-tax
assumption.
https://efinancemanagement.com/sources-of-
finance/shareholders-vs-stakeholders
Proposition 1
In a tax environment, the value of a levered company is higher
than the value of an unlevered company
by an amount equal to the product of absolute amount of debt
and tax rate.
This can be expressed mathematically as follows:
VL = VUL + t × D
Where VL is the value of levered company i.e. company with
some debt in its capital structure, VUL is the
value of an un-levered company i.e. with no or lower debt, t is
the tax rate and D is the absolute amount
of debt.
The Trade-off theory of capital structure
21. The trade-off theory states that the optimal capital structure is a
trade-off between interest tax shields
and cost of financial distress:
Value of firm = Value if all-equity financed + PV(tax shield) -
PV(cost of financial distress)
The trade-off theory can be summarized graphically. The
starting point is the value of the all-equity
financed firm illustrated by the black horizontal line in Figure
10. The present value of tax shields is then
added to form the red line. Note that PV(tax shield) initially
increases as the firm borrows more, until
additional borrowing increases the probability of financial
distress rapidly. In addition, the firm cannot
be sure to benefit from the full tax shield if it borrows
excessively as it takes positive earnings to save
corporate taxes. Cost of financial distress is assumed to increase
with the debt level.
The cost of financial distress is illustrated in the diagram as the
difference between the red and blue
curve. Thus, the blue curve shows firm value as a function of
the debt level. Moreover, as the graph
suggest an optimal debt policy exists which maximized firm
value.
22. In summary, the trade-off theory states that capital structure is
based on a trade-off between tax savings
and distress costs of debt. Firms with safe, tangible assets and
plenty of taxable income to shield should
have high target debt ratios. The theory is capable of explaining
why capital structures differ between
industries, whereas it cannot explain why profitable companies
within the industry have lower debt ratios
(trade-off theory predicts the opposite as profitable firms have a
larger scope for tax shields and therefore
subsequently should have higher debt levels).
The pecking order theory of capital structure
The pecking order theory has emerged as alternative theory to
the trade-off theory. Rather than
introducing corporate taxes and financial distress into the MM
framework, the key assumption of the
pecking order theory is asymmetric information. Asymmetric
information captures that managers know
more than investors and their actions therefore provides a signal
to investors about the prospects of the
firm.
The intuition behind the pecking order theory is derived from
23. considering the following string of
arguments:
stock price because investors believe
managers are more likely to issue when shares are overpriced.
t as this will allow the
firm to raise funds without sending adverse
signals to the stock market. Moreover, even debt issues might
create information problems if the
probability of default is significant, since a pessimistic manager
will issue debt just before bad news
get out.
This leads to the following pecking order in the financing
decision:
1. Internal cash flow
2. Issue debt
3. Issue equity
The pecking order theory states that internal financing is
preferred over external financing, and if external
finance is required, firms should issue debt first and equity as a
last resort. Moreover, the pecking order
seems to explain why profitable firms have low debt ratios: This
24. happens not because they have low
target debt ratios, but because they do not need to obtain
external financing. Thus, unlike the trade-off
theory the pecking order theory is capable of explaining
differences in capital structures within
industries.
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FI1405USUnited States / Motor Vehicles -INDFI1405US
Source: FactSet Market AggregratesDEC '19DEC '18DEC
'17DEC '16DEC '15DEC '14DEC '13DEC '12DEC '11DEC
'10Profitability (%)Gross
Margin10.3610.7211.7315.3213.8611.1012.1313.3613.8513.82O
perating Margin2.832.643.145.564.402.313.304.805.344.82Net
Margin3.001.193.206.293.743.5311.088.265.814.08EBIT
Margin2.832.643.145.564.402.313.304.805.344.82EBITDA
Margin10.8110.0710.4111.809.446.647.528.909.4510.20Return
on Assets1.880.752.024.332.702.748.966.825.223.37Return on
Equity11.344.8212.6825.4517.4214.9556.1037.7031.0835.54Ret
urn on Invested
Capital3.671.463.998.865.755.9619.0016.5011.467.90Free Cash
Flow Margin1.34-0.51-2.25-
0.510.011.641.402.222.323.71Valuation
(x)Price/Earnings17.1335.8316.327.1312.9714.374.444.585.041
1.63Price/Earnings (excl negatives)8.85-
9.855.209.6411.603.884.354.8011.26Price/Sales0.510.430.520.4
50.490.510.490.380.290.47Price/Book
Value1.941.732.071.812.262.152.491.731.574.13Price/Cash
Flow4.664.005.314.155.076.627.185.234.936.94Price/Cash
Flow (excl
negatives)4.663.993.554.143.916.627.184.994.726.77Price/Free
Cash Flow38.25-83.03-23.23-
87.828,167.0630.9335.0417.0912.6112.79Enterprise
Value/EBIT40.5140.6135.7716.9920.9136.6423.5412.389.1214.
29Enterprise
Value/EBITDA10.6110.6510.808.019.7612.7310.336.675.156.7
28. TSLA-USTesla IncTSLA 88160R101 B616C79 NASDAQ
Common stock Source: FactSet FundamentalsDEC '19DEC
'18DEC '17DEC '16DEC '15DEC '14DEC '13DEC '12DEC
'11DEC '10365 Days365 Days365 Days366 Days365 Days365
Days365 Days366 Days365 Days365 DaysProfitability (%)Gross
Margin16.5618.8318.8522.2022.8227.5722.667.2830.1626.32SG
&A to
Sales16.2320.0132.7832.0741.9934.4625.70102.68153.29152.10
Operating Margin0.33-1.18-13.93-9.86-19.16-6.89-3.04-95.41-
123.13-125.78Pretax Margin-2.71-4.68-18.79-10.66-23.09-9.96-
3.55-95.84-124.32-132.05Net Margin-3.51-4.55-16.68-9.64-
21.96-9.19-3.68-95.88-124.56-132.19Free Cash Flow
Margin3.96-1.03-35.22-22.35-53.37-32.12-0.31-122.28-152.89-
199.78Return on Assets (%)-2.69-3.34-7.64-4.39-12.75-7.11-
4.19-43.36-46.28-59.76Return on Equity (%)-14.94-21.31-
43.63-23.11-88.84-37.25-18.69-227.22-118.03-113.16Return on
Common Equity-14.94-21.31-43.63-23.11-88.84-37.25-18.69-
227.22-118.03-Return on Total Capital0.37-1.33-10.15-7.46-
20.95-9.45-6.57-71.98-64.17-84.77Return on Invested Capital-
4.89-6.21-14.25-8.70-28.97-14.60-8.21-76.83-65.69-89.24Cash
Flow Return on Invested Capital13.6313.35-0.44-1.60-17.10-
2.8528.63-51.60-29.53-73.91Valuation
(x)Price/Sales3.012.644.394.407.608.668.928.8014.0421.65Pric
e/Earnings-85.90-58.14-26.32-45.66-34.63-94.24-242.63-9.18-
11.29-16.34Price/Book
Value11.4411.6712.407.2628.9730.6627.7631.0213.3212.21Pric
e/Tangible Book
Value12.4512.5613.777.8928.9730.6628.3535.0313.3212.21Pric
e/Cash Flow30.7927.05-850.87-248.86-58.67-483.0969.63-
13.66-25.07-19.77Price/Free Cash Flow76.10-255.96-12.46-
19.70-14.25-26.96-2,883.54-7.20-9.18-10.84Enterprise
Value/EBIT1,067.41-272.04-38.20-59.04-42.88-129.32-298.20-
10.43-11.78-16.53Enterprise Value/EBITDA38.2241.73-
37,170.31158.91-94.272,491.94407.91-11.26-12.63-
17.82Enterprise
Value/Sales3.473.205.325.828.228.919.089.9614.5020.79Total
29. Debt/Enterprise
Value0.170.200.190.210.090.090.030.110.090.03Per ShareSales
per
Share138.86125.8570.9448.5431.5625.6816.863.852.031.23EBI
T (Operating Income) per Share0.45-1.48-9.88-4.79-6.05-1.77-
0.51-3.67-2.51-1.55EPS (recurring)-4.12-5.26-11.86-5.04-6.93-
2.36-0.62-3.68-2.51-1.63EPS (diluted)-4.87-5.72-11.83-4.68-
6.93-2.36-0.62-3.69-2.53-1.63Book Value per
Share36.5628.5225.1029.428.297.255.421.092.142.18Tangible
Book Value per
Share33.6026.4922.6027.098.297.255.310.972.142.18Cash Flow
per Share13.5912.30-0.37-0.86-4.09-0.462.16-2.48-1.14-
1.35Free Cash Flow per Share5.50-1.30-24.99-10.85-16.84-
8.25-0.05-4.71-3.11-2.46Diluted Shares
Outstanding177.00170.53165.76144.21128.20124.54119.42107.
