Elon Musk is one of the richest people in the world, with his main ownership in Tesla, making him worth more than a hundred billion dollars. The companies founded by Elon Musk range from electric vehicles and renewable energies, with Tesla, rockets, with SpaceX, infrastructure with The Boring Company, and neurotechnology with Neuralink. And in April 2022, Musk acquired Twitter for about $44 billion.
Company / Organization
Business Category
Key Differentiator
Integration Strategy
Tesla, Inc.
Electric Vehicles and Clean Energy
Leading electric vehicle and renewable energy company.
Focuses on the development and production of electric vehicles and sustainable energy solutions to combat climate change.
SpaceX
Aerospace and Space Exploration
Private aerospace manufacturer and spaceflight company.
Advances space exploration and commercial space travel, aiming to make space accessible to humanity.
Neuralink
Neuroscience and Brain-Computer Interfaces
Brain-computer interface technology.
Develops cutting-edge neuroscience technologies, with the goal of enabling direct communication between the brain and computers.
The Boring Company
Infrastructure and Tunneling
Infrastructure and tunnel construction services.
Focuses on tunneling technology and transportation infrastructure to address urban congestion and transportation challenges.
SolarCity
Solar Energy and Clean Technology
Solar energy installation and services.
Offers solar energy solutions for residential and commercial customers, supporting clean energy adoption.
X.com (Former Twitter)
Social Media
Social Media
Acquired by Elon Musk in 2022, Musk is trying to turn former Twitter into an everything app.
After a circuitous route from his home country of South Africa to the United States, Musk secured two internships in Silicon Valley in 1994. One was with an energy-storage start-up, while the other was a game developer company.
The following year, he got accepted into a Stanford University doctorate program but dropped out soon after. He instead chose to capitalize on the booming popularity of the internet and launched his own start-ups including Zip2 and X.com – a precursor to PayPal.
Musk has since gone on to found companies in the exploration, artificial intelligence, aerospace, green energy, and transportation industries.
SpaceX
SpaceX is a space exploration company with a core focus on reusable rockets, space tourism, and satellites that can provide better internet connectivity. Musk created SpaceX out of a need to reduce transportation costs in space and ultimately, facilitate the colonization of Mars.
SpaceX has notoriously lofty ambitions and is never far from the headlines, but the company is making significant progress on its projects. The company recently won a $2.9 billion NASA contract to develop a system for landing astronauts on the moon.
Tesla
Tesla is vertically integrated. Therefore, the company runs and operates Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
Tesla is perhaps the company for which Elon Musk is best known. Through the popularization of electric vehicles, Musk is seeking to make green vehicles more affordable to consumers.
After rolling out the prototype Tesla Roadster in 2005, the company now offers an SUV, sedan, and sports car variant. Tesla’s pick-up truck, dubbed the Cybertruck, is due for production commencement in late 2021.
Tesla has also expanded into non-automatic products, acquiring solar power business SolarCity in 2016. To complement solar systems, Tesla also sells batteries to store generated energy.
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.
OpenAI
OpenAI is an artificial intelligence research lab with a stated goal of creating artificial intelligence that benefits humanity.
Musk has openly stated that he created the company because of the fear of a so-called “intelligence explosion” – or a hypothetical point where artificial intelligence growth becomes unmanageable and poses a threat to humanity.
In 2019, OpenAI transitioned from a non-profit to a for-profit organization. Soon after, it partnered with Microsoft after securing $1 billion in investment funding.
The Boring Company
Musk founded The Boring Company on a whim after being stuck in Los Angeles traffic and lamenting the limitations of two-dimensional transport.
As a result, the company aims to construct underground tunnels that allow easier access from A to B. This includes traffic and freight movement, but it also encompasses better access for pedestrians and utility networks.
The Boring Company was infamous for randomly selling 20,000 flamethrowers to consumers. Critics suggest that the move was a non-dilutive capital raising or publicity stunt, or perhaps both.
