Survivability Report

8 May 2013

Table of Content

Executive Summary
Background
Rounds of Financing
Issues
Forecast/Product Development
Cycle

Recommendations

Executive Summary
700%

600%

Tesla is a fast growing Electric Vehicle

Company

500%
Net Loss as % of Sales
R&D as % of Sales
Sales Growth

400%
300%
200%

Current financial risks:

100%
0%
2009

2010

2011

Over-leverage, high R&D costs,

insufficient sales and other

operational cost burdens

2012

-100%
-200%
p/e ratios for selected motor companies

GM

Three Options for Sustainability:

tabilize in the growth product life

S
cycle and control costs

Raise more equity

Merge with another company

Toyota

Ford Motor

Daimler

10

15

20

Background

Founded 2003

Business model

Selling Electric Vehicles and

Electric power train components

ision: Intends to mass produce

V
electric vehicles

trategy: Sell high range models in

S
order to finance development of
mass produced models

Tactic: Sell only through Teslas

showrooms

3,000 Employees

Market Capitalization of $6.3billion

(6 May 2013)

Headquartered in California, USA

Background (cont'd)

Two car models Roadster, Model-S

Roadster is a high range sports car model with

price tag of >US$100,000

Model-S is a sedan with price tag of

~US$60,000

Currently planning a Model-X (SUV) in

cooperation with Toyota

Also planning a Bluestar version (2016-17)

which will sell for US$30,000

Rounds of Financing

US$7.5mln

US$40mln

First Round

Elon Musk

Compact Tech

SDL Ventures

Private Investors

Third Round

Elon Musk

Google co-founders

Ebay president

VC firms

pre-May 2006
pre-May 2006
Second Round

Elon Musk

Valor Equity

Others

US$13mln

Fifth Round

Elon Musk

Others

DOE debt

May 2007
Fourth Round

Elon Musk

Others

US$45mln

Total equity raised before IPO = US$285mln

IPO

Jun 2010

Jun 2009

Feb 2008

May 2006

US$226mln

US$465mln

US$40mln

May 2009
Equity Sale to

Daimler

Other

US$50mln

Sept 2009
Sixth Round
Elon Musk
Daimler
Others

US$82.5mln

Issues: Financial Position

Over-leverage

Tesla 80% appreciation since IPO

Ford

Strained liquidity - low current ratio of 1

Negative cashflow from

operations/investing activities @ -86% of

sales

Toyota
Paccar

LT Debt-Equity ratio of 374.2%

Insufficient sales volume

Rising R&D costs 3 year average of 179%

Growing inventory

ost inefficiencies third party

C
plants/showroom investment

GM

In general, Tesla faces the risk of

bankruptcy

Yet, Stocks trade around US$57

Forecast (current trend worst case)

Tesla cannot sustain the current trend, which will require funds for over $6 Billion in 4 years.
Operating Ratios:
Sales growth rate
Op costs / Sales
Cash / Sales
Inventory / Sales
Net plant / Sales

3 yr Av
60.62%
206.60%
117.00%
42.70%
130.10%

Million US$
Income Statement
Sales
Costs (excl. depr.)
Depreciation
Total op. costs
EBIT
Net operating profit after taxes
Net operating working capital
Total operating capital
FCF = NOPAT op capital
YEAR
Required Increase in Assets
Less Spontaneous Increase in Payables and
Accruals
Less Addition to Retained Earnings
Additional Funds Needed to Support Growth

Actual Forecast Forecast

2012
2013
2014
$413.3
$663.8
$1,066.2
780.3
1,371.4
2,202.7
28.8
55.3
88.8
$809.1 $1,426.6 $2,291.4
-$395.8 -$762.8 -$1,225.3
-$257
-$496
-$796
$213
$785
$1,261
$775
$1,649
$2,648
N/A
-$1,369
-$1,796
2013
2014
$881.77 $1,209.95
$

Forecast
2015
$1,712.5
3,537.9
142.6
$3,680.5
-$1,968.1
-$1,279
$2,026
$4,254
-$2,885
2015
$1,943.42

Forecast
2016
$2,750.5
5,682.6
229.0
$5,911.6
-$3,161.1
-$2,055
$3,254
$6,832
-$4,633
2016
$3,121.53

8.59

$ 189.12

$ 303.76

$ 487.90

$0.0
$873.18

$0.0
$1,020.83

$0.0
$1,639.66

$0.0
$2,633.63

Product Development Cycle

Model-X/
Bluestar?

Model-S

Roadster
Pre-2007

September 2010: "Its working capital was about $90 million

in the red, and its stockholders were under water to the tune
of $28 million. The only thing that saved Tesla from preelection disaster was a last-minute offering that scored $222
million in new investor cash in early October."

