It has not made any significant profits in the last eight quarters, but its revenue is growing. A large portion of Tesla’s revenue comes from selling “credits” to other auto companies. All auto companies are required to meet certain emission standards around the globe. Since Tesla’s model-s is 100% electric vehicle, it does not generate any emission. So Tesla is able to sell these “negative emissions” to other auto companies. This allows those auto companies to meet the emission standard and avoid paying the fines. (I learned this during our visit to Detroit, from Mr.Treece)
Its stock has grown from $25 to $250 thanks for the successful model-s. Tesla is also the first auto company that issues IPOs since 1956.
There have been many articles on the internet trying to explain and predict what Tesla is doing. However, the best way to know these answers is to hear it directly from Elon Musk, the co-founder of Tesla. In an interview with a Chinese business newspaper, Elon Musk explained Tesla’s primary goal and Tesla’s strategy in China.
Tesla’s primary goal is to “accelerate the advent of sustainable transport”. Succeeding in China is crucial for Tesla to achieve this goal. Today, there are more than two hundred million automobiles in China, and the number is still growing rapidly. Chines is both the largest producer and biggest consumer of automobiles. Elon Musk believes that “every vehicle will be completely electric (not even hybrid), and it is just a question of when”.
The biggest challenges that Tesla faces in China are the constructions of service centers and charge stations. Tesla is planning to construct service structure and charging infrastructure across China. These constructions require large amount of investments and time, so coast cities have the advantages of building these constructions faster than cities in the middle of country. Tesla delayed the delivery of vehicles for Chinese customers not living in coast cities for this reason.
Elon Musk’s plan is to begin local production of Tesla in China in three or four years. Shipping vehicles from California is not sustainable in long run. If sales go up in China, shipping expense will become too expensive. Therefore, local production becomes the best choice for Tesla. Major auto companies such as BMW, Toyota, Ford have initiated local productions in China to decrease shipping costs and utilize the advantages of lower labor expense. Their successes in China prove that local production is the best choice for auto companies trying to enter Chinese market.