35100.3994.91Basic Shares
Outstanding177.00170.53165.76144.21128.20124.54119.42107.
35100.3994.91Total Shares
Outstanding181.00172.60168.80161.56131.43125.69123.09114.
21104.5394.91Asset Turnover Analysis (x)Cash & ST
Investments4.735.803.352.972.572.313.761.570.860.96Receivab
les21.6329.3123.1820.9620.4623.2053.0222.7225.1422.90Inven
tories6.156.484.413.262.803.585.122.412.992.51Current
Assets2.412.891.831.551.351.432.250.920.670.69Fixed
Assets1.231.070.660.691.041.722.390.950.941.60Total
Assets0.770.740.460.460.580.771.140.450.370.45DuPont
Analysis Asset Turnover
(x)0.770.740.460.460.580.771.140.450.370.45 x Pretax
Margin (%)-2.71-4.68-18.79-10.66-23.09-9.96-3.55-95.84-
124.32-132.05 = Pretax Return on Assets (%)-2.08-3.44-8.61-
4.85-13.40-7.70-4.05-43.34-46.19-59.69 = Return on Assets
(%)-2.69-3.34-7.64-4.39-12.75-7.11-4.19-43.36-46.28-59.76 x
Equity Multiplier
(Assets/Equity)5.556.375.715.266.975.244.465.242.551.89 =
Return on Equity (%)-14.94-21.31-43.63-23.11-88.84-37.25-
18.69-227.22-118.03-113.16 = Reinvestment Rate (%)-14.94-
30. 21.31-43.63-23.11-88.84-37.25-18.69-227.22-118.03-
113.16Note: EBIT Return on Assets (%)0.25-0.87-6.38-4.49-
11.12-5.33-3.47-43.15-45.74-56.86Note: Interest as %
Assets2.002.231.640.881.471.720.920.020.010.26Operating
Efficiency (x)Revenue/Employee
(actual)511,871439,627313,208233,143309,850314,768343,659
139,425144,137129,860Net Income/Employee (actual)-17,952-
19,995-52,244-22,478-68,055-28,938-12,633-133,675-179,542-
171,666Assets/Employee
(actual)714,533609,206763,268754,840619,732575,657412,516
375,908503,492429,457Receivables Turnover
(x)21.6329.3123.1820.9620.4623.2053.0222.7225.1422.90Inven
tory Turnover
(x)6.156.484.413.262.803.585.122.412.992.51Payables
Turnover (x)5.846.314.584.494.075.425.363.353.474.90Asset
Turnover
(x)0.770.740.460.460.580.771.140.450.370.45Working Capital
Turnover (x)17.12--16.19-2.933.41-1.130.78Operating Cycle
(Days) Days of Inventory on
Hand59.3156.3382.84112.11130.42101.9471.36151.73121.8814
5.14 + Days of Sales
Outstanding16.8812.4515.7517.4217.8415.736.8816.0714.5215.
94 = Operating
Cycle76.1968.7998.58129.53148.27117.6778.24167.80136.4016
1.08 - Days of Payables
Outstanding62.5157.8979.6681.2689.7067.3968.04109.06105.25
74.43 = Net Operating
Cycle13.6810.9018.9248.2658.5750.2810.2058.7431.1586.65Li
quidity (%)Current
Ratio1.130.830.861.070.991.521.880.971.952.76Quick
Ratio0.800.520.560.720.541.071.370.481.692.23Cash
Ratio0.610.390.460.600.430.911.260.411.592.02Cash & ST
Inv/Current Assets
(%)53.8246.6953.6255.9043.6960.1467.0642.1181.4873.41CFO/
Current Liabilities (%)22.5520.99-0.79-2.13-18.62-2.7238.21-
49.36-59.77-149.38Coverage (x)Net Debt/EBITDA3.666.04-
31. 5,114.4519.85-4.8248.82-5.40-0.670.100.74Net Debt/(EBITDA-
Capex)10.27-14.82-2.11-4.30-0.85-0.581.10-0.410.050.42Total
Debt/EBITDA6.058.39-33.49-216.9513.55---EBIT/Interest
Expense (Int. Coverage)0.11-0.35-2.75-2.81-4.83-1.94-2.39-
50.20-48.90-81.94EBITDA/Interest Expense3.262.49-0.001.29-
2.970.112.02-1,438.81-5,455.09-137.31Fixed-charge Coverage
Ratio0.11-0.35-2.75-2.81-4.83-1.94-2.39-50.20-48.90-
81.94CFO/Interest Expense3.513.16-0.13-0.62-4.41-0.5711.66-
1,047.56-2,659.63-128.85LT Debt/EBITDA5.656.74-
6,626.3128.79-6.48161.7013.37-1.13-1.16-0.53Net
Debt/FFO2.974.8819.748.93-54.432.80-1.46-0.800.120.86LT
Debt/FFO4.585.4525.5812.96-73.179.273.61-1.33-1.33-
0.62FCF/Total Debt0.07-0.02-0.34-0.18-0.74-0.41-0.01-1.08-
1.11-3.21CFO/Total Debt0.160.15-0.01-0.01-0.18-0.020.43-
0.57-0.41-1.76Leverage (%)LT Debt/Total
Equity190.80225.79263.19155.40209.72202.9489.79329.96121.
0334.93LT Debt/Total
Capital59.2459.2868.1355.3556.9954.5147.0269.5853.7825.86L
T Debt/Total
Assets36.8037.3838.9232.5928.2231.6324.7836.9338.0118.73T
otal Debt/Total
Assets42.8446.4942.3337.9136.0642.4425.1141.8839.2718.81N
et Debt/Total Equity123.65202.08203.14107.16155.9961.28-
36.28197.02-10.56-48.56Total
Debt/Equity222.08280.86286.29180.77267.98272.2790.97374.2
3125.0435.07Net Debt/Total
Capital38.3953.0652.5938.1742.3916.46-19.0041.54-4.69-
35.96Total Debt/Total
Capital68.9573.7474.1164.3872.8273.1447.6478.9155.5625.96A
ll figures in millions of U.S. Dollar except per share and labeled
items.
Q4 and FY2019 Update
32. Highlights 03
Financial Summary 04
Operational Summary 06
Vehicle Capacity 07
Core Technology 08
Other Highlights 09
Outlook 10
Photos & Charts 11
Financial Statements 20
Additional Information 25
2019 was a turning point for Tesla. We demonstrated strong
organic
demand for Model 3, returned to GAAP profitability in 2H19
and
generated $1.1B of free cash flow for the year. We achieved
strong cash
generation through persistent cost control across the business.
Our pace of execution has also improved significantly, as we
33. have
incorporated many learnings from our experience launching
Model 3 in
the United States. As a result, we were able to start Model 3
production
in Gigafactory Shanghai in less than 10 months from breaking
ground
and have already begun the production ramp for Model Y in
Fremont.
None of this would be possible without strong demand for our
products. For most of 2019, nearly all orders came from new
buyers
that did not hold a prior reservation, demonstrating significant
reach
beyond those who showed early interest. Amazingly, this was
accomplished without any spend on advertising. As more people
drive
our cars and as the industry rapidly validates electrification,
interest in
our products will continue to grow.
