MEMORANDUM

To: Elon Musk, CEO, Tesla Motors, Inc.

From: Timothy Hart, Junior Analyst, Tesla Motors, Inc.
Subject: Competitive Analysis with Ford Motor Company
Date: February 8, 2016

This report outlines the performance of Tesla Motors, Inc. (Tesla) as compared to Ford
Motor Company (Ford), which was chosen because it is an established leader in the
automotive industry. This report shows that Teslas sales and stocks are competing well
with major automotive companies; however, Teslas net income, price/earnings ratio,
and earnings per share are still negative. Tesla Motors, Inc. stocks have been consistent
and are out performing Fords stocks. Tesla Motors, Inc. is expected to set record sales
and move from operating at a loss to making income and becoming profitable in the
coming years due to consumer demand for automobiles that are more environmentally
friendly.

Teslas Stock Performance outperforms Ford

Tesla Motors stock has out performed Fords stock during 2015.

Date Tesla Stock Price Ford Stock Price

January 26, 2015 $201.83 $14.98
July 31, 2015 $216.15 $14.09
January 25, 2016 (Open) $200.06 $12.30
January 25, 2016 (Close) $196.38 $11.98

Table 1. (TSLA Historical Prices, 2016, p.1) (F Historical Prices, 2016, p.1)

It may appear that Teslas stock has not been performing highly, but the stock has been
very consistent, only dropping 2.7%. Over the same year, Ford experienced a 20% drop
in their stock price, which is a significant sign that Ford is not performing as highly as
past years. One reason Teslas stock is performing better is because people are now more
willing to invest in eco-friendly technology in automobiles. This consumer desire for
these type of automobiles has also been increasing Tesla sales.

Teslas Sales Increase 18%

Teslas sales have increased significantly over the years; however, the company still
continues to operate at a loss, which is typical of new companies.

Tesla Ford
Sales 2013: 15,585 16.8 Million
Sales 2014: 18,480 15.9 Million

Table 2. (Shahan, 4 Feb. 2015, p.1) (Ford Vehicle Sales, 2015, p.1).
Demand for electric powered vehicles has been driving sales of Teslas Model S, while
simultaneously causing sales of gasoline powered cars to drop as seen in Fords sales.
While sales have been high for Tesla, the company still operates at a net loss.

Revenue Increases but Tesla Still Operates at a Loss

Tesla Ford
Revenue 2013 $2,013,496,000 $146,917,000
Revenue 2014 $3,198,356,000 $144,077,000
Net Income 2013 ($74,014,000) $7,182,000
Net Income 2014 ($294,040,000) $3,187,000

Table 3. (TSLA Income Statement, 2016, p.1) (F Income Statement, 2016, p.1)

Tesla was able to increase its revenue significantly in 2014 due to the large increase in
sales of the Model S. Tesla experienced a net loss because of the high investments that
many young companies must make. One reason for a bigger loss in 2014 was because of
increased spending on the Model X, which is set to release later this year, and opening a
new factory to produce batteries for the vehicles (Vlasic, 12 Feb. 2015, p.1). Both of
these investments will lead to a higher net income in the future. Ford was unable to
maintain its revenue during 2014. Ford also experienced over a 50% drop in net income
in 2014. These are both signs that consumers are quickly turning away from gasoline
powered cars, which will lead to Teslas success in the future.

Price/Earnings Ratio and Earnings per Share Are Still Negative

Tesla has not been profitable so far according to the price/earnings ratio or earnings per
share.

Tesla Ford
Price/Earnings Ratio -199.17 6.19
Earnings Per Share -2.36 .81

Table 3 (Revenue, EPS, and Dividend, Tesla Motors, Inc., n.d. p.1) (Revenue, EPS, and
Dividend, Ford Motor Co., n.d. p.1).

Teslas PE ratio and EPS are negative because of the many investments the company
makes each year. The demand for Teslas vehicles are rising, which means Tesla has had
to invest in infrastructure to meet production. As sales continue to grow, Tesla will begin
to operate at a net gain. When Tesla is able to operate at a net gain, the P/E ration and
EPS will become positive and quickly take over automotive giants like Ford as the fail to
meet consumer demands for electric vehicles.
 References

F Historical Prices | Ford Motor Company Common Stock Stock - Yahoo! Finance.

(n.d.). Retrieved February 04, 2016, from http://finance.yahoo.com/q/hp?s=F

F Income Statement | Ford Motor Company Common Stock Stock - Yahoo! Finance.

(n.d.). Retrieved February 04, 2016, from http://finance.yahoo.com/q/is?s=F

Income Statement

Ford - vehicle sales by automotive segment 2014 | Statistic. (2015). Retrieved February

04, 2016, from http://www.statista.com/statistics/239738/vehicle-sales-of-the-

ford-motor-company/

Revenue, EPS, & Dividend - Ford Motor Company (F) - NASDAQ.com. (n.d.).

Retrieved February 04, 2016, from http://www.nasdaq.com/symbol/f/revenue-eps

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Retrieved February 04, 2016, from http://www.nasdaq.com/symbol/tsla/revenue-

eps

Shahan, Z. (2015, February 14). Tesla Sales Updates & Estimates. Retrieved February

04, 2016, from http://evobsession.com/tesla-sales-updates-estimates/

TSLA Historical Prices | Tesla Motors, Inc. Stock - Yahoo! Finance. (n.d.). Retrieved

February 04, 2016, from http://finance.yahoo.com/q/hp?s=TSLA

TSLA Income Statement | Tesla Motors, Inc. Stock - Yahoo! Finance. (n.d.). Retrieved

February 04, 2016, from http://finance.yahoo.com/q/is?s=TSLA Income

Statement
Vlasic, B. (2015, February 12). Tesla Motors Met Its Output Goal, but Showed a 4th-

Quarter Loss. Retrieved February 23, 2016, from

http://www.nytimes.com/2015/02/12/business/tesla-motors-quarterly-earnings-

electric-cars.html?_r=0