EQUITY RESEARCH

INITIATION
Tesla Motors Inc.

Electric Vehicles
May 21, 2012
Closing Price (5/21/12):
12-month Target Price:
52-Week Range:
Market Cap (MM):
Shares O/S (MM):
Float (MM):
Avg. Vol. (MM)
Shares Short (MM)
Book Value/Share:
Dividend/Yield:
Risk Profile:
FYE: December
2011A
2012E
2013E
2014E
LT Earnings Growth

$28.77
$50.00
$21.50 - $39.95
$3,015.1
104.8
64.6
1.2
23.5
$1.47
$0.00 / 0.00%
High
EPS
($2.21)
($2.22)
$0.53
$1.86

P/E
NM
NM
54.3
15.5

NM

Source: Big Charts

Aaron Chew

(212) 895-3568

[email protected]
Francesco Citro, Ph.D.

[email protected]

Buy

(TSLA NASDAQ $28.77)

(212) 895-3809

Revving Up the Engines ahead of the Model S Launch, TSLA

Is Set to Zoom Past Targets and Turn the Corner on Doubts;
Initiating Coverage with a Buy Rating and $50 Price Target
Living Up to Its Name, TSLA Is Taking the Electric Vehicle to a New
Level: A pioneer in EVs (releasing its Roadster three years before the Volt),
TSLA plans to launch its sleek, high-performance Model S in June, targeting
the $50k-$75k luxury sedan market. Penetrating the auto market with an EV is
no small feat, but its track record of success lays the groundwork for more.
Obstacles to Higher EV Penetration Likely to Take Years to Surmount:
Despite widespread hype and anticipation, EV sales have only crept out of the
starting gate with 18k sold in 2011, and we expect penetration to be lower and
slower than hoped given concerns over range, charging time, and life which
require changes in consumer behavior (and charging station infrastructure).
Targeting 3% of the Luxury Segment, TSLA Offers the Performance and
Image to Do It: While others have set loftier EV goals, TSLAs target of 10k
in the U.S. only represents 3% of the luxury sedan market. With a price inline
with conventional cars in its class, a range >2x EV peers, high performance,
and an exclusive image, we believe the Model S is set to defy expectations.
Low Cost of Modular Battery Design a Major Competitive Advantage:
Though high battery costs are one of the biggest obstacles to EV penetration
and profitability, TSLAs modular design of thousands of small form factor
cellsand cumulative price points with suppliersyield a cost advantage that
we believe positions it to outpace peers, take share, and achieve profitability.
Powertrain Business Is Both a Growth Driver and Key Source of Value:
Though popularly known only as an automaker, it is in TSLAs powertrain
where its true distinction lies. Leaps and bounds ahead of its peers, its unique
powertrains are used in the Mercedes Benz A-Class and Toyota RAV4 EV.
Underscored by a pending contract for the next Benz approaching $300m, its
powertrain business is not only a growth driver, but a core source of value.
Liquidity a Risk but Cash of $287m Offers Sufficient Bridge to 2014:
With $700m in free cash flow losses since 2009 and more to come, liquidity is
the biggest risk on TSLAs horizon. However with a DOE loan-funded cash
balance of $287m and TSLA poised to hit targets, we estimate this is enough
to get TSLA to at least 2014 when cash flow prospects can be better gauged.
Amidst Widespread Doubts, Stock To Power Higher as TSLA Hits
Targets: While the jury is still out over TSLAs longer-term market
penetrationgiven foreboding competition from majors like BMW and
Audiwe believe the engines are revved up and ready to power TSLAs
stock higher as we expect negative investor sentiment (with short interest at
over 36% of the float) to quickly unwind as TSLA hits its 2012-13 targets.
Sum-of-the-Parts Using $1.5b Value for Powertrain Business Supports a
$50 Stock: While the uncertainty makes TSLA tough to value, we use a sumof-the-parts to reflect EPS power and technology assets. With (1) a DCF of
vehicle sales pointing to $3.7b and (2) a powertrain valuation of $1.5 based on
EBITDA and IP, we set our price target at $50 and initiate with a Buy rating.

Maxim Group LLC, 405 Lexington Avenue, New York, NY 10174

SEE PAGES 38 FOR RISKS AND 48-50 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS

Tesla Motors, Inc. (TSLA)

CORPORATE PROFILE
Tesla Motors Inc.
3500 Deer Creek
Palo Alto, CA 94304
United States
Website: www.teslamotors.com
Senior Management:
Mr. Elon Musk is the co-founder of Tesla and has
served as CEO since October 2008. In addition, Mr.
Musk holds the positions of Chairman and Product
Architect, and he has been instrumental in the design of
the Tesla Roadster and the development of the Model S.
He presently also serves as CEO and CTO of SpaceX a
company that develops rockets and spacecraft for
commercial trips to the Earths orbit and beyond and is
the Chairman of Solarcity, a pioneer in solar system
leasing. Mr. Musks claim to fame was the founding of
both Zip2 and PayPal. He earned a B.S. degree in physics
and business from the University of Pennsylvania.
Mr. Deepak Ahuja has been TSLAs Chief Financial
Officer since its founding in 2007. Mr. Ahuja brings
more than 15 years of experience in the global auto
finance markets, including as the Controller of Small
Cars Product Development at Ford and CFO of Ford of
Southern Africa. Earning his degrees in Material
Engineering, he holds a B.S. from Banaras Hindu
University and a Masters from Northwestern University.

