Operating in the U.S., China, Norway and many other countries internationally, Tesla Motors Inc. (TSLA, Financial) is a publicly traded company dealing in electrically run vehicles, powertrain components and energy storage systems. The company is also into providing development services to other car manufacturers. It aids them in developing powertrain components. Founded in 2003, the company is headquartered in Palo Alto, California.
In a report lately published by Kelly Blue Book, Tesla Model S is included in the list of top 10 green cars. Tesla sold 37,000 Model S Sedan in the U.S. last year and since January 2015 has so far sold 4,900 cars. The manufacturer’s suggested retail price of the Model S Sedan is $71,070. Other cars on the list of KBB’s best green cars were Volkswagen (VOW, Financial) Jetta TDI, Ford (F, Financial) C-Max Hybrid, Toyota (TM, Financial) Camry Hybrid, Chevrolet Volt, Honda (HMC, Financial) Accord Hybrid, Toyota Prius, Nissan (NSANY, Financial) Leaf, Volkswagen e-Gold, and BMW (BMW, Financial) i3.
Tesla’s revenues have invariably been increasing since 2012. Its revenues increased by almost 387% in the financial year 2012-2013. In 2014, they increased by almost 59%. The gigantic increase in the sales of hybrid cars produced by Tesla in the year 2013 can be attributed to the sky-high conventional energy prices during the period. Crude oil price back then was hovering around $115/barrel. The unprecedented decrease in global crude oil prices has caused the sales of Tesla to grow at a relatively lesser rate in 2014.
Despite a healthy increase in sales revenues, Tesla has been unable to convert its revenues to profit. During the past three years, Tesla has continuously earned losses. In the year 2013, the company’s losses decreased by some 82%. In 2014, they again rose by almost 500%. In its annual statement of 2014, Tesla reported a net loss of $294,040.
With the exception of the year 2013, Tesla’s cash flows from operations have remained negative. It has been unable to generate any cash from its core business operations. In 2014, Tesla’s cash flows from operations were -$57,337.
The substantial increase in the sales revenues of Tesla in 2013 caused its stock prices to spike. From $37.51 on Jan. 2, 2013, the stock prices increased to $181.41 on Jan. 2, 2014. Its stocks are currently being traded at $206.79. During this period, Tesla has been unable to pay its stockholders any amount in dividends.
Tesla’s major competitors are automobile giants such as General Motors Company (GM, Financial) and Toyota Motor Corporation. The former has, during the financial year 2014, earned a net income of $2.80 billion and the latter has during the same period earned $16.79 billion. For a company established in 2003, competing with the automobile industry bigwigs is something very difficult.
The price of Tesla’s stock is expected to go under $200 for the remainder of 2015. The company needs just to improve its efficiency to enhance its ability to convert revenues to profits. Elon Musk, the CEO of Tesla, attributed the losses to delivery shortfalls, which he claimed to be caused by various factors.
As Tesla competes strongly for dominance in 2015, other auto companies are doing the same as well. Ford is offering an array of new cars that they hope will take the market by storm. Meanwhile more auto investors are turning to electric cars where they see a growing market and where they hope to make a good financial killing as well.
Operating in a highly competitive market, the luxury of committing blunders is not available to Tesla. Without enhancing its efficiency, the company will not be able to grow financially. It is a prerequisite that needs first to be fulfilled satisfactorily.
