Question

What do we learn from the data in case Exhibit 3? Does the data provide valuable information about the possible future of electric vehicles? Should Tesla be concerned about the increased competition it will soon face from all the major automobile manufacturers that are scheduled to introduce new models of electric vehicles in 2019-2020 and beyond?

Tesla's Financial Performance for 2015 versus 2014, EXHIBIT 3 GAAP versus Non-GAAP 2015 2014 $4,046,025 $3,198,356 Revenues (GAAP) Model S revenues deferred due to lease accounting 1,245,517 400,185 Revenues (Non-GAAP) 5,291,542 3,598,541 Gross profit (loss) (GAAP) 923,502 881,671 Model S gross profit deferred due to lease accounting 309,515 82,626 Stock-based compensation expense 19,244 17,455 Gross profit (loss) (Non-GAAP) 1,252,261 981,752 Research and development expenses (GAAP) 717,900 464,700 Stock-based compensation expense (89,309) (62,601) Research and development expenses (Non-GAAP) 628,591 402,099 Selling, general, and administrative expenses (GAAP) 922,232 603,660 Stock-based compensation expense (76,411) (89,466) Selling, general and administrative expenses (Non-GAAP) 527,219 832,786 Net loss (GAAP) $ (888,663) $(294,040) Stock-based compensation expense 197,999 156,496 86,247 75,019 Non-cash interest expense related to convertible notes and other borrowing Model S gross profit deferred due to lease accounting 309,515 82,616 Net income (loss) (Non-GAAP) $20,101 $ (294,902) $(6.93) $(2.36) Net income (loss) per common share, basic (GAAP) Net income (loss) per common share, basic (Non-GAAP) (2.30) 0.16 Shares (in 000s) used in per share calculation, basic (GAAP and Non-GAAP) 128,202 124,573

Answer 1

Exhibit 3 clearly tells that revenue of the company increased when compared to previous year. But at the same time, the net revenue (non GAAP) has resulted in losses from profit in previous year.

Research and development cost has gone up by huge amount. Also with increased competition, tesla would definitely face challenges because it has to invest in R&D, marketing. This will definitely impact the bottom line. Tesla definitely has to be concerned about competitors and their product offerings.