Insider Ownership:

26%

Institutional Ownership:

74%

Balance Sheet Summary:

(As of March 31, 2012)
Equity:
Assets:
Long-Term Debt:
ROE 2011:
ROE 2012E:

1Q
2Q
3Q
4Q
FY

1Q
2Q
3Q
4Q
FY

$M
$154
$779
$361
NM
NM

Quarterly Non-GAAP EPS

2011A
2012E
2013E
($0.44)
($0.76A) $0.05
($0.53)
($0.96)
$0.05
($0.55)
($0.42)
$0.22
($0.69)
($0.09)
$0.21
($2.21)
($2.21)
$0.53
Quarterly Revenue
2011A 2012E
$49.0
$30.2A
$58.2
$30.4
$57.7
$134.7
$39.4
$372.8
$240.2 $568.1

(M)
2013E
$373.4
$373.6
$380.8
$376.1
$1,503.9

Fiscal Year Ends December 31

Company Description:
Tesla Motors, Inc. designs and manufactures electric
vehicles differentiated by its proprietary powertrain
technology, which is also sold on an OEM basis to other
automakers like Toyota and Daimler. A pioneer in EVs,
Tesla introduced its flagship Roadster in 2008, selling
2,100 cars through 2011YE. With plans to launch its
sports sedan Model S in June 2012 and sports utility
vehicle Model X in 2014, Tesla is a true start-up seeking
to upend the global automotive industry.

FC Analysts Following the Co.: 14

(Excluding Maxim Group LLC)
Consensus non-GAAP EPS Estimates:
2012E:
($2.46)
2013E:
$0.66

Investment Risks:
Model S fails to achieve managements targets
Obstacles to EV adoption restrain penetration
Battery costs do not decline fast enough
New EV Models from luxury auto brands take share
Switch to natural gas fleet gains steam on low prices
Shareholder dilution from future equity offerings
(PLEASE SEE PAGE 38 FOR A MORE DETAILED OUTLINE OF
OUR INVESTMENT RISKS)

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

INVESTMENT SUMMARY AND CONCLUSION

We are initiating coverage on Tesla Motors Inc. [TSLA: $28.77] with a Buy Rating and $50 price
target. Our thesis is founded upon the following key points:
Striving to Live Up to its Legendary Name, TSLA Has Invented a New Class of Electric Cars:
Aside from breaking new ground with electric car technology yet to be broadly accepted by the
market, TSLA also aspires to penetrate the global auto industry dominated by entrenched
heavyweights with deep pockets. After releasing the first highway capable electric vehicle [EV] in
2008, TSLAs $50,000+ Model S will be the first EV to target the luxury sedan market.
Despite the Hype, the Road to Higher EV Adoption Likely to Prove Slow and Bumpy: While EVs
have long been awaited and discussed, their entry onto the stage has proven less than stellar, with
18k sold in 2011. Despite the cost and energy savings generated, EVs face a breadth of obstacles
that may prove insurmountable to many: (1) limited range; (2) hours of charging time; (3) chickenegg dependence upon charging station network; (3) limited and deteriorating battery life; and (4) an
outright adjustment to consumer behavior. While hopes soar high along with Obamas 1m EVs
target by 2015, we estimate 50k sold in 2012 and > 500k on the road by 2015.
Model S Only Targets 3% of the Niche Luxury Sedan Market Geared for High Performance and
Exclusive Image: While we expect EVs to be relegated to a small share of the auto market, TSLAs
2013 target of 20k vehicle deliveries (50% U.S./50% international) represents a modest market
share of only 3% of the U.S. luxury sedan market (or < 0.1% of the total U.S. market) and even less
of the global market. Priced in line with conventional cars in its class, and boasting a range >2x EV
peers, high performance, and a sexy image, the Model S is, in our view, poised to build off its
10k reservations, awe consumers, surprise doubters,and achieve its 20k target..
Low Battery Costs Yield a Competitive Advantage vs. EV Peers and Global Automakers: While
high battery costs are, in our view, the predominant impediment to more accommodative pricing
and higher EV penetration, TSLAs battery costs are the lowest in the field. With thousands of
small cylindrical form factor cells and the benefit of cumulative volume price break points, TSLAs
module battery build provides flexibility and a lower cost structure. With better costs and
performance, TSLA is in a position to out-duel other EVs, as well as standard autos in its class.
Powertrain Technology Is the Heart and Soul of TSLA that Underscores Its True Value: While
TSLA is popularly known as an automaker, we believe the foremost distinction and strength in its
manufacturing capabilities lie in its proprietary powertrainsthe battery/gearbox/electronics unit
that provides power to the engine. With the only EV offering four years of logged miles on the
road, TSLAs experience and expertise give the company an expanding lead over its peers that has
provided a platform for an OEM powertrain business. Each successive contract is getting larger;
TSLA not only developed but will supply the powertrains for Toyotas new RAV4 EV and
Daimlers A-Class. We believe the company is close to signing a new powertrain contract for a new
electric Mercedes-Benz that could approach $300m.
Liquidity Risk Looms but $287m Cash Balance Should Bridge It to At Least 2014: With free cash
flow losses totaling $700m since 2009 and set to continue, liquidity risk lingers on the horizon.
However, with TSLA set to hit targets and armed with a DOE loan-funded $287m cash balance, we
believe TSLA has sufficient liquidity until at least 2014 when positive cash flow is possible.
Sum-of-the-Parts Using $1.5b Value for Powertrain Business and DCF Supports a $50 Stock:
With much uncertainty on the horizon, it is a challenge to comfortably value TSLA. While the
stocks near-term direction likely to hinge on the success of the Model S more than anything else,
profitability and cash flow should later emerge as a bigger driver of valuation. Now, we use sumof-the-parts to reflect both earnings and technology asset value. With (1) a DCF of vehicle-only
sales adding $3.7 billion, (2) $750 million based on a 10x EV/EBITDA of its OEM powertrain
business, and (3) $750 million to reflect the value of its investment/IP in powertrain technology, we
set our price target at $50 and initiate coverage on TSLA with a Buy rating.