Higher volumes driven by Model Y and Gigafactory Shanghai,
continued
improvements in operating leverage, and further cost
34. efficiencies should
allow Tesla to ultimately reach an industry-leading operating
margin.
$930M increase in our cash and cash equivalents in Q4 to $6.3B
$1.0B operating cash flow less capex ("free cash flow") in Q4
Cash
Model Y production ramp started in January 2020, ahead of
schedule
Increased Model Y all-wheel drive EPA range to 315 miles from
280 miles
Record vehicle deliveries of 112,095 in Q4
Record Q4 storage deployment of 530 MWh; 26% solar growth
QoQ
Profitability $359M GAAP operating income; 4.9% operating
margin in Q4
$105M GAAP net income; $386M non-GAAP net income (ex-
SBC) in Q4
Operations
S U M M A R YH I G H L I G H T S
3
SBC = stock-based compensation expense
35. F I N A N C I A L S U M M A R Y
(Unaudited)
4
($ in millions, except percentages and per share data) Q4-2018
Q1-2019 Q2-2019 Q3-2019 Q4-2019 QoQ YoY
Automotive revenues 6,323 3,724 5,376 5,353 6,368 19% 1%
of which regulatory credits 95 216 111 134 133 -1% 40%
Automotive gross profit 1,537 751 1,016 1,222 1,434 17% -7%
Automotive gross margin 24.3% 20.2% 18.9% 22.8% 22.5% -31
bp -179 bp
Total revenues 7,226 4,541 6,350 6,303 7,384 17% 2%
Total gross profit 1,443 566 921 1,191 1,391 17% -4%
Total GAAP gross margin 20.0% 12.5% 14.5% 18.9% 18.8% -6
bp -113 bp
Operating expenses 1,029 1,088 1,088 930 1,032 11% 0%
Income (loss) from operations 414 (522) (167) 261 359 38% -
13%
Operating margin 5.7% -11.5% -2.6% 4.1% 4.9% 72 bp -87 bp
Adjusted EBITDA 1,039 155 572 1,083 1,175 8% 13%
36. Adjusted EBITDA margin 14.4% 3.4% 9.0% 17.2% 15.9% -127
bp 153 bp
Net income (loss) attributable to common stockholders (GAAP)
140 (702) (408) 143 105 -27% -25%
Net income (loss) attributable to common stockholders (non-
GAAP) 345 (494) (198) 342 386 13% 12%
EPS attributable to common stockholders, basic (GAAP) 0.81
(4.10) (2.31) 0.80 0.58 -28% -28%
EPS attributable to common stockholders, basic (non-GAAP)
2.00 (2.90) (1.12) 1.91 2.14 12% 7%
Net cash provided by (used in) operating activities 1,235 (640)
864 756 1,425 88% 15%
Capital expenditures (325) (280) (250) (385) (412) 7% 27%
Free cash flow 910 (920) 614 371 1,013 173% 11%
Cash and cash equivalents 3,686 2,198 4,955 5,338 6,268 17%
70%
EPS = Earnings per share
F I N A N C I A L S U M M A R Y
Revenue
Profitability
Cash
37. In 2019, our revenue growth was positively impacted by a
strong increase in vehicle deliveries. Revenue growth was offset
by higher
lease mix*, Model 3 becoming a larger part of our mix,
introduction of the Standard Range trims of Model 3, and
adjustments to
vehicle pricing. These changes have resulted in a reduction to
the average selling price (ASP) relative to 2018. We do not
expect
ASP to change significantly in the near term, which means
volume growth and revenue growth should correlate more
closely this
year.
We are positioned to accelerate our revenue growth further
through increasing build rates in Gigafactory Shanghai and our
Mod el Y
production line in Fremont. These production increases will
allow for higher total vehicle deliveries and associated revenue.
GAAP gross profit of $4.1B remained essentially flat in 2019
compared to 2018. Volume growth and successful cost reduction
efforts were offset by normalization of ASP, mix shift towards
Model 3 and a higher lease mix.
Sequentially, GAAP gross margin remained relatively flat in Q4
compared to Q3, while we ramped Model 3 production at
Gigafactory Shanghai. While we saw an increase in operating
38. expenses in Q4 (driven mostly by $72M of non -cash SBC
expense
related to one more 2018 CEO award operational milestone
becoming probable), higher gross profit resulted in a 72bp
sequentia l
improvement of GAAP operating margin to 4.9% in Q4.
Quarter-end cash and cash equivalents increased by $930M QoQ
to $6.3B, driven by positive quarterly free cash flow of $1.0B.
Capital expenditures increased sequentially due to investments
in Gigafactory Shanghai and Model Y preparations in Fremont.
5
* Revenue on leased vehicles is recognized on monthly lease
payments, and thus
contribute less to total revenues in the quarter of delivery than
sold vehicles
In Q4, the annualized total vehicle production rate in Fremont
was just over 415,000 units, about the same rate as the factory
under NUMMI reached in its peak year of
2006. We achieved this production rate in spite of Model S/X
running on a single shift and before the start of Model Y
production.
Our finished vehicle inventory levels reached just 11 days of
sales(1) at the end of Q4, the lowest level in the past 4 years.
Our Mobile Service fleet almost doubled in 2019 to 743
vehicles, and we continue to open new service locations
39. globally. As customers are increasingly buying their Tesla
vehicles online, vehicle deliveries grew 50% while our retail
footprint remained unchanged with a stable total store count
across 2019.
Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 QoQ YoY
Model S/X production 25,161 14,163 14,517 16,318 17,933 10%
-29%
Model 3 production 61,394 62,975 72,531 79,837 86,958 9%
42%
Model S/X deliveries 27,607 12,091 17,722 17,483 19,475 11%
-29%
of which subject to lease accounting 3,639 1,363 1,820 2,588
2,807 8% -23%
Model 3 deliveries 63,359 50,928 77,634 79,703 92,620 16%
46%
of which subject to lease accounting 4,322 6,498 6,041 -7%
Global inventory (days of sales)(1) 19 30 18 17 11 -35% -42%
Solar deployed (MW) 73 47 29 43 54 26% -26%
Storage deployed (MWh) 225 229 415 477 530 11% 136%
Store and Service locations 378 377 402 413 429 4% 13%
Mobile service fleet 411 550 651 719 743 3% 81%
Supercharger stations 1,421 1,490 1,587 1,653 1,821 10% 28%
40. Supercharger connectors 12,002 12,767 13,881 14,658 16,104
10% 34%
1 The industry reference for days of sales is calculated by
dividing new car inventory by the
trailing four quarters of deliveries and using 261 working days
(source: Automotive News).6
O P E R A T I O N A L S U M M A R Y
(Unaudited)
Model 3 deliveries by region
V E H I C L E C A P A C I T Y
Fremont
The production ramp of Model Y started in January 2020.
Together with
Model 3, our combined installed production capacity for these
vehicles is now
400,000 units per year.
The ramp of Model Y will be gradual as we will be adding
additional machinery
in various production shops. After such expansions are done by
mid-2020,
installed combined Model 3 and Model Y capacity should reach
41. 500,000 units
per year. We will start delivering Model Y vehicles by the end
of Q1 2020.
Shanghai
We have been gradually ramping local production of battery
packs since late
Q4 2019. The rest of the Model 3 manufacturing processes are
running as
expected. Due to strong initial customer response in China, our
goal is to
increase Model 3 capacity even further using existing facilities.
We have already broken ground on the next phase of
Gigafactory Shanghai.
Given the popularity of the SUV vehicle segment, we are
planning for Model Y
capacity to be at least equivalent to Model 3 capacity.
Berlin-Brandenburg
We are moving forward with our preparations near Berlin,
which we have
selected as the right place to build vehicles for the European
market due to a
strong manufacturing and engineering presence in Germany.
The first deliveries
42. from this factory are expected in 2021.
