Why Tesla.. A Success !!
"Tesla" a word which does not need an introduction today, is an American automotive, lifestyle & clean / renewable energy company which was originally founded in 2003. The name "Tesla" is derived from the name of a famous inventor & electric engineer Nikolas Tesla. This brand has been in losses since the very beginning and could not make money the way investors expects. However; they have been in a position to build the value of this brand by staying in losses for over a decade. One should be thinking, how on earth the shares of a loss making company can touch sky. Well, this is really possible in the world of innovation & creativity; where quality & experience comes before money.
There was a time in 2010 when Tesla was valued at $2 Billion against $90 Billion valuation of 2 of its major rivals combined i.e. General Motors & Ford. 10 years later in 2020, Tesla is been valued at $154 Billion where the same 2 rivals are valued at $60 Billion. Isn't it interesting? It took Tesla a decade of innovation & years of losses to set this benchmark in Electric Automobile Industry.
It will not be wrong to say that Tesla is a Technology company. This fact & idea got lime-light when the share of Tesla jumped up by more than 300% within a year during 2013. It was the time when the big companies from Technology sector shot up. Tesla plotted a similar pattern too.
It will not be wrong to say that Tesla is a Technology company. This fact & idea got lime-light when the share of Tesla jumped up by more than 300% within a year during 2013. It was the time when the big companies from Technology sector shot up. Tesla plotted a similar pattern too.
When Figures Speaks about Tesla (A Finance Aspect)
Tesla has been consistently spending over 79% of its revenues on operations as direct cost and over 39% in Research & Development as indirect cost to come with quality & innovative product. Only 3% of the times they spent more than revenue in operation cost, while; 11% of the times they spent more than revenue in Research & Development. It makes things clear about what's been the major area of focus for Tesla.
It can also be seen that Tesla has been spending more in Research & Development (151% of Revenue) than automative (78% of Revenue) & operations continuously before 3rd Quarter of year 2012. This sounds strange & makes Tesla more of an IT company instead of an Automotive one. Well, there was a big motive behind that much of spending in research. It was the big launch of the "Super Charger Network" across glob scheduled in Q3, 2012.
It was undoubtedly a big success & achievement for Tesla. Stock market too jumped up right after that launch. It was Quarter 2 for 2013 when stock in NYSE experienced a bullish behaviour & observed more than 150% of growth compared to last quarter, which continued to jump up by 77% 3rd quarter. That was the point where Tesla started boosting its spendings in operations to keep up with the high demand and started reducing its budget for Research & Development over time. Figures says that the spending in Research & Development post launch has been reduced to 20% of revenue & now since last few quarters of 2019 its been reduced to 5% of revenue.
Tesla has also been boosting its liquidity since then to maintain adequate cash flow in the system to invest in marketing & advertisements & to be in a strong position than its rivals. It can also be observed how Tesla managed to boost, retain or keep up with the liquidity during major launch across globe. This is where the efficiency comes in to be in a position to forecast well & to avoid any financial crisis in short run.
It was undoubtedly a big success & achievement for Tesla. Stock market too jumped up right after that launch. It was Quarter 2 for 2013 when stock in NYSE experienced a bullish behaviour & observed more than 150% of growth compared to last quarter, which continued to jump up by 77% 3rd quarter. That was the point where Tesla started boosting its spendings in operations to keep up with the high demand and started reducing its budget for Research & Development over time. Figures says that the spending in Research & Development post launch has been reduced to 20% of revenue & now since last few quarters of 2019 its been reduced to 5% of revenue.
Tesla has also been boosting its liquidity since then to maintain adequate cash flow in the system to invest in marketing & advertisements & to be in a strong position than its rivals. It can also be observed how Tesla managed to boost, retain or keep up with the liquidity during major launch across globe. This is where the efficiency comes in to be in a position to forecast well & to avoid any financial crisis in short run.
The SWOT Analysis
Automotive industry being a very diversified market with a lot of players in ground, Tesla is facing cut throat competition from its rivals all across glob. Largest enemies of Tesla are General Motors, Ford & Hyundai Motors. Tesla's dedication towards technology, innovation, self owned stores & super charger's network is what's keeping Tesla on track with other players. However, Tesla really needs to work on building its network in Asian markets & other global markets to make an impact. Dealerships & various channels are other way around to expend & reach global as they have been using their self owned stores across glob instead of being dependent on other channels.
Despite of all these achievements, Tesla still have some challenges in self-driving competency which is its major strength too. It will take a decade for people to adopt that level of technology. Asian markets are still full of Diesel & Petrol based vehicles. Change in human behaviour is necessary to adopt anything new; and it is about Tesla, where every single thing is new !!