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

LIVING UP TO ITS LEGENDARY DARK HORSE NAME

Named after the legendaryyet widely unrecognizedinventor Nikola Tesla (who developed alternative
current [AC] transmission/distribution systems for electricity, Tesla Motors is a pioneer in electric vehicle
[EV] technology, having launched the first highway-capable EV in 2008not only three years before both
General Motors [GM: $21.54 - Not Rated] and Nissan [7201.TYO: 743.00 - Not Rated], but also with
battery performance that is close to twice as powerful as either GMs or Nissans with a range of over 200
miles. With over 36% of its float short, we believe TSLA is shrouded in negative sentiment and doubts
surrounding (1) the pace and depth of electrical vehicle penetration in general; (2) market share prospects
of its Model S and X at a $50,000+ price point; and (3) the ability of its current financing to bridge the gap
to free cash flow without further diluting shareholders. Heading into the June 2012 launch of its Model S,
we expect TSLA shares to begin a steady march upward as (1) positive headlines, reviews, and uptake
through year-end turn the tables on sentiment towards the stock; and (2) unit sales meet or exceed targets.

Beyond an Automaker, TSLA Also Sells Its Powertrain/Battery Technology

While TSLA is popularly perceived as an auto manufacturer, auto sales only represent one of its revenue
streams; TSLA also develops and sells powertrains to other auto manufacturers. Its Automotive Sales
segment accounts for ~95% of revenue, while its Development Services segment chips in around 5%.
Development services, however, tend to only represent the first stage of a longer-term agreement for TSLA
to design, develop, and ultimately supply complete OEM powertrains for other auto manufacturers. The
latter half of this contract likely entails producing and supplying the powertrain as well. The powertrain
component and related sales are reported within the Automotive Sales segment and have recently
contributed around 15% of revenue. Together, we expect TSLAs OEM powertrain business (through both
development services and powertrain supply)to account for 20% of revenue in 2012.
While much of the focus is on the sale of TSLAs successive car models, we believe the sale of its
powertrain technology not only underscores TSLAs competitive advantage in the marketplace but will be a
critical driver of growth, revenue diversification, and above all profitability in the years to come.
Figure 1: Development Services Drive 5% of Revenue, and Powertrain Sales Add Another 15%

2012
Development
Services
5%

Automotive
Sales
95%

Powertrain/
Develop.
Sales
21%

2012

Vehicle
Sales
79%

Source: Tesla Motors and Maxim Group estimates

Vehicle Sales Kicked Off in 2008 but Are Expected to Take Off in 2012-2013
Founded in 2003, TSLA has focused on EV development from its very beginnings. With the launch of the
Tesla Roadster in 2008, TSLA introduced the first highway capable EV to the market. At a price tag of
$109,000, this luxury sportster seats two, accelerates from 0 to 60 in less than four seconds, and has a 54
kWh battery that offers an EPA range of 220 miles. Solely targeting the affluent market, the Roadster
rounded up 2,100 in sales through 2011 and will be discontinued at 2,500. Selling roughly 600 vehicles per
year, the Roadster generated ~$75 million in revenue in 2010 and over $100 million in 2011.

