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Tesla, Inc. designs, develops, manufactures, sells and leases fully electric vehicles and energy generation and storage systems, and offer services related to its products. The Company's automotive segment includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits. Additionally, the automotive segment is also comprised of services and other, which includes non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, sales by its acquired subsidiaries to third party customers, and vehicle insurance. Its energy generation and storage segment includes the design, manufacture, installation, sales and leasing of solar energy generation and energy storage products and related services and sales of solar energy systems incentives. Its automotive products include Model 3, Model Y, Model S and Model X. Powerwall and Megapack are its lithium-ion battery energy storage products.
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How does Tesla make money?
Unless you're reading this from under a rock, you know that Tesla specialises in the creation and sale of electric vehicles. Less known is the fact they also develop solar power generation and energy saving products. So their revenue is reported in two major business segments — Automotive and Energy Generation and Storage.
Tesla's Automotive segment makes up 95% of their revenue. This segment includes the design, development, manufacture, sales and leasing of their electric cars.
While Tesla offers consumers luxury level vehicles in the form of the Model S and Model X, most car sales come from their lower cost vehicles. These include the Model 3, a four-door mid-size sedan, and the Model Y, a compact SUV built on the Model 3 platform.
Tesla’s remaining 5% of revenue comes from their Energy Generation and Storage business segment. Within this segment, Tesla designs, manufactures, sells, leases and installs three main products:
Solar Roof — a solar and storage system which powers homes
Powerwall — which stores energy for homes or small commercial facilities
Megapack — an energy storage solution for commercial, industrial, utility and energy generation customers.
What moves TSLA stock?
Tesla is currently the world’s most valuable automaker and is the second company after Apple to have surpassed a US$1.0t market cap (Oct 2021). At the end of 2021, Tesla’s Automotive segment was up 87% from 499,647 to 936,222 deliveries for a gross profit of US$13.7b.
But unlike other U.S. technology stalwarts, Tesla’s stock is volatile, prone to large daily swings. In 2021 alone, there were over 20 daily moves of at least 5% to the upside or downside.
Some reasons for these large TSLA price moves include:
Production and delivery delays of the much anticipated Cybertruck — production was meant to begin in 2022 but has been pushed back to 2023.
Electric vehicle competition — while Tesla is the current market leader, Nio, Xpeng and BYD are already taking hold of China. European, U.S. and Japanese car manufacturers have also made commitments to a greener future, posing even greater risk to Tesla’s revenue growth.
Elon Musk’s Twitter behaviour — Musk’s Tweets can send the TSLA share price on a roller coaster ride. He has publicly expressed an interest in taking Tesla private, has proclaimed Tesla stock is too expensive and made mistakes in vehicle delivery projections. Musk has even joked that Tesla went bankrupt in 2018 and has also referred to Tesla stock as “a souffle under a sledgehammer” in a leaked company email.
Short sellers — made famous by the film “The Big Short,” Dr Michael Burry of Scion Asset Management bet US$530m against Tesla stock in May 2021. He closed his short position 6 months later.
2022 has also shown that Tesla stock is as susceptible to the effects of inflation and geopolitical tensions as any other U.S. technology mega cap. Tesla has dropped over 30% in market value since the beginning of the year.
Is it too late to buy TSLA?
While Tesla stock has grown over 800% in value since January 2020, many shareholders still believe Tesla has plenty of runway to grow as a company. Others believe Tesla has peaked, with too many competitors entering the EV and energy generation markets.