Tesla Motors (TSLA) Last Update 4/27/21
Related: DDAIF F HMC GM
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Tesla Motors
$447.03
Yours
Trefis Price
N/A
$618
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Tesla Motors Company

VALUATION HIGHLIGHTS

  1. Automotive constitutes 98% of the Trefis price estimate for Tesla Motors's stock.

WHAT HAS CHANGED?

Tesla's Strong 2020 Deliveries

Over 2020, Tesla delivered close to 500k vehicles, marking an increase of roughly 35% compared to last year. The numbers are impressive, considering that the broader auto market is still reeling from the Covid-19 related slowdown. Tesla's performance was driven by growth in its Chinese business, a ramp-up of production from its Shanghai facility, some price cuts and promotions on its vehicles, and the launch of the Model Y compact SUV in early 2020.

Tesla Battery Day 2020 Updates

During its Battery Day event held in mid-September, Tesla outlined a host of improvements to its battery technology including the way batteries are designed, manufactured, and integrated into its vehicles. While these enhancements could take about three years to fully materialize, Tesla expects them to help cut the cost per kilowatt-hour of batteries by about 56% per kilowatt-hour. Tesla is also betting big on manufacturing its own batteries, and targeting 100-gigawatt hours (1 gigawatt-hour is 1 million kilowatt-hours) of internally produced battery capacity by 2022. For perspective, that’s about 3x the battery production capacity that it has at Gigafactory 1, in collaboration with Panasonic.

BUSINESS SUMMARY

Tesla is a Silicon Valley-based automobile manufacturer focusing on the design, manufacture, and sale of electric vehicles and related technologies. The company's current model line-up includes the Model S luxury sedan, the Model X luxury SUV, the Model 3 sedan, and the Model Y compact SUV. Tesla also sells renewable energy products such as solar panels and battery technology.

SOURCES OF VALUE

The majority of Tesla's value comes from Model 3 and Model Y.

Future model launches

Tesla Motors launched the Model S, a battery-electric luxury sedan, in June 2012 and followed up with the Model S SUV. The two vehicles together sell under 100k units per year. In 2017, the company introduced the Model 3, a mass-market electric car with a base price of under $40,000. The company delivered roughly 300k units of the vehicle in 2019. Over 2020 Tesla launched a compact SUV - dubbed the Model Y and the Cybertruck pickup truck is likely to go into production by 2021. Tesla is expected to take its first step away from the luxury passenger vehicle market into the commercial space, with plans to launch an all-electric semi-truck.

Total electric vehicle and plug-in hybrid market size

Tesla aims to become a mass producer of electric vehicles. In order to achieve that, there must be a large enough market. This is especially relevant for the Model 3 vehicle launched in 2017. As mentioned above, Tesla's value depends on its future electric vehicle sales, which, in turn, depends upon the potential size of the market. There are various factors that could affect the potential size of the market, such as the price of oil, fuel efficiency improvements in its internal combustion engine cars, the cost of batteries, recharging infrastructure, and government incentives. In China, the government is investing heavily in setting up a recharging infrastructure. China is already the world's largest automobile market, and it is growing at a much faster pace than the U.S. It is inevitable then that China will also be the largest market for plug-in vehicles. As Tesla expands internationally, China could be an important source of sales for Tesla, especially for the Model 3.

KEY TRENDS

Falling battery costs to speed up the adoption of electric cars

According to Bloomberg New Energy Finance (BNEF), the industry average battery costs (cell + packaging) have declined from $288 per kilowatt-hour to $176 between 2016 and 2018, driven by higher volumes and improved technologies. Tesla's battery costs are likely to be lower than the broader industry, considering the company is one of the largest EV players.

The electric car space is getting increasingly competitive with both established manufacturers and start-ups set to introduce new models

Mainstream automotive manufacturers are getting more serious about their electric vehicle programs, as they look to take advantage of the performance and cost advantages offered by all-electric drive-trains. General Motors now offers the Chevy Bolt, an all-electric vehicle with a range of over 200 miles, while Nissan launched the second generation of its popular Leaf with an improved 150-mile range. Volkswagen announced that it would invest as much as 70 billion euros (~$84 billion USD) to bring around 300 electric models to market by 2030.

Government incentives for the electric vehicle industry

In order to reduce dependence on oil, governments across the world are providing incentives to both consumers and manufacturers for the adoption of electric cars. In the U.S., for example, the federal government offers tax credits of up to $7,500 for the purchase of "advanced technology vehicles" (this includes EVs although Tesla vehicles no longer qualify for this credit). There are several other regulations, such as corporate average fuel economy (CAFE) regulations, the Zero Emission Vehicle program (ZEV), and subsidized loans for battery research and the manufacture of electric cars that can accelerate the pace of adoption.

Changes in consumer behavior

Consumer behavior patterns are an important trend for electric car manufacturers. As oil prices rise and battery prices fall, it may become more attractive for consumers to purchase electric vehicles. Once there is a clear economic rationale to purchase electric vehicles, there could be a surge in demand. Other factors affecting consumer behavior will be the maintenance costs for electric cars vis-a-vis internal combustion engine cars and the resale value of electric cars.