Installed Annual Capacity Current Status
Fremont Model S / Model X 90,000 Production
Model 3 / Model Y * 400,000 Production
Shanghai Model 3 150,000 Production
Model Y - Construction
Berlin Model 3 - In development
Model Y - In development
North America Tesla Semi - In development
Roadster - In development
Cybertruck - In development
* Model 3/ Model Y installed capacity in Fremont will extend to
500,000 by mid-2020
7
0
50,000
100,000
150,000
43. 200,000
250,000
300,000
2017 2018 2019
Other
Greater China
Europe
North America
C O R E T E C H N O L O G Y
Autopilot & Full Self Driving (FSD)
To date, Tesla vehicles have driven over 3 billion miles in
Autopilot mode. As our fleet
grows, Autopilot miles increase exponentially, adding yet more
data to our neural net.
All Tesla vehicles with our FSD computer have been updated
with new software that
can better detect new details in their environments, allowing us
to show various lane
markings, traffic lights, stop signs, cones as well as other
vehicles and road users.
44. Understanding the environment around a Tesla is key to
enabling our cars to react to
traffic lights and stop signs and take intersections through city
streets. We are
currently validating this functionality before releasing to
customers, and we look
forward to its gradual deployment.
Vehicle Software
In Q4, we launched premium vehicle connectivity in the US for
$9.99 (plus tax) per
month. This enables our customers to stream music or videos,
browse internet or see
live traffic through an embedded connection.
We also introduced in-app purchases, where our customers can
buy various software
updates, such as basic Autopilot, FSD, acceleration boost and
additional premium
features. Software will continue to play a growing role in our
business model.
Battery & Powertrain
Due to continued engineering progress of the Model Y all-wheel
drive (AWD), we
45. have been able to increase its maximum EPA range to 315
miles, compared to our
previous estimate of 280 miles. This extends Model Y's lead as
the most energy-
efficient electric SUV in the world.
In app purchases
Electric SUV energy efficiency (EPA miles per kWh)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Model Y
AWD
Jaguar
46. iPace
Mercedes
EQC*
Ford
Mach E AWD
Audi
e-tron
8 *Tesla estimate
O T H E R H I G H L I G H T S
Energy Business
Energy storage deployment reached an all-time high of 530
MWh in Q4,
which included the first deployments of Megapack, our new
commercial-
scale 3 MWh integrated storage system that is preassembled at
Gigafactory
Nevada as a single unit. Since the introduction of this product,
the level of
interest and orders from various global project developers and
utilities has
surpassed our expectations.
47. In 2019, we deployed 1.65 GWh of energy storage, more than
we deployed in
all prior years combined.
In Q4, we deployed 54 MW of solar, 26% more than in the prior
quarter.
Where offered, subscription solar has grown significantly in Q4.
With a
monthly subscription that can generate income from the first
month of
usage, there is no reason not to have solar panels installed.
Solarglass Roof
In Q4, we continued to ramp both Solarglass Roof production as
well as
installations. In addition to Tesla installers, we have also
partnered with
several roofing companies to support installations to fulfill
demand for
Solarglass Roof.
After organizing several roofing company training days at our
training homes
in Fremont, we already demonstrated dramatically shorter
installation times
versus previous versions of this product. Solarglass tiles are
48. made in our
Gigafactory New York, and we are hiring hundreds of
employees at this
facility.
Solarglass Roof installation
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2015 2016 2017 2018 2019
Energy storage deployed (in MWh)
9
49. O U T L O O K
Volume
Production ramp of Model Y in Fremont has begun, ahead of
schedule. Model 3 production in Shanghai is
continuing to ramp while Model Y production in Shanghai will
begin in 2021. We are planning to produce limited
volumes of Tesla Semi this year.
Cash Flow
Profitability
Product
For full year 2020, vehicle deliveries should comfortably
exceed 500,000 units. Due to ramp of Model 3 in
Shanghai and Model Y in Fremont, production will likely
outpace deliveries this year. Both solar and storage
deployments should grow at least 50% in 2020.
We expect positive quarterly free cash flow going forward, with
possible temporary exceptions, particularly
around the launch and ramp of new products. We continue to
believe our business has grown to the point of
being self-funding.
We expect positive GAAP net income going forward, with
possible temporary exceptions, particularly around
the launch and ramp of new products. Continuous volume
growth, capacity expansion, and cash generation
remain the main focus.
10
50. P H O T O S & C H A R T S
F R E M O N T F A C T O R Y - M O D E L Y B O D Y
S H O P
12
F R E M O N T F A C T O R Y - M O D E L Y B O D Y
S H O P
13
F R E M O N T F A C T O R Y - M O D E L Y B O D Y
S H O P
14
March 2019 Prototype January 2020 Production vehicle
M O D E L Y - 1 0 M O N T H S F R O M P R O T O T
Y P E T O P R O D U C T I O N S T A R T
15
51. Model 3 in Fremont, CA Model 3 in Gigafactory Shanghai
F R E M O N T F A C T O R Y L A Y O U T V S . G I G A F A
C T O R Y S H A N G H A I L A Y O U T
16
Stamping
Body in white (welding)
P
a
in
t
s
h
o
p
G
e
n
e
ra
l
A
s
s
e
m
61. 3
Q
-2
0
19
4
Q
-2
0
19
Vehicle Deliveries (units) Net Income ($B)*
K E Y M E T R I C S Q U A R T E R L Y
(Unaudited)
17
Operating cash flow ($B)
Free cash flow ($B)
* Attributable to Common Stockholders
-3.0
-2.0
78. V E H I C L E D E L I V E R I E S & F R E E C A S H F L O W
(Unaudited)
Model 3 ramped to
5,000/week (250,000/year run
rate) at the end of Q2-2018
Operating cash flow ($B)
Free cash flow ($B)
Vehicle deliveries
19
F I N A N C I A L S T A T E M E N T S
Three months ending Year ending
In millions of USD or shares as applicable, except per share
data 31-Dec-18 30-Sep-19 31-Dec-19 31-Dec-18 31-Dec-19
REVENUES
Automotive sales 6,074 5,132 6,143 17,632 19,952
Automotive leasing 249 221 225 883 869
Total automotive revenue 6,323 5,353 6,368 18,515 20,821
79. Energy generation and storage 372 402 436 1,555 1,531
Services and other 531 548 580 1,391 2,226
Total revenues 7,226 6,303 7,384 21,461 24,578
COST OF REVENUES
Automotive sales 4,659 4,014 4,815 13,686 15,939
Automotive leasing 127 117 119 488 459
Total automotive cost of revenues 4,786 4,131 4,934 14,174
16,398
Energy generation and storage 329 314 385 1,365 1,341
Services and other 668 667 674 1,880 2,770
Total cost of revenues 5,783 5,112 5,993 17,419 20,509
Gross profit 1,443 1,191 1,391 4,042 4,069
OPERATING EXPENSES
Research and development 356 334 345 1,460 1,343
Selling, general and administrative 668 596 699 2,835 2,646
Restructuring and other 5 (12) 135 149
Total operating expenses 1,029 930 1,032 4,430 4,138
INCOME (LOSS) FROM OPERATIONS 414 261 359 (388) (69)
Interest income 7 15 10 24 44
80. Interest expense (175) (185) (170) (663) (685)
Other (expense) income, net (14) 85 (25) 22 45
INCOME (LOSS) BEFORE INCOME TAXES 232 176 174
(1,005) (665)
Provision for income taxes 22 26 42 58 110
NET INCOME (LOSS) 210 150 132 (1,063) (775)
Net income (loss) attributable to noncontrolling interests and
redeemable noncontrolling interests 70 7 27 (87) 87
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS 140 143 105 (976) (862)
Net income (loss) per share of common stock attributable to
common stockholders
Basic 0.81 0.80 0.58 (5.72) (4.92)
Diluted 0.78 0.78 0.56 (5.72) (4.92)
