How Does Tesla Make Money?

Tesla Inc. (NASDAQ: TSLA) has become the most valuable auto manufacturer globally by market capitalization. The biggest share of Tesla’s revenue is car sales — the majority is from lower-priced Model Y and Model 3 vehicles.

Besides selling pickup trucks, Tesla also offers solar energy generation and energy storage products. A part of its revenue is from servicing and other charges to Tesla cars. A future income stream could be the rumored Pi phone.

In this article, Benzinga looks at Tesla’s history and future, as well as the company’s executives, its stock price and ways to buy Tesla stock.  

How Tesla Makes Money

Tesla generates revenue from several products and services. Apart from car sales, Tesla offers solar energy generation and energy storage products. Another revenue stream is servicing used Tesla cars.

Car Sales

Tesla’s addition to the product line and geographical expansion into China resulted in a $5.5 billion profit on $53.8 billion sales in 2021. In Q4 2021, Tesla reported revenue of $17.7 billion, a 65% increase year over year.

Tesla delivered 936,172 cars in 2021, an 87% increase on 499,647 cars in 2020. It delivered 308,600 cars in Q4 2021. Model 3 and Model Y are Tesla’s biggest revenue generators. Model 3 was Europe’s best-selling car in September 2021. Model X and Model S also generate Tesla revenue.

With the expected arrival of the Cybertruck, Tesla’s earnings have tremendous upside potential.

Energy Solutions

Tesla’s desire to create a sustainable energy ecosystem has resulted in the production of the Powerwall, Powerpack and Solar Roof — enabling homeowners and businesses to manage renewable energy generation, consumption and storage.

The Tesla Solar Roof powers homes and is a full solar and storage system. The Powerwall is a compact home battery bundled with Tesla’s solar purchase. It provides 24/7 energy security and stores the energy produced from the Solar Roof.

Tesla’s energy revenue was $2.789 billion in 2021. The cost of the energy revenue was $2.918 billion, resulting in a $129 million loss. But the company increased annual revenue by 40%, earning $2 billion in 2020.

Servicing

Another revenue stream for Tesla is servicing old Tesla cars. During Q3 2021, Tesla suffered a 39% sales drop in the U.S., but the services and other charges revenue grew by 68% — from $326 million a year earlier to $548 million. Services and other charges revenue is vehicle repairs and sales of parts and used cars. 

During the first nine months of 2019, the services and other revenue grew 91% to $1.65 billion from a year earlier.  

TSLA Stock Price

A stock price is the highest amount an investor pays to own a single share of a company. Another way of looking at a stock price: the lowest amount investors need to pay to acquire a single company share. 

TSLA YTD from Benzinga Pro

Where to Buy Stocks

The easiest way to buy Tesla stock is with an online broker. You may be overwhelmed by the number of brokers to choose from, so Benzinga compiled a list of some of the best. 

History of the Company

Marc Tarpenning and Martin Eberhard founded the company in 2003 and named it after Nikola Tesla, an inventor and electrical engineer. Their goal was to prove to the market that they didn’t have to compromise by driving electric vehicles (EVs). They believed EVs were faster and more fun to drive than gasoline vehicles.

The co-founders held several investing rounds with venture capital firms in 2004. Elon Musk led the initial rounds and joined as the head of the board of directors. Musk became the company’s CEO and product architect in 2008, when Tesla launched the Roadster.

The Roadster, the company’s first vehicle, was a sports car with cutting-edge battery technology. It reached 245 miles on a single charge and accelerated 0 to 60 miles per hour in less than four seconds. Tesla also designed the first premium all-electric sedan — Model S. It became the best car in its class in every category.

Tesla expanded its product line in 2015 by debuting Model X and the following year with Model 3. The company’s range expanded further in 2019 by unveiling Model Y, a mid-size SUV seating seven people. Another addition was the Cybertruck. Tesla stated that the Cybertruck is faster than a sports car and has better utility than traditional trucks.

The company’s goal of establishing a sustainable ecosystem led it to produce the Tesla Solar Roof and the Tesla Powerpack. Using those energy solutions, homeowners and businesses can manage renewable energy generation, consumption and storage.  

Current Events

Source: Benzinga Pro

Tesla’s Q4 2021 results were better than expected. The company earned $2.54 per share instead of the expected $2.26. The forecasted revenue was $16.35 billion, but Tesla generated $17.72 billion. Its revenue increased 65% year over year in the quarter.

Tesla’s net income was $2.32 billion, an increase of 760%. The company stated that its gross margin was 27.4%, and the previous quarter was 26.6%.  

Energy generation and storage revenue were Tesla’s shortfall. It earned $688 million, a decrease of 8%. 

Musk said that the company would not introduce new vehicle models in 2022.

German regulator Kraftfahrt-Bundesamt is assessing Tesla’s Autopilot to determine its safety on German roads. It is also in talks with The Netherlands’ vehicle agency responsible for approving European vehicles.

Tesla announced a switch to iron-based batteries, known as lithium iron phosphate batteries. Switching to iron-based batteries enables Tesla to reduce production costs because of the lower price of raw materials. 

The drawback of iron-based batteries is the range. The material in iron-based batteries has a lower energy density than nickel-based lithium-ion batteries.

Future Potential

Tesla plans to expand further in China and erect new buildings in Austin, Texas. It is currently busy with a building in Lathrop, California, for its utility-scale battery product. The company has set its sights on Tesla Insurance. Customers would be able to get competitive rates in Arizona, California, Illinois, Ohio and Texas. 

Musk said that Tesla would be chip-limited in 2022 and believes the company would be parts constrained. He also stated that the lack of Cybertruck’s release update was because of supply chain issues.

Tesla had stated it would release a $25,000 model in 2022 at the Shanghai facility. Model 2, the car’s rumored name, may see the production line only in 2023.

Tesla’s latest analyst ratings, published on Feb. 14, 2022, by analyst firm Piper Sandler, were an upside of 57.53% and a stock price target of $1,300 to $1,350. The previous rating, published on Jan. 31, 2022, featured Credit Suisse’s upgrading to overweight and a prediction of 19.61% upside in the stock’s price.

The C-Suite

Tarpenning and Eberhard founded the company, but Tesla formed a new executive team since its inception. 

Elon MuskChief Executive Officer

Musk became the CEO in 2008 after holding the initial rounds of investing for the company in 2004. He is one of the main contributors to the production and marketing of Tesla vehicles. Musk was a co-founder of Paypal Holdings Inc. (NASDAQ: PYPL) and SpaceX. You can find more information about Musk’s projects and the latest developments on Twitter.

Zachary KirkhornChief Financial Officer

Kirkhorn became Tesla’s CFO in March 2019, succeeding Deepak Ahuja. He has more than 20 years of automotive finance experience and was the vice president and senior director of finance at Tesla. Tesla gave him the title Master of Coin, a reference to the Game of Thrones title for a CFO. More information about Kirkhorn is on his LinkedIn.

Andrew BaglinoSenior Vice President, Powertrain and Energy Engineer

In 2019, Baglino succeeded Jeffrey Straubel, the former Chief Technology Officer. Baglino’s title is senior vice president, though he fulfilled most of Strubel’s responsibilities. He obtained an electrical engineering degree from Stanford University.

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