Neuralink
Neuralink is a relative newcomer to Elon Musk’s suite of companies. Founded in 2016, the company employs neuroscientists to develop implantable brain-machine interfaces (BMIs).
This important work is intended to give those suffering from paralysis more independence – whether that be through increased mobility, communication, or self-expression.
In 2020 the company released a proof of concept in the form of a pig called Gertrude which had a small computer chip embedded in its brain. However, Musk accepts that it will be some time before the product is safe to use in people.
Twitter
Twitter makes money in two ways: advertising and data licensing. In 2021, Twitter generated $4.5 billion from advertising and $570 million from data licensing. While Twitter generated $5 billion in total revenues, it lost 221 million.
In April 2022, Elon Musk finalized the acquisition of Twitter, in one of the most controversial deals of business history.
Let’s review the timeline.
Musk placed, out of the blue, a bet to take over the whole company. It was April 14th, 2022:
The public records show the whole conversation of the offer Musk made to take over Twitter. Below is the main extract, of the conversation, between Musk and the Twitter’s board, as per SEC Filings, Musk had sent a message to Bret Taylor, Chairman of the Twitter’s board:
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.
However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.
Twitter has extraordinary potential. I will unlock it.
Elon Musk
In a follow-up text, Musk highlighted:
As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.
After the past several days of thinking this over, I have decided I want to acquire the company and take it private.
I am going to send you an offer letter tonight, it will be public in the morning.
Are you available to chat?
Elon Musk
As a final message to the Twitter’s board, Musk highlighted:
1. Best and final
a. I’m not playing the back-and-forth game.
b. I have moved straight to the end.
c. It’s a high price and your shareholders will love it.
d. If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.
i. This is not a threat, it’s simply not a good investment without the changes that need to be made.
ii. And those changes won’t happen without taking the company private.
2. My advisors and my team are available after you get the letter to answer any questions
a. There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.
Elon Musk
In short, Musk had offered to purchase Twitter, for $54.20 per share, a 54% premium, before Musk had started to buy Twitter shares.
While the offer was good from a valuation standpoint, the board tried to fight it. Also influential business commentators were against it.
This is one of those where they are literally not doing their job, there’s no fiduciary responsibility if they just say, ‘you know what, we take it, there are times when individual directors are opened up for a level of lack of fiduciary that I think crosses the line. This crosses the line.
Similar comments came from Galloway:
"I don't think this is a serious offer and the market doesn't think this is a serious offer," @profgalloway says
Throughout the deal, none expected it to go through so quickly. Indeed, given the controversy around Twitter, most business people thought this would have turned into a few months’ fight over Twitter’s ownership.
Yet, things tumbled very quickly. And by April 25th, 2022, the deal was officially announced!
The announcement of Twitter’s board, accepting the offer from Elon Musk to buy the company.
Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.
The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.
Parag Agrawal, Twitter’s CEO, highlighted on Twitter
Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.
How did Elon Musk secure the funding to purchase the company?
He secured $25.5 billion of fully committed debt and margin loan financing and is providing an approximately $21.0 billion equity commitment.
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to create X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a leading investor in the early years) and SpaceX. Tesla started as an electric sports car niche player and eventually became a mass-manufacturing electric car maker. In October 2022, Elon Musk finalized the acquisition of Twitter.
How did Elon Musk become wealthy? The full business story
Elon Musk has made most of his money by investing in ideas and companies he is passionate about. After eBay acquired PayPal for $1.5 billion in 2002, Musk used his personal wealth to fund his new ventures: Tesla and SpaceX. Most of Elon Musk’s wealth comes from Tesla, as he’s the major shareholder for the company. Making Elon Musk’s net worth well past the hundred billion-dollar mark.
Elon Musk’s wealth increased exponentially when one of his major bets, Tesla, became among the most valued companies on earth. Elon Musk started from a very early age building tech startups.
The early years
For instance, as a child, he had a passion for code, so after developing it, he sold the source code for his first video game for $500 at age 12.
After moving to the US, in 1995, with his brother, they founded Zip2, which was later (in 1999) sold to Compaq, in a deal worth $341 million, where Elon Musk made $22 million.
