Tesla revenue Model

A Brief Look at the Business Model of Tesla.

Table of Contents

Introduction 

Tesla Business Model
Tesla Model 3. img src= Tesla press release.

 

Tesla is an innovative automobile firm which makes electrical cars and power products. The company makes and sells premium electric sedans and SUVs . The core market of Tesla Motors is the United States. However, the company is also growing its footprint in China, the leading automobile market of the world.  Tesla's business model is different from the other car brands. Its core focus is innovation to create environment friendly products.

Tesla cars have grown fast in popularity and its sedan sales rose sharply in 2019. Despite continuing losses for several years, the company has not let its focus upon quality and technological innovation waver. It has a large number of patents to its name which the company has proudly dedicated to its customers and fans around the world.

Growing car sales of Tesla in 2019 signify the increased popularity of electric cars. However, it also shows that the company might soon start generating profits. Its net loss came down by a billion dollars in 2018 compared to the previous year. Tesla CEO Elon Musk is confident about the company's future. The growing popularity and demand of Tesla cars has also inspired confidence in the investors. Moreover, the popularity of its autodrive technology and growing brand recognition around the world are also expected to support Tesla's fast growth. 

Product segments:

The business of Tesla Motors is organized into two reportable segments that include automotive segment and energy generation and storage segment.

The automobile segment is responsible for the design, development, marketing and sales and leasing of electric vehicles and automotive regulatory credits. Tesla's regulatory credits are also a good source of revenue for the brand. Other brands buy these credits to offset  their sales of polluting vehicles. Since Tesla sells emission free vehicles, it has a lot of regulatory credits remaining to sell to others. Some of the well known customers of Tesla's zero emissions vehicle credits include GM and Fiat Chrysler. These credits work as an insurance against the pollution regulations. The automobile segment is also responsible for the sales of used vehicles, after sales services, sales of electric vehicle parts and systems to other brands. 

The energy generation and storage segment of Tesla is engaged in the making and sales of stationary energy stoarge products, solar energy systems and electricity geenrated fromt he solar energy systems.   

Main Sources of Revenue  (Operating Segments)

The automotive segment of Tesla is its largest source of revenue. This segment includes sales as well as leasing of automobiles. It generated more than 85% of the brand's revenue in 2018. Automotive sales alone generated approximately 81% of the company's revenue in 2018. Automotive leasing is the smallest of all segments that accounted for around 4% of the company's revenue in 2018. The customers of Tesla automobile business include individual customers as well as vehicle brands. 

The energy generation and storage segment as well as the services and other segment together accounted for around 13% of the company's total revenue. The customers of energy generations and storage segment include individual customers as well as commercial and industrial customers. 

 Geographical segments of Tesla Motors

United States is the largest geographical segment of Tesla accounting for around 69% of its revenue in 2018. China is another major geographic segment of Tesla. However, its contribution to the total revenue of the brand was less than 10% in 2018. Netherlands and Norway are other major markets of Tesla products.  Other countries together ccounted for around 14% of the company's net revenue in 2018.

Manufacturing Facilities

 Tesla has leading manufacturing facilities in Fremont, California; Lathrop, California; and Tilburg, Netherlands. There is another leading manufacturing facility Gigafactory 1 outside Reno, Nevada as well as  Gigafactory 2 in Buffalo, Newyork.  The company is also constructing another Gigafactory in Shanghai, China. 

The Tesla factory in Fremont, California is among the world's most advanced automotive manufacturing facilities. There are more than 10,000 employees working at this factory currently. Tesla makes vehicles and certain parts and components at the Fremont and Lathrop factories. The Fremont manufacturing facility includes several manufacturing operations including stamping, machining, casting, plastics, body assembly, paint operations, drive unit production, seat assembly, final vehicle assembly and end-of-line testing. The company also manufactures lithium-ion battery packs, electric motors, gearboxes and components for Model S and Model X at the Tesla Factory. 

Tesla's European headquarters are at Amsterdam, Netherlands. It has an assembly plant in Tilburg, Netherlands. The Tilburg operations of Tesla include final assembly testing and quality control for the Model S and Model X vehicles delivered to the European Union. This plant also works as a warehouse for parts to be distributed to the service centers in Europe as well as a customer service center. 

