{"id":2686,"date":"2023-07-21T03:44:42","date_gmt":"2023-07-21T03:44:42","guid":{"rendered":"https:\/\/www.syfe.com\/au\/learn\/?p=2686"},"modified":"2023-08-04T07:07:24","modified_gmt":"2023-08-04T07:07:24","slug":"tesla-deep-dive-2023","status":"publish","type":"post","link":"https:\/\/www.syfe.com\/au\/learn\/tesla-deep-dive-2023\/","title":{"rendered":"Tesla Deep Dive 2023"},"content":{"rendered":"\n
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In this series of company deep dives, we analyse some of the world\u2019s most prominent and impressive companies – with the aim of unpacking what makes them great. These deep dives will ultimately help investors make more informed trading decisions as well as get a better understanding of the key drivers of share price performance behind some of the world\u2019s most important companies.<\/em><\/p>\n\n\n\n

The World\u2019s Most Valuable Car Company<\/strong><\/h2>\n\n\n\n

From January to June 2023 short sellers got crushed betting against Tesla. They racked up losses of $12.68 billion as the stock turned parabolic, with the automaker\u2019s shares now up 143% YTD. <\/p>\n\n\n\n

At its closing price of $262.90 per share on 21 July 2023, Tesla boasts a market capitalisation of $33.3 billion and counts itself as the most valuable car company in the world. In fact, Tesla is more valuable than the world’s next nine largest automakers combined – on a list that includes Toyota, Mercedes, Volkswagen, and Ford. <\/p>\n\n\n\n

Ranking<\/strong><\/td>Company<\/strong><\/td>Market Cap<\/strong><\/td>Share Price<\/strong><\/td><\/tr>
1<\/td>Tesla<\/td>$833.3B<\/td>$262.90<\/td><\/tr>
2<\/td>Toyota<\/td>$223.2B<\/td>$163.28<\/td><\/tr>
3<\/td>Porsche<\/td>$114.9B<\/td>$126.11<\/td><\/tr>
4<\/td>BYD<\/td>$104.1B<\/td>$36.88<\/td><\/tr>
5<\/td>Mercedes<\/td>$85.9B<\/td>$80.25<\/td><\/tr>
6<\/td>Volkswagen<\/td>$79.9B<\/td>$139.13<\/td><\/tr>
7<\/td>BMW<\/td>$79.7B<\/td>$120.76<\/td><\/tr>
8<\/td>Ferrari<\/td>$58.4B<\/td>$318.66<\/td><\/tr>
9<\/td>Stellantis<\/td>$57.8B<\/td>$18.50<\/td><\/tr>
10<\/td>Ford<\/td>$56.4B<\/td>$14.03<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Since its inception Tesla has grappled with scandals, recalls, share price collapses, SEC lawsuits, and production hell. The automaker seemingly has a habit of flirting with disaster only to turn things around precisely at the right moment. <\/p>\n\n\n\n

Much of that has been put down to Elon Musk – Tesla\u2019s mercurial, brilliant, and complex Founder and CEO. Musk has been the driving force behind the outsized success of Tesla – building it into one of the world\u2019s most valuable companies.<\/p>\n\n\n\n

In our deep dive of Tesla we\u2019ll look at four parts behind the success of the electric vehicle giant: (1) popularity among consumers<\/a>, (2) business fundamentals<\/a>, (3) leadership excellence<\/a>, and (4) optionality<\/a>. The broader aim of this deep dive is to help investors ponder a more fundamental question about Tesla: Why has the market historically valued the automaker so richly when compared to its competitors? <\/p>\n\n\n\n

Part One: Popularity<\/strong><\/h2>\n\n\n\n

Since 2009 Tesla has sold over 1.9 million electric vehicles, breaking into a capital heavy industry that many would not attempt to breach. That success and popularity continues to snowball. <\/p>\n\n\n\n

According to analysts, the Tesla Model Y was the best selling car in the first quarter of 2023, with the company booking 267,000 sales in that period. In the second quarter of 2023 Tesla delivered over 466,000 vehicles and produced 479,700 more. Of those total Q2 deliveries, 19,200 were from the automaker\u2019s high margin Model S\/X, while the majority – 446,915 – were from its more affordable Model 3\/Y lineup. <\/p>\n\n\n

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Source: Wikipedia; A white Tesla Model 3.<\/em><\/p>\n\n\n\n

This persistent and long standing popularity has material business implications. In the past, Musk has argued that Tesla has been a supply constrained business, meaning that the automaker hasn\u2019t been able to manufacture enough vehicles to keep pace with consumer demand. <\/p>\n\n\n\n

