D ragan s tojanovic 2021 p age 10 of 22 market

D
RAGAN
S
TOJANOVIC
© 2021 P
AGE
10
OF
22
* Market capitalization at opening on Wednesday, December 30, 2021.
EXERCISE: Tesla and Apple
By the second half of 2021, it seems accepted that Apple is planning to get into the car business ,
although the progress is still questionable . One of the concerns noted by a recent CNN Business
report is that “cars can be less profitable relative to Apple's other products , so that is a concern if
Apple is going to be shifting gears into a less profitable business line”. See also a tweet by Elon
Musk about the possible sale to Apple.
REQUIRED: Re view Tesla’s selected financial statements below. How does Tesla’s gross profit
(as a % of revenues) compare to Apple’s gross profit percentage ? Do you agree with the concern?
Tesla Inc.
Consolidated Statement of Income
USD $ in Millions
12 Months
Ended
Dec. 31, 2020
12 Months
Ended
Dec. 31, 2019
12 Months
Ended
Dec. 31, 2018
Total revenues 31,536 24,578 21,461
Total cost of revenues 24,906 20,509 17,419
Gross profit 6,630 4,069 4,042
Operating expenses
Research and development 1,491 1,343 1,460
Selling, general and administrative 3,145 2,646 2,835
Restructuring and other - 149 135
Total operating expenses 4,636 4,138 4,430
Income (loss) from operations 1,994 (69) (388)
Interest income 30 44 24
Interest expense (748) (685) (663)
Other income (expense), net (122) 45 22
Income (loss) before income taxes 1,154 (665) (1,005)
Provision for income taxes 292 110 58
Net loss 862 (775) (1,063)
TEXTBOOK
p. 21
$2.9 TRILLION
$1.1
TRILLION

D
RAGAN
S
TOJANOVIC
© 2021 P
AGE
11
OF
22
EXERCISE: These stories matter!
On August 29, 2016 Elon Musk (Tesla’s CEO) an email to Tesla’s employees (below).
REFLECT: What lessons do you take away from this example?
SUBJECT: Third Quarter Rally!
I thought it was important to write you a note directly to let you know how critical this quarter is.
The third quarter will be our last chance to show investors that Tesla can be at least slightly
positive cash flow and profitable before the Model 3 reaches full production. Once we get to Q4,
Model 3 capital expenditures force us into a negative position until Model 3 reaches full
production. That won’t be until late next year.
We are on the razor’s edge of achieving a good Q3, but it requires building and delivering every
car we possibly can, w hile simultaneously trimming any cost that isn’t critical, at least for the next
4.5 weeks. Right now, we are tracking to be a few percentage points negative on cash flow and
GAAP profitability, but this is a small number, so I’m confident that we can rall y hard and push
the results into positive territory. It would be awesome to throw a pie in the face of all the
naysayers on Wall Street who keep insisting that Tesla will always be a money-loser!
Even more important, we will need to raise additional cash in Q4 to complete the Model 3 vehicle
factory and the Gigafactory. The simple reality of it is that we will be in a far better position to
convince potential investors to bet on us if the headline is not “Tesla Loses Money Again”, but
rather “Tesla Defies All Expectations and Achieves Profitability”. That would be amazing!