Weighted average shares used in computing net income (loss)
per share of common stock
Basic 172 179 180 171 177
Diluted 179 184 187 171 177
S T A T E M E N T O F O P E R A T I O N S
(Unaudited)
21
81. B A L A N C E S H E E T
(Unaudited)
In millions of USD 31-Dec-18 31-Mar-19 30-Jun-19 30-Sep-19
31-Dec-19
ASSETS
Current assets
Cash and cash equivalents 3,686 2,198 4,955 5,338 6,268
Restricted cash 193 131 128 233 246
Accounts receivable, net 949 1,047 1,147 1,128 1,324
Inventory 3,113 3,837 3,382 3,581 3,552
Prepaid expenses and other current assets 366 465 570 660 713
Total current assets 8,307 7,678 10,182 10,940 12,103
Operating lease vehicles, net 2,090 1,973 2,070 2,253 2,447
Solar energy systems, net 6,271 6,242 6,201 6,168 6,138
Property, plant and equipment, net 11,330 9,851 10,082 10,190
10,396
Operating lease right-of-use assets 1,253 1,248 1,234 1,218
Goodwill and intangible assets, net 350 348 481 537 537
MyPower customer notes receivable, net of current portion 422
413 400 398 393
Restricted cash, net of current portion 398 354 366 255 269
Other assets 572 801 843 820 808
Total assets 29,740 28,913 31,873 32,795 34,309
LIABILITIES AND EQUITY
Current liabilities
82. Accounts payable 3,405 3,249 3,134 3,468 3,771
Accrued liabilities and other 2,094 2,277 2,623 2,497 2,905
Deferred revenue 630 763 884 1,045 1,163
Resale value guarantees 503 480 527 441 317
Customer deposits 793 768 631 665 726
Current portion of debt and finance leases (1) 2,568 1,706 1,791
2,030 1,785
Total current liabilities 9,993 9,243 9,590 10,146 10,667
Debt and finance leases, net of current portion (1) 9,404 9,788
11,235 11,313 11,634
Deferred revenue, net of current portion 991 1,157 1,182 1,140
1,207
Resale value guarantees, net of current portion 329 211 61 38
36
Other long-term liabilities 2,710 2,476 2,656 2,676 2,655
Total liabilities 23,427 22,875 24,724 25,313 26,199
Redeemable noncontrolling interests in subsidiaries 556 570
580 600 643
Total stockholders' equity 4,923 4,606 5,715 6,040 6,618
Noncontrolling interests in subsidiaries 834 862 854 842 849
Total liabilities and equity 29,740 28,913 31,873 32,795 34,309
(1) Breakdown of our debt is as follows:
Recourse debt 7,081 6,517 7,813 7,882 7,263
Non-recourse debt 3,552 3,486 3,553 3,857 4,538
22
Three months ending Year ending
83. In millions of USD 31-Dec-18 30-Sep-19 31-Dec-19 31-Dec-18
31-Dec-19
Cash Flows from Operating Activities
Net income (loss) 210 150 132 (1,063) (775)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation, amortization and impairment 497 530 577 1,901
2,154
Stock-based compensation 205 199 281 749 898
Operating cash flow related to repayment of discounted
convertible notes (188)
Other 124 68 204 453 665
Changes in operating assets and liabilities, net of effect of
business combinations 199 (191) 231 58 (349)
Net cash provided by operating activities 1,235 756 1,425 2,098
2,405
Cash Flows from Investing Activities
Capital expenditures (325) (385) (412) (2,101) (1,327)
Payments for the cost of solar energy systems, net (29) (25)
(37) (218) (105)
Purchase of intangible assets (5)
84. Receipt of government grants 46 46
Business combinations, net of cash acquired (11) (76) (18) (45)
Net cash used in investing activities (365) (486) (403) (2,337)
(1,436)
Cash Flows from Financing Activities
Net cash flows from debt activities (185) (19) (434) 37 378
Collateralized lease repayments (216) (83) (87) (559) (389)
Net borrowings under Warehouse Agreements and automotive
asset-backed notes 193 148 321 596 470
Net cash flows from noncontrolling interests - Auto 38 30 19
112 35
Net cash flows from noncontrolling interests - Solar (18) (28) 6
92 (76)
Proceeds from issuances of common stock in public offerings
848
Other 76 71 96 296 263
Net cash (used in) provided by financing activities (112) 119
(79) 574 1,529
Effect of exchange rate changes on cash and cash equivalents
and restricted cash (4) (12) 14 (23) 8
Net increase in cash and cash equivalents and restricted cash
754 377 957 312 2,506
85. Cash and cash equivalents and restricted cash at beginning of
period 3,523 5,449 5,826 3,965 4,277
Cash and cash equivalents and restricted cash at end of period
4,277 5,826 6,783 4,277 6,783
S T A T E M E N T O F C A S H F L O W S
(Unaudited)
23
In millions of USD or shares as applicable, except per share
data Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019
Net income (loss) attributable to common stockholders (GAAP)
140 (702) (408) 143 105
Stock-based compensation expense 205 208 210 199 281
Net income (loss) attributable to common stockholders (non-
GAAP) 345 (494) (198) 342 386
Net income (loss) per share attributable to common
stockholders, basic (GAAP) 0.81 (4.10) (2.31) 0.80 0.58
Stock-based compensation expense 1.19 1.20 1.19 1.11 1.56
Net income (loss) per share attributable to common
stockholders, basic (non -GAAP) 2.00 (2.90) (1.12) 1.91 2.14
Shares used in per share calculation, basic (GAAP and non-
GAAP) 172 173 177 179 180
Net income (loss) attributable to common stockholders (GAAP)
140 (702) (408) 143 105
Interest expense 175 158 172 185 170
Provision for income taxes 22 23 19 26 42
86. Depreciation, amortization and impairment 497 468 579 530
577
Stock-based compensation expense 205 208 210 199 281
Adjusted EBITDA (non-GAAP) 1,039 155 572 1,083 1,175
Total revenues 7,226 4,541 6,350 6,303 7,384
Adjusted EBITDA margin (non-GAAP) (1) 14.4% 3.4% 9.0%
17.2% 15.9%
Automotive gross margin (GAAP) 24.3% 20.2% 18.9% 22.8%
22.5%
Total regulatory credit revenue recognized -1.1% -4.9% -1.7% -
2.0% -1.6%
Automotive gross margin excluding regulatory credits (non-
GAAP) 23.2% 15.3% 17.2% 20.8% 20.9%
R E C O N C I L I A T I O N O F G A A P T O N O N G A A P
F I N A N C I A L I N F O R M A T I O N
(Unaudited)
(1) Adjusted EBITDA margin is Adjusted EBITDA as a
percentage of Total revenues
1
24
In millions of USD 1Q-2013 2Q-2013 3Q-2013 4Q-2013 1Q-
2014 2Q-2014 3Q-2014 4Q-2014 1Q-2015 2Q-2015 3Q-2015
4Q-2015 1Q-2016 2Q-2016 3Q-2016 4Q-2016
87. Net cash provided by (used in) operating activities (GAAP) 64
(38) 102 130 60 (2) (28) (86) (132) (160) (203) (30) (250) 150
424 (448)
Capital expenditures (58) (41) (76) (90) (141) (175) (284) (369)
(426) (405) (393) (411) (217) (294) (248) (522)
Free cash flow (non-GAAP) 6 (79) 26 40 (81) (177) (312) (455)
(558) (565) (596) (441) (467) (144) 176 (970)
In millions of USD 1Q-2017 2Q-2017 3Q-2017 4Q-2017 1Q-
2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019
4Q-2019
Net cash (used in) provided by operating activities (GAAP) (70)
(200) (301) 510 (398) (130) 1,391 1,235 (640) 864 756 1,425
Capital expenditures (553) (959) (1,116) (787) (656) (610)
(510) (325) (280) (250) (385) (412)
Free cash flow (non-GAAP) (623) (1,159) (1,417) (277) (1,054)
(740) 881 910 (920) 614 371 1,013
In millions of USD 1Q-2017 2Q-2017 3Q-2017 4Q-2017 1Q-
2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019
4Q-2019
Net cash provided by (used in) operating activities - TTM
(GAAP) 56 (294) (1,019) (61) (389) (319) 1,373 2,098 1,856
2,850 2,215 2,405
Capital expenditures TTM (1,618) (2,282) (3,150) (3,415)
(3,518) (3,169) (2,563) (2,101) (1,725) (1,365) (1,240) (1,327)
Free cash flow - TTM (non-GAAP) (1,562) (2,576) (4,169)
(3,476) (3,907) (3,488) (1,190) (3) 131 1,485 975 1,078
A D D I T I O N A L I N F O R M A T I O N
WEBCAST INFORMATION
Tesla will provide a live webcast of its fourth quarter and full
88. year 2019 financial results conference call beginning at 3:30
p.m. PT on January 29, 2020, at ir.tesla.com. This webcast will
also be available for replay for approximately
one year thereafter.
