Telsa 2016 Cas Study

1. Overview of Tesla Motor

Founded with the idea to accelerate the development of sustainable transport industry by bringing compelling high performance green cars to the market in July 2003 by two Silicon Valley engineers Martin Eberhard and Marc Tarpenning, Tesla Motor develops, manufactures and sells electric vehicles and its powertrain components. One year later, Tesla Motor gained the interest of Elon Musk, who is currently its CEO and principal investor. The vehicles received high attention from the public and the media, because they address the high end customer segment, which are new for EVs, and its innovative multi-channel for distribution. Nowadays, Tesla Motors provides power train components for car producers, including Daimler and Toyota, designs and manufactures Model S (Tesla.com, 2014), the first world’s premium zero-emission sedan that became the third best-selling all-electric car in the U.S (HybridCars.com, 2013) and Europe (Pontes, 2014). The company is worth more than $25 billion (Groom, 2014) – roughly half that of General Motors (GM) and has one of the highest growth rate in U.S. This success of the company is contributed to Elon Musk, the CEO and Product Architect of Tesla (Tesla, 2014), who has a very strong vision of company’s future.

1. Financial situation

Having Formula:

Gross Profit Margin = [pic 1]

Based on the statistics shown in case Exhibit 2, profit margins of Tesla Motor from 2011- 2015 are calculated as the following table:

Gross Profit margin illustrates the percentage of revenues available to cover operating expenses and yield a profit. The higher profit margin, the better a company is. The trend should be upward. Based on the above calculation, it can be seen that Tesla Motor had experienced a downward trend in profit margin from 2013 to 2015.

Current ratio= [pic 2]

This ratio shows the company’s ability to pay current debts using assets. A higher current ratio is always more favorable than a lower current one because it means that the company can more easily make current liabilities payments. Tesla Motor‘s current ratio decreased over the years from 1.948 to 0.991 as indicated.

Working capital:[pic 3]

The table shows the fluctuation in the working capital of Tesla Motor from 2011 to 2015. Overall, the working capital decreased rapidly between 2011 and 2015. That means they have less fund to pay their current debts in short term, hard to attract investors and lenders.