The Analysis of Tesla Motors Inc.

...

On the other part of the operation; selling, general and administrative expenses consist primarily of personnel and facilities costs related to Tesla retail and service stores, marketing, sales, executive, finance, human resources, information technology and legal organizations, settlements and fees for professional and contract services supporting these functions. Selling, general and administrative expenses in 2015 were 922.2 million dollars, an increase from 603.7 million dollars for 2014. The expenses increased primarily from higher headcount and facility costs, including stock-based compensation, to support an expanded retail, service and Supercharger footprint as well as the general growth of the business. The increase in selling, general and administrative expenses consisted primarily of a 138.4 million dollars increase in employee compensation expenses related to higher sales, service and marketing headcount to support sales activities worldwide and higher general and administrative headcount to support the expansion of the business, 126.1 million dollars increase in office, information technology and facilities-related costs to support the growth of our business as well as sales and marketing activities to handle our expanding market presence, a 41.8 million dollars increase in professional and outside services costs, and a 12.2 million dollars increase in stock-based compensation.[from 10k] Tesla admitted that their selling and general administrative processes were not efficient, that cost a lot of money, and need to be improved.

Stock performance

On the stock market, the price of Tesla was not stable and kept decreasing. In the October of 2015 the price decreased 17%, because of the Model X was launched after series of delays, from 2014 to the third quarter of 2015, failed to meet public’s expectation of their business. After a recovery of the price, the ending price was 240.1dollars per share, which was higher than the ending price of 2014 was 222.41 dollars per share. Except from the low cost of oil and the competitors’ new products, like BMW and Nissan, the low production and long delivery time caused the price decreased in the first two months in 2016. Tesla also faced a problem that their door sometimes cannot open, this problem occurred many times than expected, the high rate of door problem made Tesla had to find a new technology cooperation to handle it and that took a long time. And there were some accidents that Tesla Model S were on fire when they were charged also made the stock price volatile. Their operating results may not meet expectations of equity research analysts or investors. With the general effect of the economy and their own deficiencies, the price dropped to 142.32 dollars per share. Because the net loss was so huge in 2015, so the net loss per share was also severity, the net loss per share got to 6.93 dollars. This was higher than 2014, which was 2.36 dollars loss per share.

With design, develop and manufacture Model 3, Tesla Energy products and other future products, increase the production capacity at manufacturing facilities to produce vehicles at higher volumes, including increase the production of Model X, the Gigafactory, open new Tesla service centers with maintenance and repair capabilities, open new Supercharger locations, increase our sales and marketing activities, and increase general and administrative functions upgrade tools and machines to support their growing operations and speed up production and deliver. As a result of these factors, we believe that the short term operating results are not necessarily meaningful for a long-term consideration, and Tesla is in the preliminary stage of development, the loss and price-volatile are difficult to avoid.

Asset growth rate

The total asset growth rate in 2015 is 38.79%, although the net loss and decreasing stock price restricted the growth rate, it was lower than previous years, it still was a very high rate that means the Tesla was developing at a high speed. Comparing with 2014, the property, plant and equipment increased 86.5% means that Tesla enlarged their scale. We also found that the operating lease vehicles increased 133.64%, it’s including a program allowed the car owners to resell their cars to Tesla, this program helped saving material cost, partially offset by proceeds from sales, and higher operating expenses (research and development, selling and general administrative). So Tesla further developed this operating process in North America, Europe and Asia. In 2015, the restricted cash also increased a lot, it reached to 177.14%. Tesla maintained certain cash amounts restricted as to withdrawal or use. Current and noncurrent restricted cash as of December 31, 2015 was comprised primarily of cash as collateral related to their sales to lease partners with a residual value guarantee and for letters of credit including for real estate leases, and insurance policies. In December 2015, Tesla settled and closed Warehouse Facility and removed restrictions on cash related to that arrangement.[from 10 k] The long term liability increased more than 1 billion dollars in 2015, the following increasing of restricted cash can be used to handle these long term payment.

Common-size analysis of Balance sheet

By common-size analysis of balance sheet，there are two significantly change. From under form, the current asset is decrease 20% in 2015 compare with 2014. and fixed assets increase almost 11% in 2015 compare with 2014, also, the percentage of current liability almost doesn’t change. Simple calculate，we could found out that current ratio is lower in 2015, which means the ability of short term debt-paying is lower in 2015 than 2014.

There is the specific data from the Tesla balance sheet. From the under chart, the cash and cash equivalents, which means current asset, decrease observably. but their operating lease vehicles, property, plant and equipment which represent fixed assets are increase obviously. So we could conclude that Tesla put more money to build property, plant, equipment and operating lease vehicles, instead of keeping cash in the hand.

References

- Tsla-10k_20151231.htm. Retrieved from https://www.sec.gov/Archives/edgar/data/1318605/000156459016013195/tsla-10k_20151231.htm

- BYD annual report of 2015. Retrieved from http://data.p5w.net/t1202089376.html

- Revenue growth analysis and Stock price movement. Parker. J. 2016. February 12. All You Need to Know about Tesla's 4Q15 Earnings. Market Realist. Retrieved from http://marketrealist.com/2016/02/need-know-teslas-4q15-earnings/