CERTAIN TERMS
When used in this update, certain terms have the following
meanings. Our vehicle deliveries include only vehicles that have
been transferred to end customers with all paperwork correctly
completed. Our energy product
deployment volume includes both customer units installed and
equipment sales; we report installations at time of
commissioning for storage projects or inspection for solar
projects, and equipment sales at time of delivery.
"Adjusted EBITDA" is equal to (i) net income (loss)
attributable to common stockholders before (ii) interest
expense, (iii) (benefit) provision for income taxes, (iv)
depreciation, amortization and impairment and (v) stock-based
compensation, which is the same measurement for this term
pursuant to the performance-based stock option award granted
to our CEO in 2018.
NON-GAAP FINANCIAL INFORMATION
Consolidated financial information has been presented in
accordance with GAAP as well as on a non-GAAP basis to
supplement our consolidated financial results. Our non-GAAP
financial measures include non-GAAP net income
(loss) attributable to common stockholders, non-GAAP net
income (loss) attributable to common stockholders on a basic
89. per share basis, Adjusted EBITDA, Adjusted EBITDA margin,
free cash flow and non-GAAP automotive gross
margin. Management believes that it is useful to supplement its
GAAP financial statements with this non-GAAP information
because management uses such information internally for its
operating, budgeting and financial planning
purposes. These non- as well as comparisons to the operating
results of other companies. Management also believes that
presentation of the non-GAAP financial measures provides
useful information to our investors regarding our financial
condition and results of operations because it allows investors
greater transparency to the information used by
Tesla management in its financial and operational decision-
making so that investors can see through the eyes of Tesla
management regarding important financial metrics that Tesla
management uses to run the business as well as
-GAAP information is not prepared under a comprehensive set
of accounting rules and therefore, should only be read in
conjunction with financial information reported
-GAAP financial information is provided above.
FORWARD-LOOKING STATEMENTS
duction, volumes, demand, deliveries, pricing, features and/or
timing of existing and future Tesla products
and technologies such as Model 3, Model Y, Tesla Semi,
Cybertruck, Tesla Roadster, Autopilot and Full Self Driving
features, in-vehicle software features, and our energy products
such as Megapack, Solarglass Roof and subscription
90. solar; statements regarding market opportunities for Tesla
products and services; statements regarding growth in service
and repair capabilities; statements regarding revenue, expenses,
cash availability and generation, cash flow,
gross and operating margin, spending, and profitability targets;
statements regarding productivity improvements, cost
reductions and capacity expansion plans; statements regarding
construction, expansion, ramp and/or hiring at
the Fremont Factory, Gigafactory Shanghai, Gigafactory New
York and a planned Gigafactory in Berlin, Germany, including
cost, timing -
uncertainties. These forward- and uncertainties, actual results
may differ materially from those projected. The following
important
factors, without limitation, could cause actual results to differ
materially from those in the forward-looking statements: the
risk of delays in the manufacture, production, delivery and/or
completion of our vehicles and energy
products and product features, including Model 3 and our
autonomous driving features; our ability to grow our
production, sales, delivery and servicing capabilities, and
manage future growth effectively, especially internationally;
et acceptance of and demand for our vehicles, including future
vehicle models such as Model Y; the
ability of suppliers to meet quality and part delivery
expectations at increasing volumes, especially with respect to
our high-volume models; our ability to sustain and further grow
our ramp of battery cell, energy product and
91. product component production at Gigafactory Nevada; our
ability to ramp Gigafactory Shanghai in accordance with our
plans; any failures by Tesla products to perform as expected or
if product recalls occur; our ability to continue
to reduce or control manufacturing and other costs; competition
in the automotive and energy product markets generally and the
alternative fuel vehicle market and the premium vehicle markets
in particular; our ability to execute
on our evolving strategy for product sales, service, charging and
other customer infrastructure; the unavailability, reduction or
elimination of government and economic incentives for electric
vehicles and energy products; potential
difficulties in performing and realizing potential benefits under
definitive agreements for our existing and future manufacturing
facilities; our ability to attract and retain key employees and
qualified personnel; our ability to maintain
the security of our information and product systems; our
compliance with various regulations and laws applicable to our
operations and products, which may evolve from time to time;
risks relating to our indebtedness and financing
strategies; and adverse foreign exchange movements. More
information on potential factors that could affect our financial
results is included from time to time in our Securities and
Exchange Commission filings and reports,
-Q filed with the SEC on October 29, 2019. Tesla disclaims any
obligation to update information contained in these forward-
looking statements whether as a result of new information,
future events, or otherwise.
92. 25
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Tesla: Disruptor or Sustaining Innovator
Dr. Salma Ahmad
Department of Business Administration, Aligarh Muslim
University,
Email: salmaahmed6[at]rediffmail[dot]com
Mohd. Azmi Khan
Department of Business Administration, Aligarh Muslim
University,
Email: azmikhan201[at]gmail[dot]com
Abstract
Tesla Inc (formerly Tesla Motors) is a pioneer of the first
highway legal serial production all-
93. electric car to use lithium-ion battery cells. Tesla launched
Roadster, the first luxury electric
car in the world in 2008 which received a humongous response.
Initially, the customers were
the affluent few. Tesla later launched less costlier versions
such as the Model S, the Model-
X and the Model-3 to target the mass market. With the
introduction of Roadster, Tesla did
not compete within the confines of the existing industry or
attempt to steal customers from
the existing automobile rivals; but, developed an uncontested
market space that made the
competition irrelevant. It created a Blue Ocean, a previously
unknown market space. The
objective of the case is to develop conceptual clarity of what a
Blue Ocean is, how it is
different from a Red Ocean, analyze whether Tesla created a
Blue Ocean. The case would
also help discuss the future strategy for the company.
Key words: Blue Ocean, electric car, innovation,
transformation, competition
Background of the Case
94. Across the world, people are
becoming increasingly concerned about
the environment. Sustainability has
become a buzz word in the corporate
sector as well as in academic literature.
People are becoming conscious of the
impact pollution has on the environment
and of the fact that transportation is a
major contributor to it. Transportation is
the second largest source of carbon
emission in the world. Electric vehicles1
(EVs) have zero emission potential as EVs
produce zero direct emissions and plug-in
hybrid electric vehicles (PHEV) produce
zero tail pipe emissions when they are in
all-electric mode, but they can produce
Journal of Case Research Volume X
95. Issue 01
evaporative emissions. Powering EVs
through solar charging stations could
considerable reduce greenhouse gases
emission of vehicle. In 2008, Tesla Motors
launched Roadster, the first luxury electric
car. By the introduction of the first electric
vehicle, it created a Blue Ocean, a
previously unknown market space.
History of Electric Vehicles (EV)
The very first EV in a very crude
form was appeared on the road in 1902.
The credit for this can be attributed to
Walter C Baker. It was called the
This became quite popular and
many different versions appeared on road
until Henry Ford launched Model-T in
96. 1908. Model-T was manufactured on the
assembly line, thus drastically lowering
the price of an automobile. Model-T made
automobiles affordable hich were earlier
only the prerogative of the rich and
affluent. Interest in EVs resurfaced in the
early 1970 s due to increasing fuel prices
and launching of NASA Lunar Roving
Vehicle which was an EV. It was round
this time that Sebring -Vanguard launched
an electric vehicle and became the 6th
largest automaker in the world in 1975.