Yet as Tesla has ramped its manufacturing capacity to meet demand, it hasn\u2019t seen its revenue decelerate. With Tesla looking to take market share from competitors through price cuts, we\u2019ve seen Tesla\u2019s revenue spike to record highs. In the second quarter of 2023 the automaker’s revenue came in just shy of $25 billion, a first for the company and warning shot to the industry at large. <\/p>\n\n\n\n

Part Two: Fundamentals <\/strong><\/h2>\n\n\n\n

Tesla\u2019s immense popularity has translated into resounding business success, with the automaker\u2019s operating performance moving sharply up and to the right over the last five years. <\/p>\n\n\n\n

Tesla Remains in Growth Mode <\/strong><\/h3>\n\n\n\n

In terms of revenue, the automaker has continued to notch up exceptional top line growth over the last five years, growing its revenue 279% from $21.46 billion to $81.5 billion, from 2018 to 2022. <\/p>\n\n\n\n

Tesla Revenue<\/strong><\/h3>\n\n\n\n
Period<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td>2020<\/strong><\/td>2021<\/strong><\/td>2022<\/strong><\/td><\/tr>
Revenue<\/td>$21.46B<\/td>$24.57B<\/td>$53.82B<\/td>$53.82B<\/td>$81.5B<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Tesla Production <\/strong><\/h3>\n\n\n\n
Period<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td>2020<\/strong><\/td>2021<\/strong><\/td>2022<\/strong><\/td><\/tr>
Vehicles Produced <\/td>245,491<\/td>367,656<\/td>499,647<\/td>936,222<\/td>1,313,851<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Underpinning Tesla\u2019s production and subsequent revenue growth has been a significant ramp up in manufacturing capacity, with Tesla building out a number of what it calls Gigafactories. In a nutshell, a Gigafactory is a specialised and large-scale manufacturing hub where Tesla puts together its electric vehicles, batteries, and more. <\/p>\n\n\n\n

Even as Tesla scales up its manufacturing capacity, the company has been able to translate growth into profitability, flipping a near billion dollar loss in 2018 to a significant profit in 2022.  <\/p>\n\n\n\n

Tesla Net Profit<\/strong> <\/h3>\n\n\n\n
Period<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td>2020<\/strong><\/td>2021<\/strong><\/td>2022<\/strong><\/td><\/tr>
Profit<\/td>($976M)<\/td>($870M)<\/td>$690M<\/td>$5.52B<\/td>$12.58B<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Tesla has Operating Leverage where other Automakers do not <\/strong><\/h3>\n\n\n\n

Behind these profits is deep operating leverage on Tesla\u2019s part. Indeed, while many competitors outstrip the EV giant in terms of production capacity and revenue – when including the production of EV and ICE vehicles – Tesla outshines them in terms of the gross margins it earns on the EVs it sells. <\/p>\n\n\n\n

Using Q3 FY222 as a snapshot, Tesla generated $15,653 in gross profit on a per vehicle basis. In terms of comps, that\u2019s more than double that of Volkswagen, four times that of Toyota, and five times that of Ford – based on a Reuters analysis. This comparison speaks to the EV-specialised manufacturing advantages that Tesla has cultivated over the medium-term, primarily through the construction of its Gigafactories and the company\u2019s cost discipline-oriented culture. <\/p>\n\n\n

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Source: Tesla; Tesla’s Nevada Gigafactory.<\/em><\/p>\n\n\n\n

To illustrate this point further, between 2018 to 2022, Tesla consistently expanded its automotive gross margins, as the automaker maintained pricing power in market and benefited from lower costs stemming from its EV manufacturing advantages. <\/p>\n\n\n\n

Automotive Gross Margin <\/strong><\/h3>\n\n\n\n
Period<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td>2020<\/strong><\/td>2021<\/strong><\/td>2022<\/strong><\/td><\/tr>
Gross Margin<\/td>23%<\/td>21%<\/td>25.6%<\/td>29.3%<\/td>28.5%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Part Three: Leadership <\/strong><\/h2>\n\n\n\n

Musk might have a prickly reputation, but there should be little doubt that he is a first class operator. Musk\u2019s leadership and strategic acumen has grown Tesla into the most valuable car company in the world and one of the largest listed companies.<\/p>\n\n\n\n

In the realm of entrepreneurship, many have got rich scaling software. Fewer have got rich building real things in the real world. Musk has spearheaded a manufacturing marvel: taking the business from little more than an idea to an automotive heavyweight that produced 479,000 EVs in Q2 alone. <\/p>\n\n\n\n

Not only has Musk taken the company from one to zero, but he has an undeniable knack for hiring strong talent, who tend to stay at the organization for extended periods of time. Here\u2019s a quick take on Musk\u2019s top lieutenants:   <\/p>\n\n\n\n