By 2020, as Tesla started to reach mass manufacturing, its profitability also widely improved, going from less than a billion in 2020 to over $12.5 billion in 2022.
Indeed, Tesla has gone through various phases in its history, now.
In the first phase, the company had to show the viability of its technology through a very nicheproduct, which turned out to be the Tesla Roadster.
As the Roadster proved EVs could be built, it was a matter of enabling that technology on a larger scale.
It took Tesla fifteen years to reach that scale with its Model 3, which is the car intended for the mass market.
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 2022, Tesla generated $81.46 billion in revenues. Tesla’s business model primarily relies on automotive sales, $71.46 billion (almost 88% of the total revenues); services/others followed with over $6 billion; energy generation and storage generated over $3 billion in revenues.
Automotive sales are the most critical segment for Tesla, with over $71.4 billion in revenue from automotive parts; most of the gross profits come from automotive sales, with over $20 billion in gross profits, or a 28.5% gross margin.
Tesla doesn’t have an official advertising budget to spend on budget, 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 2022, and it generated $12.55 billion in net profits. Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in net profits in 2020. And it further generated $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 profitmargin per car in 2022 was $9580, compared to over $6000 in 2021 and over $1700 in 2020.
As Tesla was working toward mass manufacturing in 2020, the company’s profitability per car has increased slightly.
Tesla R&D’s costs have doubled in absolute number, from almost $1.5 billion in 2020 to over $3 billion in 2022. Yet they have decreased as a percentage of revenue, from 5% in 2020 to 4% in 2022. These R&D expenses primarily comprise costs associated with personnel for teams in engineering and research, manufacturing engineering and manufacturing test organizations, prototyping expense, contract, 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.
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.
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the 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.
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.