However, due to the limitation of range as
compared to fuel-based cars, it gradually
lost its prominence by 1990s.
With environmental consciousness
gaining ground all over the world, interest
in EVs has grown. Government
97. regulations were also introduced in this
regard giving a further thrust to acceptance
of EVs. Automobile manufacturers started
launching EVs. Chrysler, Ford, GM,
Honda, Toyota all launched EVs for the
automobile market. Nissan Leaf was the
first all-electric, zero emission vehicle
produced for the mass market.
Since the introduction of electric
vehicle Tesla has come a long way. It
started with the launch of the Model S
which was very expensive but later it
launched low-cost versions for the mass
market. It has better acceptance than the
EVs which were launched earlier because
Tesla provides a larger driving range
,infrastructure for charging, facility for
98. free charging between cities, and also on
building back-up battery supply. It also
provides infotainment which is not an
essential feature of a vehicle but it is what
desire. Additionally, it has
adopted a unique distribution model of
both direct and online sales
Hybrid Electric Vehicles Vs. Plug-in
Hybrid Electric Vehicles
Hybrid Electric Vehicle (HEV) is a
vehicle that no longer depends solely on
Journal of Case Research Volume X
Issue 01
the internal combustion engine (ICE) to
propel the engine, but rather uses an
electric motor to propel the vehicle using
99. electricity. While Plug-in Hybrid Electric
Vehicles (PHEVs), are also called range-
extended electric vehicles because the
vehicles always have gasoline as a
potential back-up that can extend the
driving range. are equipped with
a larger and more powerful battery
compared to HEVs which can be
recharged at the electricity grid. Both
HEVs and PHEVs are energy-efficient and
environment-friendly hybrid electric
vehicles that do not depend solely on an
internal combustion engine as their only
propulsion mechanism, instead they use
bidirectional power flow. However, they
have their fair share of differences in terms
of efficiency, operating cost, maintenance
cost, range, emissions, etc as shown in
100. Exhibit 1.
Tesla Motors-The Company
Tesla Inc is an American
multinational corporation which is
popularly known for the manufacture of
electric vehicles (EVs).Tesla Inc (formerly
Tesla Motors) was established in the year
2003. Based in Palo Alto, California, it
was founded by Martin Eberhard and Marc
Tarpenning who wanted to build cars for
people who had a passion for driving. In
2008, Tesla launched the first ever electric
car-the Roadster and gained popularity the
world over. Tesla, the company also
specializes in the manufacture of lithium-
ion battery energy storage, and residential
photovoltaic panels (through the
subsidiary company Solar City) energy
101. storage and solar panels. It also sells Tesla
Power wall and Power pack batteries, solar
panels, and solar roof tiles.
Tesla Motors started small with a
little over 80 employees, which included
teams in California, the United Kingdom,
and also Taiwan. The employees are
drawn from diverse industry and expertise
such as electronics, automotive, and
software.
The Product
Tesla offered different models such
as Roadster, and currently sells the Model
S, Model X, Model 3. The company is also
accepting bookings now for the upcoming
Model Y. The power of the car is derived
from its Lithium-ion Energy Storage
102. System, or a battery pack, which can be
charged in minimum time. These vehicles
conform to US safety standards,
environment, and durability standards. The
cars have in-built safety features like the
essential airbags, front crumple zones, side
impact protection, and 2 and ½ mph
bumpers.
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Green Car-Green Initiative
Tesla is deep in the green car
industry. This is the untapped market
segment it is focusing on. It has devoted
all its research and development (R&D)
efforts for this purpose. Further, Tesla is a
pioneer and a market leader of EVs and
103. has about a five-year head start over other
companies. While other companies are still
evolving and developing their green car
designs, Tesla has already made a name
and a brand for itself. It is believed that
the future is of electric cars which would
be dependent on renewable sources of
energy and Tesla is all in to derive benefits
from this trend.
Transformation of the Auto-Industry
Tesla has had a significant impact
on the auto industry and has been able to
transform the auto industry. In time, all
automobile manufacturers would be
delivering EVs. Tesla has also introduced
the concept of self-driving. It would be
remembered as an innovator who
104. transformed the automobile industry, and
other automobile manufacturers followed
suit (see Exhibit-2). The first product
launched by Tesla was Roadster, which
was priced at $1,09,000. This was
prohibitively expensive for the common
man. As such, its target audience
(consumers) was only the affluent few,
who were conscious of eco-friendliness.
This included businessmen, politicians and
celebrities. Later, it launched other lower
priced brands. The Model-S was priced at
$69,900. This is the flagship
Model. The Model-X, and the Model-3,
priced at $35,000, followed. Model-3 is
aimed at a higher-volume segment. This
received huge acceptance. It delivered
around 1,03,000 vehicles in the fiscal year
105. 2017 and 40,740 vehicles in the second
quarter of 2018, and during the third
quarter of 2018, Tesla delivered around
83,500 units, of which some 55,840 were
deliveries of Tesla's Model 3, about 14,470
were Model S, and some 13,190 were
deliveries of Model X (see Exhibit-3).
Product Strategy
Tesla followed a strategy which is
typically adopted by the technological
industry where initially an expensive
product is launched targeting the affluent
buyers and then launching products for the
mass market. It followed a typical
technological-product life cycle. In the
words of its CEO Elon Musk,
technology in any field takes a few
versions to optimize before reaching the
106. mass market, and in this case, it is
competing with 150 years and trillions of
dollars spent on gasoline
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Vertical Integration
The automobile industry is largely
dependent upon its component suppliers,
and only engine manufacturing and final
assembly are undertaken by the
manufacturer. Companies typically
outsource component production to the
extent of over 90 percent. Vertical
integration is, in fact, rare in the
automobile sector. In general, the auto
107. industry does not have a single source; an
OEM would have a range of suppliers.
production strategy
includes a high degree of vertical
integration. This includes component
production and proprietary charging
infrastructure. The company has large
factories to bring economies of scale. It
builds electric power train components for
vehicles from other automakers, like
Daimler AG, and Toyota. Tesla has a
limited number of suppliers and in most
cases, a single supplier for certain
components. Consequently, the company
has much more supply-chain volatility as
compared to most automakers.
Sales Strategy
108. Automobile manufacturers have a
large network of dealers for distribution to
their customers. They are dependent upon
their dealers for sales of their products.
Rather Tesla does not resort to the
conventional norm of selling through an
extensive dealer network. It has adopted a
unique strategy and sells its vehicles
through company-owned showrooms as
well as online.
Technology Strategy
The focus of technology
strategy is on pure-electric propulsion. It
picks up approaches from the technology
industry and transfers them to the
transportation industry such as online
software updates.
109. Acquisition Strategy
Tesla acquired Solar City in the
year 2016. Through this it ventured into
the manufacturing of solar panels, solar
roof tiles, and battery storage. These
batteries complement the generation
profile of solar panels that charge only
during the day when the sun is shining. It
stores electricity for use on cloudy days
and at night, which is needed to provide
the on-demand electricity consumers are
used to.
The company has also set up a
large factory to produce battery at Nevada
in partnership with Panasonic. The plant
would undertake all aspects of battery
production, from raw material to battery
110. Journal of Case Research Volume X
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pack. Further, the company also intends to
sell its OEM batteries for non-automotive
applications to increase production volume
and reduce per unit cost of production.
Technical Differences
Model S, its first electric
vehicle, is unique. It has a 17-inch touch
screen infotainment system which has
become an industry benchmark for
automotive display integration. It also has
an optoelectronics display, which is the
same technology which is used in
smartphones and tablets. The system runs
on a Linux-based operating system which
111. offers navigation and also computes at a
speed which is at par with most other
systems. The system also includes an
embedded 3G modem that runs on
broadband data. This can receive software
updates over the air and controls all the
functions of infotainment, audio,
navigation, Bluetooth phone, and even
vehicle settings like windows, door locks,
sunroof, trunk release, traction control,
headlights, steering and also suspension
settings.