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

Though sales of the Roadster will be limited to the final 400 deliveries to Europe and Asia in 2012, the
company has set its sights upon the mass market with the wide release of the Model S in July 2012. With
three price points$49,900 (after the $7,500 U.S. federal tax credit) for the 40 kWh battery, $59,900 for
the 60 kWh, and $69,900 for the 85 kWh Signature Series, the Model S is targeting the luxury sedan
market. Following that, TSLA aims to release its Model X electric sports utility vehicle in early 2014.

Q u a rte rly R o a d s te r D e liv e rie s

Figure 2: Following the Roadsters Limited Release, Model S to Begin Mass Production in 2H12
350

324

Roadster

300
250
195

200
150

148
112

130 132

151

190 184

165

150

131

99 105

100

77
49

50

12
3Q E
12
4Q E
12
1Q E
13
2Q E
13
3Q E
13
4Q E
13
E

2Q

11

12

1Q

4Q

11

11

3Q

2Q

10

10,000
Q u a rte rly M o d e l S D e liv e rie s

11

1Q

4Q

10

10

3Q

2Q

10

09

4Q

1Q

09

09

3Q

2Q

1Q

09

Model S

9,000
8,000
7,000

5,931 6,057

6,000

6,815

6,436

5,000 5,053 5,043 5,056 5,033

5,000
4,000
3,000
2,000
1,000

980
-

20

1Q12 2Q12E 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 1Q14E 2Q14E 3Q14E 4Q14E

Source: Tesla Motors and Maxim Group estimates

With Near-Term Targets in Sight, TSLA Is Ready to Shift Into High Gear
Given the tremendous feat TSLA is trying to pull off in not only introducing a successful EV to the market
but also competing against the global automakers, doubters are prevalent and negative sentiment abounds.
With short interest at an elevated 36% of the float, we believe sentiment will quickly turn if TSLA
continues to achieve its milestones and hit its targets. While the bear case is bolstered by doubts
surrounding both broader EV adoption and specific industry competition, we believe TSLA is poised to
prove its naysayers wrong over the next year, owing to the following points:

EVs May Remain a Niche Market, but Model S Targets a Small Share of a Narrow Segment

Battery Design and Cumulative Volume Price Breaks Offer a Cost Advantage Difficult to Beat

Strength of Powertrain Technology Underscores Greater Value in TSLA than Is Appreciated

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

SLOW PACE OF EV ADOPTION A FOREBODING OBSTACLE

Despite TSLAs early success in the EV market with its exclusive Roadster offering, it aspires for a much
grander feat with its wider release of the Model S. Selling a few hundred vehicles per year is one thing;
selling 20,000 is another. While the introduction of any new car modelnot to mention a new automaker
brandis a challenge alone, the success of TSLAs Model S depends in large part upon the broader
acceptance and adoption of EVs in the marketplace. Unlike with a conventional combustion engine vehicle,
the buying decision for an EV requires a change in mindset in which the longer-term economic benefits
must overcome the range of concerns, doubts, and uncertainties about EVs.
Figure 3: EV Adoption Has Begun at a Snails Pace with ~50,000 Vehicles Likely in 2012
13,041
11,772

50

13,500
2.4
1.1

10,601

14,000
12,000

5.0

40

8.0

10,000
8,000

30

11
6,000
0.4

20

0.1
10

10

4,000
22
2,000

0.3
2009

0.4

2010

2011E

Total U.S. Light Vehicle Deliveries (000s)

Annual EV Deliveries in U.S. (000s)

60

GM's Volt
Ford's Focus Electric
Mitsubishi's i-MiEV
Total U.S. Light Vehicle Deliveries

2012E

Nissan's Leaf
Tesla's Model S
Other

Source: Wards Automotive, company reports and Maxim Group calculations

Tailwinds for EVs Have Been Building Since 2008

Despite a number of attempts in the past, EVs have never successfully penetrated the global auto market,
which is dominated by internal combustion engine-based vehicles. However, the winds have shifted in EVs
favor since 2008, owing to a range of factors:
Heightened Concern of Higher Oil Prices: Following oils run to $147/barrel in 2008, the public
has grown increasingly concerned about both (1) higher prices and (2) dependence upon imports.
With oil prices holding above $100/barrel and gasoline prices forecast to average $3.71/gallon in
the U.S. in 2012, we believe EVs will become a more attractive option in the marketplace.
Federal Targets and Regulatory Standards Help Provide a Tailwind: With Obamas goal of 1.0
million EVs on the road by 2015 and stricter fuel efficiency standards starting in 2017, we expect
the regulatory environment to be supportive of EV development. While automakers will likely
achieve the new 54.5 miles per gallon [mpg] requirement by 2025 (predominantly through greater
gasoline fuel efficiency), this should also underpin the development and production of more EVs.
Higher Fuel Efficiency and Falling Costs Yielding Compelling Economics: Driven by both
environmental and economic factors, EVs are growing into a viable alternative. As EVs use roughly
80%-90% of the energy generated by the batteryversus only 30% for a combustion engine
vehicleit offers far higher fuel efficiency. TSLAs Model S offers a mileage per gallonequivalent [MPGe] of over 100, 4-5x the 20-25 average of the luxury sedan class. With battery cell
costs falling and natural gas prices likely to remain depressed, EV economics are improving.