With the capital from Zip2, Musk founded X.com in 1999, one of the first FDIC-insured online banks in the world. After seeing promise in its easy payment service.
At the same time, a company named PayPal, as a money-transfer system, had been founded in 1998 by a company called Confinity.
At the time, Confinity had a fierce competitor called X.com. Rather than competing, the two companies merged by bringing them together under the umbrella of PayPal.
The “PayPal Mafia” years
Once the company merged, it could finally focus on the commercial strategy. Rather than boiling the ocean, PayPal started with a small niche at the time until it monopolized it and grew further.
Musk merged his company with Confinity the following year. In 2001, the company became PayPal and Musk became an 11.7% shareholder.
When eBay acquired PayPal for $1.5 billion in 2002, Musk received $180 million, which he would later reinvest into some of his most famous passion projects.
PayPal makes money primarily by processing customer transactions on the Payments Platform and other value-added services. Thus, the revenue streams are divided into transaction revenues based on the volume of activity or total payments volume—and value-added services, such as interest and fees earned on loans and interest receivable. In 2023, PayPal generated nearly $30 billion in revenues and $4.24 billion in net profits.
Indeed, it seems that at the time most PayPal users were coming from eBay. As reported by a release on July 2002:
The agreement also should benefit eBay shareholders. The combination of the two networks should expand both platforms while minimizing shared operational costs. Strengthening the marketplace and realizing the efficiencies made possible by the acquisition will increase the value of both businesses.
PayPal would also be an extremely important hotbed for what would be later called the “PayPal Mafia,” a group of smart people that went on to fund many of the companies that created an impact on the Silicon Valley tech ecosystem:
Jeremy Stoppelman (founded Yelp with Russel Simmons),
Andrew McCormack (partner at venture capital firm Valar Ventures),
Premal Shah (non-profit organization Kiva),
Luke Nosek (Founders Firm),
Ken Howery (VP at Clarium Capital),
David Sacks (produced “Thank You for Smoking”),
Peter Thiel (created hedge fund Clarium Capital and Founders Firm),
Keith Rabois (held senior positions at LinkedIn, Slide),
Reid Hoffman (LinkedIn),
Max Levchin (Slide. Google bought it for $182 million in 2010),
Roelof Botha (Sequoia Capital),
Russel Simmons (Yelp),
Elon Musk (Tesla, SpaceX).
After two decades after PayPal’s acquisition from eBay, Elon Musk went on to create some of his most prominent ventures:
Elon Musk is one of the richest people in the world, with his main ownership in Tesla, making him worth more than a hundred billion dollars. The companies founded by Elon Musk range from electric vehicles and renewable energies, with Tesla, rockets, with SpaceX, infrastructure, with The Boring Company, and neurotechnology with Neuralink.
When Tesla was a niche electric sports car maker
Tesla is vertically integrated. Therefore, the company runs and operates Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
Tesla is perhaps the biggest accelerator of Elon Musk’s net worth.
The company has become among the most valued tech companies in the last few years.
The electric carmaker company now owned by entrepreneur/visionary Elon Musk was founded by Martin Eberhard and Marc Tarpenning in July 2003.
By 2006 Musk joined, first as an investor and chairman, then he took the role of CEO, which he still holds today. Musk is a major Tesla shareholder:
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.
“In 2006 our plan was to build an electric sports car followed by an affordable electric sedan, and reduce our dependence on oil…delivering Model S is a key part of that plan and represents Tesla’s transition to a mass-production automaker and the most compelling car company of the 21st century.”
By starting with a niche strategy, mainly focused on proving an electric sports car could be delivered in a premium market, Tesla slowly, then quickly ramped up its new models to cover wider and wider sections of the market, and it ramped up its manufacturing capability.
Beyond early adoption, using a transitional business model to scale up
Therefore, Tesla finally moved from a transitional, niche business model, to a scaled up business model:
The hardest part for Elon Musk has been the scale-up of Tesla’s manufacturing facilities. In what Elon Musk would later recall as a “logistic hell.”