Further, a 12.3 inch fully digital
instrument cluster is placed in front of the
driver with a processor which is used to
handle a diverse range of graphics, and
content for the driver. The only familiar
driver components are the steering wheel,
112. pedals, and transmission shifter. The
system is a class of its own, and Tesla has
created a benchmark for the automobile
industry.
Manufacturing Model
Tesla has a unique manufacturing
model. It adopted the electronic
manufacturing services (EMS) model of
production that is a norm not in the
automobile industry but the consumer
electronics industry. Therefore, it is often
seen as being a technology company than
a traditional automobile company. It
entered into a contract with leading EMS
provider to build its central infotainment
system, instrument cluster, and several
other systems. This meant that Tesla
113. needed to internalize much of the
hardware and software development, and
the systems integration. The company had
an advantage in this regard as it had
recruited its engineers from all over
Silicon Valley. Since it adopts a design
and builds model, it has direct control over
the finished product, more control over the
user experience and over quality and
performance. This can be said to be its
competitive advantage.
Journal of Case Research Volume X
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Design Innovation
Tesla expedited the pace of
114. hardware, software, services, and
application development and re-think
design innovation. Tesla has a competitive
advantage over design innovation. It
recruited many design engineers from
various leading technology companies to
design and build the car. software
design is state-of-the-art. It can update
vehicle software over-the-air (OTA) with
ease. And as consumers and government
pursue eco-friendly and low-emission
transport options, Tesla stands to have an
upper hand.
Design thinking2 focuses on
customer needs and designs a product
accordingly. It can be said to be a
customer-focused innovation. Tesla has
embraced the concept of design thinking.
115. Tesla believes in re-designing a vehicle
about its energy source (electric) and its
driver (based on artificial intelligence). It
did not think about Tesla as a vehicle in
isolation but how the vehicle could impact
the planet. The EV is much more than
transportation. It is about creating a
sustainable planet. It thought about EV as
not something that functions within an
ecosystem but something that can
transform that ecosystem.
Tesla and Artificial Intelligence (AI)
Autopilot uses artificial
intelligence3 to drive a Tesla vehicle with
minimal assistance. This is also another
innovation that other automobile
manufacturers are trying to emulate and
116. trying to keep pace with the innovation of
Tesla.
Tesla has used machine learning4
in its Autopilot program. It used to it
handle a large amount of data created by
its fleet of vehicles and the Autopilot
sensor suite on those vehicles.
Customer Experience
Though the products offered, Tesla
is providing a different customer
experience that other automobile
manufacturers would find difficult to copy
and compete with. It is often said that
people are not buying when they
buy Tesla, but they are buying
experienc And the key elements of the
117. Tesla experience include the buying
process, the lack of refueling cost, the lack
of mandatory service checkups, the air
improvements, lower depreciation, and the
driving experience.
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Tesla-An Innovator and Market Leader
Tesla, focus was on climate
change. Tesla is the key driver of
innovation, and these innovations have
been around sustainable mobility and
automotive technology. Consumers are
increasingly becoming conscious of using
environment friendly product, and Tesla
118. tapped on this sentiment and has become
one of the most recognizable brands in the
world. It has been rated as the best car
brand in terms of technology and
innovation (see Exhibit-4).
Investor confidence has also grown
and has resulted in an increase in its stock
prices by tenfold. It has become a leader,
and many companies are following its
lead. Due to its incredible market value,
people have included Tesla among the Big
Three. People have started calling Tesla,
GM, and Ford as the "New Big Three". As
of 2017, Tesla was amongst the top 10
most valuable car brands worldwide,
valued at 4.4 billion U.S. dollars. The
reason why the automaker made it into the
119. ranking was large because of its top-
selling model, which is Model-S. The
model beat out decades of brand building
and production capacity of other giant
automakers.
Brian Loh, a partner at McKinsey
and Company, said, is at an
-time in the auto industry right
now, which is significant because
historically, the auto industry is very slow
to so much change
happening that the automakers are trying
to make sure as successful in the
next era as they were in the
electronics innovation trend with the
industry has been going on for a while, but
I think accelerating. The mega trends
we read about in the papers every day of
120. automotive driving, electrification,
connectivity, shared mobility. These are
huge industry-shaping trends, and they are
having a big impact in the industry at the
OEM level and the supplier level, and
leading to a lot of big And
Tesla has taken the lead, proved to be a
disruptive innovator and making the
industry to follow suit.
Tesla is today acknowledged being
one of the most technologically innovative
companies dealing with climate change.
The focus on environmental
sustainability, safety, and innovation made
its electric cars immensely popular and got
an overwhelming response. It is an
innovator, and this innovation is its
greatest strength. It has challenged the
121. Journal of Case Research Volume X
Issue 01
norms and influenced and transformed
what kinds of cars other automobile
manufacturers should make. It has also
transformed what kind of cars consumers
should drive. Tesla has been an inspiration
in the industry and demonstrated that year-
old convention could be defied.
122. 1 An electric vehicle (EV) is a vehicle which uses one or more
electric motors for propulsion. EVs store
electricity in an energy storage device, such as a battery.
Electricity can be used as a transportation fuel to power
battery electric vehicles (EVs).
2 Design thinking is process of creative problem solving. It has
a human-centered core and encourages
organizations to focus the people needs..
3 Artificial intelligence (AI) is the ability of a digital computer
or computer-controlled robot to perform tasks
commonly associated with intelligent beings.
4 Machine learning is an application of artificial intelligence
(AI) that provides systems the ability to
automatically learn and improve from experience without being
explicitly programmed.
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Exhibit 1:
Hybrid Vehicles Plug-in Hybrid Vehicles
HEV is a vehicle whose propulsion energy is
123. acquired from more than two types of energy
sources, one of which is electric.
PHEVs are vehicles equipped with a large
battery which can be plugged into the
national grid or home outlets.
The battery can only be charged via
regenerative braking and can call on gasoline
to extend its range.
The battery can be charged via regenerative
braking as well as by plugging it in any
household 120-volt power outlet.
It reduces the toxic emissions by shutting
down the ICE at idle and restarting it when
needed.
Centralized electricity generation is much
more efficient and products.
Exhibit 2: Other automobile growing interest in electric
vehicles
In 2014, Mercedes approved an investment of over US 4 2
billion for purpose-built electric
vehicles (Source: fool.com)
In 2014, General Motors announced an investment of US $ 449
million for the next generation
of electric vehicles and advanced battery technologies.
(Source:gm.com)
124. In 2015, Ford announced a US $ 4.5 billion investment in EV
technology and 13 new electric
models will be added by 2020. (Source: Ford Annual Report-
2015)
In 2020, Volkswagen would be launching over twenty electric
and plug-in hybrid electric
vehicles, ranging from small-sized cars to large SUVs in China,
its largest market. (Source:
forbes.com)
Exhibit 3: Sales of Tesla depicting number of vehicles
delivered worldwide
Source: www.statistica.com/statistics/502208/tesla-quarterly-
vehicle-deliveries
Journal of Case Research Volume X
Issue 01
Exhibit 4: Perception of best car brands (index score)
Vehicle Index Score %
125. Tesla 33.90
Mercedes Benz 19.70
Toyota 19.50
Ford 19.50
BMW 18.20
Cadillac 18.10
Audi 16.50
Lexus 16.50
Chevrolet 11.30
Acura 11.30
Source: www.statistica.com/statistics/303737/US-car-owner-
perception-of-best-car-brands-
for-innovation/; Opinion Research Corporation, Consumer
Union.
Exhibit 5: Tesla models specification with price
Models Acceleration Range Price
Model Y 3.5-5.9 seconds 280-300 miles $39,000-47,000
Model 3 5.1-5.6 seconds 220-310 miles $35,000-44,000
Model S 4.1-4.3 seconds 259-335 miles $69,500-97,500
Model X 2.7-6 seconds 200-325 miles $80,000-1,44,000
Roadster 4.2-8.8 seconds 620 miles $2,50,000-2,00,000
Source: www.tesla.com
126. Journal of Case Research Volume X
Issue 01
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Journal of Case Research Volume X
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