Tesla Tomorrow-The Future of Tesla Motors

TESLATOMORROWDecember14,2010UniversityofWisconsin-MadisonWisconsinSchoolofBusiness-MBATeamA6DanielleBoykeJiaChengJaredCleversMichaelSchroederKarenStruppTheFutureofTeslaMotorsImageCredit:TeslaMotorsTesla’sfuturedependsonthesuccessoftheModelSProjected2010Loss:$159MPlug-inhybridsprojectedtohitthemarketin20122009Loss:$56MProjected2014Loss:$211M$465MDOELoanModelSlaunchdelayedto2012.WillconsumersbuyEVs?Sold1,350Roadsters.Audi:“WewillbetheEVleader”Corporaterestructuring…In3years.ImageCredit:TeslaMotorsTESLATOMORROWTeslaTomorrow:Recommendations1.ImplementaModelSmarketingcampaign2.IntroducenewpricingstructureforModelS2.03.NegotiateaserviceandrepairagreementwithToyota4.DevelopModelSpowertrainlineextensionsTESLATOMORROWAgenda•AshorthistoryofTesla•Thestateoftheindustry•Tesla’ssituation–Operations–Accounting–Finance–Marketing•Recommendations•Questions&AnswersImageCredit:TeslaMotorsASHORTHISTORYOFTESLAMOTORSTESLATOMORROW“Foundedin2003byagroupofengineerswhosetouttoprovethatelectricvehiclescouldbeawesome.”Mission:•Toincreasethenumberandvarietyofelectriccarsavailabletomainstreamconsumers•Environmentallyresponsible•FuntodriveCOMPANYTESLATOMORROWTeslasetouttochangealltherules•ASiliconValleyApproach•StrategicpartnershipsCOMPANYTESLATOMORROWCreatinganelectriccarthatpeopleactuallywanttodrive•2008:TeslaRoadster•2010:Roadster2.5COMPANY•2009:ModelSprototyperevealed•2012:ExpectedModelSLaunchTHEELECTRICVEHICLEINDUSTRYTESLATOMORROWThere’sexcitementandmomentum,butindustrygrowthwillbeslow.Source:DataFromCSMAuto(GlobalInsight)LimitedEV/PHEVU.S.marketpenetrationby2015(0.6–0.9%)INDUSTRYTESLATOMORROWThegovernmentiscommittedtosuccessofelectricvehicles.•DOEinvesting$5BinEV/PHEVtechnologyandinfrastructure•Reducebatterypackcosts70%by2015•20,000chargingstationsbyDec2012INDUSTRYTESLATOMORROWHigherpurchaseprice,butlowerfuelcosts.INDUSTRY$50,632$60,000$18,010$25,000$23,000$10,304$2,061$6,558$2,061$4,122$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000ICELuxurySedanEVLuxurySedanICEEconomyEVEconomyHEVNetPresentValueVehicleTypeNPVPurchasePriceandFuelCostsOver5YearsByVehicleTypeFuel(NPV5-Yrs)PurchasePriceTESLATOMORROWThecompetitioniscoming.•Luxury•Niche•EveryoneelseINDUSTRYOPERATIONSTESLATOMORROWTesla’snotmanufacturingcarsinagarageanymore.OPERATIONSTESLATOMORROWTheintegratedmanufacturingmodelatthenewFremontplantisakeytoModelSsuccess.LotusFacilityHethel,UKEuropeanCustomersNorthAmericanSuppliersEuropeanSuppliersUS&AsianCustomersAsianSuppliersTeslaAssemblyFacilityMenloPark,California,US•Controlquality•Protectintellectualproperty•Reduceshippingcosts•ReducerelianceonsupplierperformanceFremontFacility-bodyassembly-paintoperation-batterypackmfctr.-finalvehicleassembly-endoflinetestingOtherSuppliers-Interiorconsole-SeatsCustomersPaloAltoFactory-PowertrainManufacturingOPERATIONSACCOUNTINGANDFINANCETESLATOMORROWAccountingchangesin2010reflectagrowingbusiness•January2010:DepartmentofEnergyLoanFacility•March2010:BeginsrecognizingrevenuefromDevelopmentServices•July2,2010:InitialPublicOffering($188.8M)•July2,2010:Allpreferredstockconvertstocommonstock•PrivatestockplacementwithToyota($50M)•PrivatestockplacementwithPanasonic($30M)ACCOUNTINGTESLATOMORROWTeslaisundergoingchangestoitscapitalstructure.$34,837$51,699$130,424$361,621$289$57,821$2,824$64,089$51,216$92,404$61,898$77,609-$16,669-$98,536$65,702$219,923-40%-20%0%20%40%60%80%100%2007200820092010(9mo)BalanceSheetSummary/CapitalStructureSEOtherLiabDebtAssetsACCOUNTINGTESLATOMORROWTesla’soperatinglossesaretypicalofatechstart-upbutunsustainable.$64($541)$10,935$19,410($79,997)($77,963)($62,832)($114,603)$1,776($4,278)($3,843)($7,777)($140,000)($120,000)($100,000)($80,000)($60,000)($40,000)($20,000)$0$20,000$40,0002007200820092010(9mo)IncomeStatementSummaryNonOperatingInc/ExpandTaxOperatingExpensesGrossProfitNetLoss:$78,157NetLoss:$102,970NetLoss:$55,740NetLoss:$82,782ACCOUNTINGTESLATOMORROWInvestorsappearconfidentinthefinancialhealthofTesla.WallStreetConsensus-TargetPricesSource:FactSetFINANCETESLATOMORROWInstitutionalinvestorsareincreasingtheirequitypositionsinTesla.TopInstitutionalInvestorsHolderNameReportDatePositionPositionChgMktValEquityAssetsMUSKELONR07/02/201025,699,59623,032,930810,051,266KOHLERHERBERT07/02/20107,475,7407,475,740235,635,325ALDARMAKIAHMEDSAIF07/02/20107,297,1390230,005,821ValorManagementCorp.07/02/20104,885,6794,885,679153,996,602JURVETSONSTEVENT07/02/20102,764,8682,764,86887,148,639TechnologyPartners07/02/20102,724,2902,724,29085,869,621Gilder,Gagnon,Howe&Co.LLC09/30/20102,062,656-305,88565,014,9175,525,397,280ArtisanPartnersLP09/30/2010782,400782,40024,661,24842,698,262,521RCMCapitalManagementLLC09/30/2010777,388777,38824,503,27021,586,103,341INVESCOPowerSharesCapitalManagementLLC09/30/2010697,730697,73021,992,45037,805,670,821BlueRidgeCapitalHoldingsLLC09/30/2010575,000575,00018,124,0007,045,439,662CuppsCapitalManagementLLC09/30/2010573,244467,88418,068,651613,681,690CapitalWorldInvestors09/30/2010465,000465,00014,656,800467,544,264,365FranklinAdvisers,Inc.09/30/2010442,660442,66013,952,64