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

Despite the Hype, Prevalent Obstacles to EV Yield Slow and Low Penetration
Even with these tailwinds, however, plenty of obstacles stand in the way of EV higher adoption. EVs
represent not merely a new product but an entirely new systemrequiring a home charging station,
commercial charging station network infrastructure, a change in consumer behavior, and ultimately an
overhaul to utility grid management once peak load surges after it takes share of transportation demand.
In our view, higher EV adoption faces six critical obstacles:

Limited Range of 100 Miles or Less May Be a Much Larger Liability than Currently Presumed:
While EVs protect their owners/drivers from exposure to oil prices, the primary drawback is that
batteries have limited range. The main EVs in the market today offer an EPA-rated range between
35 and 76 miles. While the base 40 kWh Model S offers the highest range in the market today at
160 miles (and its higher-end Signature Series 300 miles), these are both still well below the 400500 miles of other luxury sedans.
Figure 4: Most EVs on Market Offer a Range of Less than 100 Miles
600
500

Range (Miles)

500

EVs on Market
in 2012

440

400
330
300
300
200

160
100

100

88

76

76

73

62

35

0
BMW
528i

Benz Honda Model

ECivic Si S (85
Class
kWH)

Model
S (40
kWH)

RAV4 CODA Ford Honda Nissan Mitsub. Chevy

EV
(31
Focus
Fit
Leaf i-MiEV Volt
kWh)

Source: EPA and company reports

Note: The ranges for TSLAs 40 kWh and 85 kWh model are based on TSLA estimates and are still pending an EPA rating

Lengthy Charging Time Can Be a Major Drawback: Unlike filling a tank of gas in a standard
automobile, which rarely takes more than a few minutes, recharging the battery in an EV can take
exceptionally longer. While using a standard 110V/15A home outlet would take as much as 20-30
hours to fully recharge an EV battery, we expect most EV buyers to purchase a Level II
240V/60A home charging network that can charge most EVs in between four and seven hours.
Commercial charging stationswhich we expect to crop up not only at gas stations but retail
parking lotswill use a Level III 440V charger that can top up a battery in less than one hour (or
80% in about 30-45 minutes). Nevertheless, in a culture as impatient as Americas, we believe the
lengthy charging time could prove an insurmountable obstacle for many would-be.

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

Figure 5: Level II Home Chargers Will Take 4-7 Hours to Recharge an EV Battery
35
30
Charging Time (Hours)

30
25
21
20
15
10
10
7
5

5
1

Model S

Nissan Leaf

Home (120V / 15A)

Chevy Volt

Level II (240V / 60A)

Level III (440V)

Source: GM, Nissan, and Tesla Motors

EV Adoption Will Largely Be Dictated by the Pace of a Charging Station Network Build-Out: In
a similar challenge faced by all new product categories that require new infrastructure (DVDs,
mobile phones, etc.), a major hurdle to EV adoption will likely be the chicken-egg phenomenon in
which higher EV adoption will be a function of the build-out of a broader charging station network.
Only 6,300 charging stations are currently installed in the United States.
Figure 6: Only 6,300 Commercial Charging Stations Have Been Installed in the U.S.

Installed Base of Charging Stations (000s)