Going almost bankrupt to pass beyond the “logistic hell.”
Between mid-2017 to mid-2019, Tesla has been very close to bankruptcy for a lack of liquidity.
I put in my last money, even though I thought we would still fail. But, it was either that or certain death for Tesla. Extremely difficult to raise money for an electric car startup (considered super quirky back then), while stalwarts like GM & Chrysler were going bankrupt.
Indirectly, the Tesla share price appreciation results from a new wave of younger investors and strong demand for electric vehicles – particularly from China.
A Biden election win has also helped Tesla benefit from legislation designed to bring electric vehicles to the mainstream.
Today Tesla is an electric empire whose potential goes way beyond the automotive sector!
The founding of SpaceX
Musk has always had a passion for space exploration. Even before the eBay acquisition of PayPal, he conceived of greenhouses to grow food crops on Mars.
Such was his passion that he traveled to Moscow to purchase intercontinental ballistic missiles that could send payloads into space.
In Moscow, however, Musk was seen as an amateur and rejected. Undeterred, he returned to the U.S. and founded SpaceX in 2002 using $100 million of his own capital.
In 2008, SpaceX received a $1.6 billion NASA grant for rockets to resupply the International Space Station.
The company then became the first to berth a private vehicle with the ISS. Reusable rockets with large payloads were also launched into space and successfully returned to Earth using SpaceX autonomous drone ships.
By March 2018, SpaceX had over 100 launches on its manifest worth approximately $12 billion in revenue. SpaceX’s most recent contract is the $2.89 billion NASA program to carry American astronauts to the moon.
Elon Musk takes over Twitter!
In April 2022, Elon Musk almost finalized the acquisition of Twitter in one of the most controversial deals in business history.
Let’s review the timeline.
Musk placed a bet to take over the whole company out of the blue. It was April 14th, 2022:
The public records show the whole conversation of the offer Musk made to take over Twitter.
Below is the main extract, of the conversation, between Musk and Twitter’s board; as per SEC Filings, Musk had sent a message to Bret Taylor, Chairman of Twitter’s board:
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.
However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.
Twitter has extraordinary potential. I will unlock it.
Elon Musk
In a follow-up text, Musk highlighted:
As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.
After the past several days of thinking this over, I have decided I want to acquire the company and take it private.
I am going to send you an offer letter tonight, it will be public in the morning.
Are you available to chat?
Elon Musk
As a final message to Twitter’s board, Musk highlighted:
1. Best and final
a. I’m not playing the back-and-forth game.
b. I have moved straight to the end.
c. It’s a high price and your shareholders will love it.
d. If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.
i. This is not a threat, it’s simply not a good investment without the changes that need to be made.
ii. And those changes won’t happen without taking the company private.
2. My advisors and my team are available after you get the letter to answer any questions
a. There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.
Elon Musk
In short, Musk had offered to purchase Twitter for $54.20 per share, a 54% premium, before Musk had started to buy Twitter shares.
While the offer was good from a valuation standpoint, the board tried to fight it.
Also, influential business commentators were against it.
This is one of those where they are literally not doing their job, there’s no fiduciary responsibility if they just say, ‘you know what, we take it, there are times when individual directors are opened up for a level of lack of fiduciary that I think crosses the line. This crosses the line.
Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.
The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.
Parag Agrawal, Twitter’s CEO, highlighted on Twitter
Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.
The greatest marketer of our times?
While for large companies, demand generation can be easily bought. For startups, it’s more complicated because they need to do that with a few resources.
Indeed, spending most of the budget on demand generation is too risky in the short term.
Yet, creating demand for your product is the most important long-term strategy as it will make the difference between selling a commoditized product at no margins instead of a premium-priced product (which gives the business enough resources to keep financing its R&D, marketing, and operations).
However, demand generation can be inexpensive if done correctly. While for massive corporations like Nike, it makes sense to spend all this money on demand generation.