Tesla manufactures battery packs and Model 3 drive units at Gigafactory 1 outside Reno, Nevada. The battery packs Tesla makes at Gigafactory 1 are used in vehicles including Model 3 and energy storage products. Tesla is working on expanding this facility further and increase its production capacity significantly. 

Tesla's main motive behind constructing a Gigafactory at Shanghai is to reduce manufacturing and logistics expenses. It will be able to eliminate certain tariffs that apply to vehicles imported from U.S. The company will be able to keep the Model 3 affordable for consumers in China in this way. Production at this factory is expected to commence by the end of 2019. 

Supercharger Network

Tesla is continuously expanding its supercharger network along well travelled routes. The company has placed 14,081 superchargers along 1,604 supercharger stations. Tesla's supercharger technology charges vehicles rapidly. It sends alerts when the vehicle is sufficiently charged. Since the supercharger network has grown fast along well travelled routes, drivers would not need to charge their vehicles above 80%.  Tesla continues to grow its network of superchargers and destination chargers in North America, Asia and Europe to provide its customers more convenient options for charging. 

2018 performance of Tesla Motors

Performance of Tesla improved sharply in 2018. Total revenue that the company generated was equal to $21.5 billion in 2018 compared to $11.76 billion in 2017.

Tesla Motors Performance by Operating Segment 

The automobile segment is the largest operating segment of Tesla. In 2018, Tesla's revenue from automobile segment around doubled compared to the previous year. Total increase was of 92%. Net revenue from the automotive segment was $18.5 billion in 2018 compared to $9.6 billion in 2017. The company generated $17.63 billion in revenue from vehicle sales alone in 2018 as compared to $8.5 billion in 2017. Total revenue from automotive leasing declined by 20% in 2018 compared to last year. Tesla generated $883.5 million from automotive leasing as compared to $1.1 billion in 2017. 

Revenue from services and others grew by 39% rising to $1.39 billion from $1 billion. Energy generation and storage revenue also grew by 39% as compared to the last year rising to $1.56 billion in 2018 against $1.12 billion in 2017. Total revenue of the company was $21.5 billion in 2018 against $11.8 billion in 2017. 

Tesla Motors Performance by Geographic segment 

United States is the largest geographic market of Tesla Motors followed by China.  Revenue from United States was 69% of the entire revenue of the brand. In 2018, the revenue of Tesla from the U.S. grew by 140% as compared to the previous year. U.S. revenue of Tesla was $14.9 billion in 2018 compared to $6.2 billion in 2017. Revenue from China declined by around 12% and came down to $1.75 billion compared to $2 billion last year. 

Tesla's revenue from Netherlands grew sharply in 2018 to $965.6 million against $330.3 million in 2017. Revenue from Norway declined by around $10.5 million and came down to $823 million in 2018. Revenue from other countries grew by around 30% and rose to $3 billion in 2018 from $2.35 billion in 2017. 

2019 performance (q1 &q2) 

 Total revenues of Tesla grew substantially in the first quarter of 2019 compared to the same period last year. Net revenues for the first quarter of 2019 were $4.5 billion compared to $3.4 billion last year; yoy growth of 32%. Gross profit during the first quarter grew to $565.7 million compared to $456.5 million during the same period last year. Net loss of the company also reduced to $667.6 million in q1 2019 compared to $784.6 million during the same period last year.  Net loss attributable to common stockholders was $702 million in 2019 first quarter compared to $709.5 million during the same period last year.  

Tesla's revenue for the second quarter of 2019 also grew substantially compared to the same period last year. The net revenue of the company grew to $6.35 billion in second quarter of 2019 compared to $4 billion during the same period last year; yoy growth of 58%. Total revenues of the company during the first half of 2019 was $10.9 billion compared to $7.4 billion during the same period last year; yoy growth of around 47%.  Net loss attributable to common stockholders was $408.3 million in 2019 first quarter compared to $717.5 million during the same period last year.