7
2.1

6.3

Rest of
Country

Total

5
0.2
4

0.5

0.4

0.5
3

0.5
0.5

1.7

California

Texas

Washington

Florida

Michigan

Oregon

New York

Source: EVSRoll

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

Battery Lifespan Still Remains a Question Given the High Cost to Replace Batteries: Another
major drawback to EVs is limited battery life. Just like the batteries used in mobile phones, remote
controls, and even conventional automobiles today, batteries in EVs will die after a limited number
of years in use. Compounding matters, their range will likely slowly wither with every year they get
older andowing to a finite cycle lifeare more likely to die faster the more they are used. In turn,
EV battery warranties including that for the Model Stend to be for up to eight years, or 100k
mileswhichever is less. With no highway-capable EV in service for eight years to date, the true
lifespan of a lithium battery in an EV has yet to be proven.
Performance of EVs Trails Combustion Engine Vehicles in Horsepower and Top Speed: While
EVs are known for fast acceleration, they notably lag their conventional vehicle peers with most at
top speeds ranging between 80 mph and 90 mph and with horsepower ranging between 100 and 150
(vs. 200 to 300 for most conventional engine vehicles).
Higher Price Points Hard to Justify: Even with cost savings from higher fuel efficiency, many
EVs are offered at premium price points that may be hard for many prospective buyers to tolerate.
All in, while hopes soar highamong both auto and environmental enthusiaststhat EVs will seize a
dominant share of the auto market, we believe the transition to a sizable EV fleet will be fraught with
challenges and prove to take much longer than many assume. Since the first widespread launch of EVs in
2011, we believe less than 27,000 EVs (excluding hybrid) have been sold in the United States through April
2012. In 2011, total sales of 17,800 represented only 0.1% of the total U.S. light passenger vehicle market.
Notably, however, this tracks inline with the market share of progress of hybrids after they were first
introduced to the market in 1999; after inching along at 0.1%-0.3% for their first five years on the market, it
took seven years to reach 1% of the market and nine years to exceed 2%.
Forecasts for the U.S. EV market have trended towards the lofty side with (1) President Obama targeting
one million EVs on the road by 2015, (2) the State of California shooting for an installed base of 1.4 million
EVs in the state by 2025, and (3) Nissans CEO Carlos Ghosn expecting EVs to achieve 10% of market
share by 2020. Near-term, despite a disappointing start to date, forecasts for 2012 are as high as 100,000 (up
more than 5x vs. less than 18,000 in 2011); however, we believe 50,000 is more likely and that it will take
until 2013 to reach 100,000 units, or an 0.8% share of an assumed 13.7 million U.S. light passenger vehicle
market. All in, we forecast an EV installed base of 520,000 by the end of 2015, with market share of sales
in that year at just over 1%, as hybrid approaches 3%.

Share of U.S. Auto Market

Figure 7: If EVs Track the Adoption Rate of Hybrid Sales 1% Market Share by 2014
5%
4%
3.1%

3%

2.7%

2%

2.1%
1.2%

1%
-%

0.2% 0.3%
0.0% 0.1% 0.1%
1999

2000

2001

2002

2003

2005

2.3%
2.2% 2.1% 2.2%

0.0% 0.0%
2006

2007

BEVs & PHEVs

2.5%
1.3%

1.5%

0.5%
2004

2.3%

2008

2009

0.0% 0.1%

2010

0.8%
0.4%

1.1%

2011 2012E 2013E 2014E 2015E

'HEVs"

Source: Department of Energys EERE, company reports, and Maxim Group calculations

Maxim Group LLC

Tesla Motors, Inc. (TSLA)

TARGETING A NICHE, MODEL S CAN PULL IT OFF

In its quest for success, TSLA unquestionably faces formidable challenges. After all, its success depends
upon two incredible feats: (1) penetrating a capital-intensive industry dominated by global heavyweights
with deep pockets and wide-reaching brands and (2) becoming the first manufacturer to produce a highperformance, highway capable EV for the mass market.
Nevertheless, we believe TSLA has what it takes to make its mark in the global auto industry. Not only
does its exclusive image and high performance set it apart from all other EVs in the market, but we believe
these factors position the company to viably compete head-to-head with the other prominent luxury brands
in its class. More importantly, while we believe that EV adoption will turn out to be slower and lower than
is widely hoped for, we do not believe this threatens TSLAs growth prospects. TSLAs annual target of
20,000 deliveries (10,000 in the United States and 10,000 international) to achieve 25% gross margin means
it need not put a dent in the auto market but only scratch the surface paint. By our estimates, EVs are likely
struggle to achieve 1% of the U.S. domestic auto market in 2014. However, relative to the 300,000 annual
vehicle sales within its addressable market, TSLA only seeks a 3% share.

With Higher Power and Range, Tesla Is Not Your Fathers Electric Vehicle
While both hybrid electric vehicles [HEVs]pioneered by Toyotas [TM: $76.70Not Rated] Priusand
plug-in hybrid electric vehicles [PHEV], such as the Volt made by General Motors, use a combination of
both a battery and electric motor and an engine as back-up, battery electric vehicles [BEVs] are 100%
electric. Relative to the highest selling BEV in the market today, Nissans Leaf and the Focus Electric,
which Ford [F: $10.20Not Rated] plans on releasing in 2012, the Tesla Model S offers exceptionally
higher performance with superior range, kWh/mile, MPGe, acceleration, and horsepower.
Figure 8: TSLA Offers Highest Range and Lowest kWh Consumption Rate in the EV Market
0.50

180
160

140

0.40

0.36

0.35

120

0.33
100

100
80

100

0.30

0.26

0.30
0.26

76

0.25

76

0.25

73
0.20

62
60

kWh per Mile

Range (Miles)

0.46 0.45

0.42

160

0.15
35

40

0.10

20

0.05

0.00
Model S

CODA

RAV4 EV Honda Fit

Focus
Range

Leaf

iMiEV

Volt

kWh/mile

Source: Company reports and Maxim Group calculations

Maxim Group LLC

10

Tesla Motors, Inc. (TSLA)