2012+
http://www.thestreet.com/story/11759628/1/teslamotors-pollutes-today-for-a-greener-tomorrow.html

What now? Second IPO?

Forecast (best case)

Sustainability and current stock price can be met assuring stable product(s) life cycle growth
and key operating ratios in conformance to industry average.

Million US$
Operating Ratios :
Sales growth rate
Op costs / Sales (85% Ind. Av.)
Cash / Sales (25% Ind. Av.)
Inventory / Sales (10% ind Av.)
Net plant / Sales (20% Ind. Av.)
Acc. pay. / Sales (10% Ind. Av.)
Income Statement
Sales
Costs (excl. depr.)
Depreciation
Total op. costs
EBIT
Net operating profit after taxes
Net operating working capital
Total operating capital
FCF = NOPAT op capital
Weighted average cost of capital (WACC)
Long-term constant growth in FCF
Horizon value
FCF in Years 1-3 and FCF4 + horizon value in Year 4
Value of operations (PV of FCF + HV)
Plus Value of Mkt. Sec.
Total Value of Company
Less Value of Debt
Less Value of Pref.
Value of Common Equity
Divided by number of shares
Price per share

Required Increase in Assets

Less Spontaneous Increase in Payables and Accruals
Less Addition to Retained Earnings
Additional Funds Needed (AFN) to Support Growth

Actual
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Forecast
Forecast
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
102.34%
80%
60%
60%
50%
40%
30%
20%
15%
10%
5%
188.81%
120%
90%
80%
70%
60%
60%
60%
75%
75%
75%
53.47%
39%
32%
28%
28%
28%
28%
28%
28%
28%
28%
64.97%
45%
30%
29%
25%
25%
25%
20%
15%
10%
10%
136.07%
84%
59%
40%
33%
30%
20%
20%
20%
20%
20%
73.41%
65%
55%
45%
35%
30%
20%
10%
10%
10%
10%
Actual
Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Forecast
Forecast
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
$413.3
$743.9 $1,190.2 $1,904.3 $2,856.4 $3,999.0 $5,198.7 $6,238.4 $7,174.2
$7,891.6
$8,286.2
780.3
892.6
1,071.2
1,523.4
1,999.5
2,399.4
3,119.2
3,743.1
5,380.6
5,918.7
6,214.6
28.8
49.9
56.4
60.9
75.0
96.0
83.2
99.8
114.8
126.3
132.6
$809.1
$942.6 $1,127.5 $1,584.4 $2,074.5 $2,495.4 $3,202.4 $3,842.9 $5,495.4
$6,045.0
$6,347.2
-$395.8
-$198.7
$62.6
$319.9
$781.9 $1,503.6 $1,996.3 $2,395.6 $1,678.8
$1,846.6
$1,939.0
-$257
-$129
$41
$208
$508
$977
$1,298
$1,557
$1,091
$1,200
$1,260
$213
$172
$122
$258
$571
$1,000
$1,820
$2,495
$2,511
$2,367
$2,486
$775
$796
$827
$1,020
$1,509
$2,199
$2,859
$3,743
$3,946
$3,946
$4,143
N/A
-$150
$9
$15
$20
$287
$638
$673
$888
$1,200
$1,063
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
12.00%
4.00%
$13,819.53
$ (149.52) $
9.36 $ 14.83 $ 19.69 $ 286.57 $ 637.76 $ 673.33 $ 888.45 $ 1,200.32 $14,882.57
$6,270.79
$
$6,270.79
$ 467.00
$
$5,803.79
115.32
$
50.33
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
$ 217.32 $ 245.78 $ 471.92 $ 717.48 $ 994.05 $ 608.35 $ 561.89 $ 380.94 $
136.61 $
272.43
$ 217.32 $ 205.31 $ 264.22 $ 209.47 $ 279.93 $ (75.98) $ (343.11) $ 159.08 $
121.96 $
67.08
$0.0
$40.5
$207.7
$508.0
$977.1 $1,297.3 $1,556.9 $1,090.9
$1,200.1
$1,260.1
$
$
$
$
$ (262.99) $ (613.01) $ (651.86) $ (869.09) $ (1,185.42) $ (1,054.73)

Our Recommendations

Raise more equity (US$6billion)

Current

leverage level makes business too risky

Additional equity will optimize cost of capital

Merge with another company

esla will provide a natural hedge for

T
companies without an electric vehicle line

ill enhance portfolio of companies with electric

W
vehicle lines

Adapt Strategy

Reduce R & D expenditure

hange distribution strategy to include third party

C
dealerships