Demand generation can be done at no cost for rising companies and startups. Demand generation can be done cheaply if you think:
Unconventionally, do things that, for linear thinkers, do not make any sense.
Obliquely, it doesn’t directly promote your company/product, but the connection there is more subtle. Yet when it gets triggered, it becomes even more powerful than a linear promotion.
Other-oriented, it’s not about you, your company, or your product. A successful demand generation campaign at no cost is about others. It’s about making them feel special, unique, and part of something.
Let’s use an emphasized example by the master of all PR stunts: Elon Musk (indeed, also the greatest salesman alive).
You need to think obliquely to be good at demand generation at no cost. In short, rather than promoting your product directly, as you would do in a traditional ad, with demand generation, you promote it indirectly through something that is so compelling that will drive attention and money to your main business.
For instance, in 2018, Elon Musk tweeted a video where he handled a flamethrower:
Source: Elon Musk Tweet
Not long after, still in 2018, the company sold 50,000 hats of the boring company:
As of 2021, the Boring company has sold over 20,000 flamethrowers, which as you might imagine, helped finance the core business of Musk’s venture:
At first sight, that doesn’t make any sense. And yet, this unconventional stunt made the company ten million dollars (flamethrowers were selling for $500 each) in revenues that could be reused toward the innovative projects the company is working on.
The flamethrower could be bought for cheaper elsewhere, but those who bought it felt part of something (and indeed could resell it at a much higher price later on, as those were limited pieces).
This, of course, is an extreme example, but you get the idea. Startups can generate demand when they use unconventional marketing tactics (lateral vs. linear thinking), oblique (indirect vs. direct promotion), and centered on making other people feel good about themselves (the iPhone could have never scaled at that premium price if it was only a smartphone).
Key takeaways
Elon Musk has made most of his money by investing in ideas and companies he is passionate about. After PayPal was acquired by eBay, he used his significant stake in the company to fund the creation of SpaceX.
After initial teething problems, SpaceX grew to become a company with 100 launches on its manifest worth $12 billion. The company has also made Musk money through several multi-billion dollar contracts with NASA.
Tesla and its rapidly appreciating share price are responsible for a large proportion of Musk’s net worth. A sizeable shareholding combined with an influx of young investors and favorable legislation has seen Musk become one of the richest men on the planet.
Key Highlights
Entrepreneurial Journey: Elon Musk was born in South Africa in 1971. He moved to the United States to attend college and later dropped out of a Stanford University Ph.D. program to pursue entrepreneurial ventures.
Zip2 and X.com (PayPal): Musk’s first major venture was Zip2, a software company that provided business directories and maps for newspapers. Compaq acquired Zip2 for $307 million in 1999. Musk then co-founded X.com, an online payment company. X.com eventually merged with Confinity to become PayPal, which was later acquired by eBay for $1.5 billion.
SpaceX: Musk founded SpaceX (Space Exploration Technologies Corp.) in 2002 with the goal of reducing space transportation costs and enabling human colonization of Mars. SpaceX has developed the Falcon 1, Falcon 9, and Falcon Heavy rockets, along with the Dragon spacecraft. It has achieved significant milestones in rocket reusability, launching satellites, cargo, and astronauts into space.
Tesla, Inc.: Musk joined Tesla Motors in 2004 as chairman and later became its CEO. Tesla revolutionized the electric vehicle (EV) industry with its electric cars, including the Model S, Model 3, Model X, and Model Y. The company’s mission is to accelerate the world’s transition to sustainable energy through EVs, solar energy, and energy storage solutions.
The Boring Company: Musk founded The Boring Company in 2016 to develop tunneling and infrastructure solutions aimed at reducing urban congestion. The company’s projects include underground transportation systems, such as the proposed Hyperloop concept.
Neuralink: In 2016, Musk founded Neuralink, a company focused on developing implantable brain-machine interfaces (BMIs) to enhance human cognitive capabilities and address neurological disorders. The goal is to merge human brains with artificial intelligence (AI) technology.