In our view, the Model S features and performance place it not only leaps and bounds ahead of the other
EVs in the market today, but squarely in competition with conventional combustion engine vehicles in its
class. The car addresses many of consumers concerns about EVs, and it should also be one of the most
efficient cars on the road that offers compelling economics vs. conventional gasoline-powered vehicles:
Range Anxiety Could Be Largely Addressed with 160 Miles: TSLAs Model S is poised to offer
the highest range of an EV on the market with the 40 kWh expected to be rated by the EPA at 160
miles and the 85 kWh at 300 miles. While below the 500 mile range of conventional cars in its
class, it is 2x that of other EVs, which in our view overcomes much of the concerns about range.
Higher Performance Puts It in the Same League as Conventional Peers: If there were any doubts
surrounding the ability of EVs to deliver comparable performance of a combustion engine vehicle,
the Model S should put them to rest. With acceleration from 0 to 60 in 5.6 seconds and a top speed
of 110 mph, TSLA belongs on stage with the big boys.
Fuel Efficiency Is Superior to Combustion Engine Vehicles as Well As Other EVs: With a 0.25
kWh/mile ratiobelow the 0.3 level of the Leaf and Ford Focus Electric and the Volts 0.4,
TSLAs Model S scores higher than all its peers and is expected to offer an MPGE of at least 112.
New Supercharger Could Take Charging Time to Next Level: After hinting at it for months,
management expects to announce this summer a charging product we believe will be faster than
Level III chargers in a development that CEO Mr. Musk referred to as quite awesome.
High Safety Ratings Should Put Fears to Rest: Despite much concern about the combustibility of
EVspunctuated by the fires caused by some damaged VoltsTSLAs relentless focus on battery
safety and winning 5-stars in crash safety test should quickly abate these fears.
In addition, we believe consumer perception of EVsand TSLA in particularhas been affected in part by
specific issues and concerns that have gained public and media attention. This stigma, in our view, is
derived from misinformation and a lack of awareness more than anything else. With the proper public
education and a slight adjustment in consumer behavior, we believe all of these issues can be addressed.
Bricking of Batteries No Greater Risk than Driving without Oil: There was some controversy
with the Roadster over some batteries bricking, a term referring to when a battery is left
unattended and uncharged for a long enough time that it is drained completely and rendered useless.
While this is the case for TSLAsand allEVs, we believe this is less than an impediment than it
is made out to be. Just like drivers have become accustomed to ensuring they dont drive until their
fuel tank is emptyand to the implications of driving a car without an oil changewe believe
consumer behavior will adapt to the need to keep an EV charged.
Battery Life Limitation Not Much Longer than Average Car Ownership in the U.S.: Though
doubters have also pointed to the Model S battery life of eight years, or 100,000 miles, we believe
this is long enough to satisfy the average U.S. car owner. According to global market intelligence
firm R.L. Polk & Co., the average length of ownership of new vehicles in the United States now
stands at 71.4 months, or just about six years. While a combustion engine vehicle will have a higher
resale value than an EV after six to eight years, we believe this is largely offset by much lower
service and maintenance costs for an EV than for a combustion engine vehicle.
Charging Station Network Likely to Catch Fire Quicker than Presumed: Finally, while the need
for charging station infrastructure hinders higher EV adoption, a charging station network has
begun to blossom in key markets like California, Texas, and New York. Spurred most notably by a
legal settlement with the State of California, NRG Energy [NRG: $15.76 - Not Rated] agreed to
invest $100 million in charging station infrastructure over the next four years, including (1) $50.5
million to build 200 eVgo Freedom retail multi-charger stations (~$250,000 per station) and (2) $40
million to set up 10,000 30A electrical installations that would be ready to install a Level II or III
commercial charging outlet within 24 to 48 hours. Though we estimate 125,000 charging outlets
needed to support our 2015 forecast for 250,000 EVs in the U.S. (vs. 6,300 today), the expanding
network of NRG and Coulombs ChargePoint America are blazing the path forward.

Maxim Group LLC

11

Tesla Motors, Inc. (TSLA)

Model S Bucks the Nerdification Trend of EVs with a Hot Mainstream Car
Automobiles are arguably about fashion as much as function to the average buyer, particularly in the U.S.
and Europe. While TSLA offers notably higher performance than its primary EV peers in the market today,
we believe it is leaps ahead of other EVs when it comes to the cool factor.
Riding the coattails of the exclusive Roadster (thanks to its scarcity value over the last few years), TSLA
has introduced the only car to date, in our view, that has introduced an EV with a sleek, sexy look. While
the Nissan Leaf follows, in our view, the trend set by Toyotas Prius in which it seems all HEVs, PHEVs,
and BEVs have been confined to the small compact car class and designed with a nerdy image (though
the Chevy Volt scores slightly better in this regard), the Model S is clearly set apart from other EVs. We
believe it will quickly grab the eye of the luxury sedan class buyer.
Figure 9: TSLAs Model S Is First EV Targeting the Luxury Sedan Class

Nissan Leaf:

Mitsubishi iMiEV:

CODA Electric Sedan:

Chevy Volt:

Tesla Model S:

