Tesla: Why it has a bright future

If you want to look at big company success stories, it’s hard to ignore Tesla. Elon Musk’s brainchild has seen exponential growth moving from roughly $15 million in annual revenue in 2008 to a staggering $21 billion ten years later. Last year, Tesla generated US$24.6 billion in revenue, with a fourth-quarter revenue report of just under US$7.4 billion. Interestingly, however, Tesla did not turn an annual profit, reporting losses of US$862 million in 2019 and a US$1 billion loss in 2018. 

While large compounded growth rates go hand-in-hand with small startups, few maintain the run. This hasn’t been an issue for Tesla, as their growth rates have remained consistent. As billionaire investor, Ron Baron stated in an interview with CNBC, “Tesla’s meteoric rise will continue for years to come.” 

 While Tesla is a diversified business, they have been clear about their goal of pushing the transition to sustainable energy. With cars already under the belt and the move into trucks well underway, Tesla’s storage and solar are amongst its most exciting advancements.  

Tesla’s cash flow 

The company creates about $4 billion a year from existing operations with a significant amount of their cash flow going towards their gigafactories, the design of new vehicles and manufacturing systems. While specific sales figures for their outgoings are somewhat unclear, Tesla has the goal of becoming one of the leading car manufacturers in the world. 

 More and more consumers are turning towards electric cars due to the shelf life of gas or petrol cars. The earth’s resources for these vehicles are dwindling, prices are rising, and electric cars are significantly cheaper to run. 

This helps to position Tesla well for achieving their goal as other manufacturers will have issues securing enough batteries to satisfy increased customer demand. Couple this with the fact that Tesla is working to bring the price point of their vehicle down, you’ll likely see many more Teslas on the road in the coming years. As Musk himself has stated,(we) will one day make vehicles that cost less than the $US35,000 Model 3 sedan. 

The beginnings of Tesla 

Tesla was incorporated on July 1, 2003, spurred by the fact that General Motors all but gave up on their electric cars and the discovery that the higher fuel efficiency of battery-electric cars was the way of the future. The first Tesla vehicle, the Roadster, which was mainly funded and overseen by Musk, had the goal of becoming the first affordable mass-market electric vehicle. 

The start of the company was shaky, with questions about whether or not they could raise enough funding for their operations leading to a significant cut in their workforce. Things improved by January 2009, however as the business was able to raise US$187 million, delivering 147 cars. US$70 million of that came from Musk’s personal stash. 

The ability to grow 

Tesla has a significant advantage over their competitors when it comes to moving vehicles across a range of markets. Tesla vehicles have no emissions, making them safer than any regional standard, avoiding the cost of needing to be reworked to meet local standards. Jeff Cairn, from Cairn Research Advisors, states that Tesla’s specific battery type also gives them an added advantage. The company uses cylindrical battery cells as opposed to pouch or prismatic cells that are used by other car manufacturing companies. 

There is also the Tesla hype-machine, which works in a similar way to Apple product releases. When Tesla announces a new vehicle, often that eclipses anything available on the market, a long wait list is formed with a required downpayment. 

For example, Musk tweeted that Tesla received 250,000 pre-orders for the new Cybertruck, each requiring a US$100 deposit. Not a bad rake-in based on an announcement of a heavily-memed vehicle. 

 The future of batteries 

The battery may be Tesla’s biggest challenge, as it is one of the primary hindrances for those considering the shift for a fully electric vehicle. They are much cheaper to run when compared to a petrol or diesel vehicle, but the charge distance is not suited for longer journeys. 

Tesla’s Model 3 and X are capable of 600 km and 560 km respectively with the Jaguar I-Pace and Kia e-Niro hitting 469 km and 453 km. Tesla has put a strong focus on the development of its batteries to help make the switch to electric a more attractive prospect.  

The Tesla “million-mile battery” is expected to hit the market soon, tipped to outlast any car it is placed in. The new battery is slated to be released early in 2021 in the Model 3 in China, offering the longest-lasting, lowest-cost battery in the world.  

What about space? 

Elon Musk is very vocal in his aspirations for space exploration, and recently successfully launched the SpaceX Dragon Capsule Demo-2 which entered orbit without incident. 

This marks the first crewed spaceflight for SpaceX as well as the first time humans had launched into space from America since 2011 when NASA launched their Space Shuttle program’s final mission. This event was also the first crewed spaceflight launched from a private company in history. 

Musk has successfully moved space exploration from the hands of government and shifted it to the public sector and private business. SpaceX, the company, predominantly funded by Musk’s US$100 million PayPal payout, began in 2002, a year before the Tesla car company. Musk’s goal was to decorate Mars with some plants, but the rocket he planned for the launch was too expensive. SpaceX was formed in an attempt to lower costs, but the three launches it held between 2006 and 2008 all failed. The fourth SpaceX rocket was the first successful launch in 2008, with the fifth in 2009 taking a satellite into orbit. 

A strong track record 

Considering that Tesla has grown its production tenfold three times in its history, which is no easy feat, it’s a safe bet that the future looks bright. 

They are building vehicles (and other products) that customers want and have the resources to meet the demand. Elon Musk made and sold a flamethrower for fun, and it earned US$10 million in four days. In total, he sold 20,000 at US$500 apiece before closing off production. His hobby move offers figures other startups dream of, so it’s safe to say the future looks bright for Tesla. 

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