OpenAI: Musk co-founded OpenAI, an AI research lab, in 2015 with the aim of advancing AI technology for the benefit of humanity. The organization focuses on developing safe and beneficial AI systems while addressing ethical concerns.
Twitter Acquisition: In 2022, Elon Musk made headlines by attempting to acquire Twitter through a series of public messages to the company’s board. Musk offered to buy Twitter for $54.20 per share, eventually leading to an agreement between Musk and Twitter’s board for the acquisition.
Space Tourism and Mars Colonization: SpaceX’s long-term vision includes enabling space tourism and establishing a self-sustaining colony on Mars. Musk envisions using the revenues generated from space tourism to fund the ambitious goal of making humanity multi-planetary.
Innovative Technologies: Musk’s ventures have pushed the boundaries of innovation in industries ranging from electric vehicles and aerospace to renewable energy and neural technology. His companies have challenged traditional norms and disrupted established industries.
Wealth and Influence: Musk’s success with companies like Tesla and SpaceX has propelled him to become one of the wealthiest individuals globally. His ventures have not only revolutionized industries but have also inspired a new generation of entrepreneurs and innovators.
By 2024, most of Tesla’s shares are still owned by Elon Musk, among the company’s co-founders and the CEO. Elon Musk is the top individual investor, with a 20.6% stake in the company. Musk is followed by Lawrence Ellison (founder of Oracle), with a 1.5% company stake. Ellison used to sit on Tesla’s board of directors. And Antonio Gracias, among the company’s first investors, has over 1.6 million shares. Other institutional investors and mutual funds like The Vanguard Group (6.9%), andBlackrock (5.6%).
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
In 2023, Tesla generated $96.77 Billion in revenues. Tesla’s business model primarily relies on automotive sales, $78.5 billion (over 81% of the total revenues); services/others followed with over $8 billion; energy generation and storage generated over $6 billion in revenues.
Automotive sales are the most critical segment for Tesla, with over $82.4 billion in revenue from automotive parts; most of the gross profits come from automotive sales, with over $16 billion in gross profits, or a 19.4 % gross margin. However, the “energy platform” (generation & storage) is contributing more and more to it. With revenue of $6 billion, a gross profit of over a billion dollars, and gross margins of 18.9%, this might become a critical component of the business model, thus changing its whole strategy.
Tesla didn’t have an official advertising budget until 2023, to spend on advertising, as it has almost been null over the years. Indeed, Tesla leveraged a combination of Elon Musk’s ability to generate significant media coverage and build a product that sold via word of mouth and directly to consumers.
Tesla was profitable in 2023, with a net profit of $14.99B, compared to $12.55 billion in 2022. Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in net profits in 2020. It will further generate $5.6 billion in net profits in 2021.
Telsa’s profit margins moved from negative 3.15% in 2019 to over 15% in 2022. As Tesla scaled up manufacturing and improved its economies of scale (with new facilities) and scope, the company became extremely profitable by 2022.
Tesla’s profit margin per car in 2023 was $8,279, compared to $9580 in 2022, over $6000 in 2021, and over $1700 in 2020. As Tesla was working toward mass manufacturing in 2020, the company’s profitability per car increased massively between 2020 and 2023, though in an attempt to gain market shares, it decreased in 2023 compared to 2022.
Tesla R&D’s costs have doubled in absolute number, from almost $1.5 billion in 2020 to nearly $4 billion in 2024. Yet they have decreased as a percentage of revenue, from 5% in 2020 to 4% in 2022 and 2023. These R&D expenses primarily comprise costs associated with personnel for teams in engineering and research, manufacturing engineering and manufacturing test organizations, prototyping expenses, contracts, and professional services.
In the peak of 2020 and 2021, Tesla reached a market cap revenue multiple of 21x and 18x, respectively. This means that Tesla was valued at 21X over its revenues in 2020 and 18X over its revenue in 2021. By the end of 2022, this multiple decreased to 4.7X. And by February 2024 the multiple increased to 6X.
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.
A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm enable Tesla to scale its demand side of the business.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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