Source: CODA, General Motors, Mitsubishi, Nissan, and Tesla Motors

Maxim Group LLC

12

Tesla Motors, Inc. (TSLA)

Fuel Efficiency Yields Cost Savings with a Present Value of $5,000 per Car
The primary advantage that EVs offer over conventional combustion engine vehicles is superior fuel
efficiency. Owing to its greater energy density (amount of energy stored per unit of mass or volume),
combustion engine vehicles may offer much higher range than EVs but are much less efficient as only 30%
of the energy is used to power the vehicle with 70% lost to friction and as waste heat. In contrast, as EVs
consume 80-90% less energy, their fuel efficiency is as low as 0.26 and 0.33 kWh per mile.
Figure 10: EVs Offer Exceptionally Higher Fuel Efficiency vs. Gasoline-Powered Cars
Fuel Efficiency of Gasoline vs. EVs
kWh per Gallon of Gasoline

Model S
(40 kWh)
40

Nissan
Leaf
24

Ford
Focus
23

Honda Fit
20

Mitsub.
i-MiEV
16

/ Range (Miles)
= Fuel Efficiency (kWh per Mile)

160
0.25

73
0.33

76
0.30

76
0.26

62
0.26

Source: EPA, company reports, and Maxim Group estimates

Note: Gasoline kWh consumption applies the EPA MPGe formula using 33.7 kWh per gallon

To translate EV fuel efficiency in metrics that are more familiar to consumers, the EPA rates each EV on
the market on a mileage per gallon equivalent [MPGe], which evaluates the range of EVs based on a five
standard drive-cycle tests and rates based on the EPA standard formula of 33.7 kWh per gallon. Most EVs
within the compact sedan class are rated between 90 MPGe and 100 MPGe. Relative to the 20 MPG offered
by Daimler AG [DAI.DE: 37.19 - Not Rated]s Mercedes-Benz E-Class and the 27 MPG by BMW Group
[BMW.DE: 61.77 - Not Rated]s 528i, the Model S is expected to offer much higher fuel efficiency.
Figure 11: EVs Use As Little As Five Times Less Energy per Mile than Gasoline-Powered Cars
EVs

Miles Per Gallon (or EPA equivalent)

120

112

112
105
99

100

93

80

73

60
42
40
27

25

20

20
0
Model S

i-MiEV

Ford
Focus

Nissan
Leaf

Chevy
Volt

CODA

Toyota
Prius

BMW
528i

Honda
Civic Si

Benz EClass

Source: EPA, company reports, and Maxim Group estimates

Note: As TSLAs Model S has yet to be rated by the EPS, we assume the lower-end of estimates at around 140 miles (not 160 miles)

It is this superior fuel efficiency that drives the economics of EVs. At a price of $3.25 per gallon, gasoline
costs roughly $0.14 per mile for most standard luxury sedans on the market with an average mileage of 2025 MPG. In contrast, even assuming the EPA rates the 40 kWh Model S at 140 miles (below the 160 miles
touted by TSLA), we estimate it will cost only $0.04 per mile (assuming an average electricity rate of
$0.14/kWh). Assuming 10,000 miles driven per year, this translates into annual savings of almost $1,100
per year, or a total of $8,750 over its eight year life.

Maxim Group LLC

13

Tesla Motors, Inc. (TSLA)

Figure 12: At $3.25/Gallon Gas and $0.14/kWh, the Model S Generates Lifetime Savings of ~$8,750
Cost Per Mile of Standard Gasoline
Price per Gallon of Gasoline
/ Gas Mileage of a Model S-Equivalent
= Cost per Mile of Standard Gasoline

$2.50
$2.50
22.5
$0.11

$2.75
$2.75
22.5
$0.12

$3.00
$3.00
22.5
$0.13

$3.25
$3.25
22.5
$0.14

$3.50
$3.50
22.5
$0.16

$3.75
$3.75
22.5
$0.17

$4.00
$4.00
22.5
$0.18

Cost Per Mile Tesla Model S (40 kWh)

Battery Size (kWh)
x Electricity Rate ($/kWh)
= Total Cost to Charge Battery

$0.08
40
$0.08
$3.20

$0.10
40
$0.10
$4.00

$0.12
40
$0.12
$4.80

$0.14
40
$0.14
$5.60

$0.16
40
$0.16
$6.40

$0.18
40
$0.18
$7.20

$0.20
40
$0.20
$8.00

/ Battery Range (Miles)

= Cost per Mile of Tesla Model S

160
$0.02

160
$0.03

160
$0.03

160
$0.04

160
$0.04

160
$0.05

160
$0.05

- Cost per Mile of Standard Gasoline

= Savings per Mile from Tesla Model S

$0.14
($0.12)

$0.14
($0.12)

$0.14
($0.11)

$0.14
($0.11)

$0.14
($0.10)

$0.14
($0.10)

$0.14
($0.09)

x Estimated Miles per Year

10,000
x Estimated Life of Battery (Years)
8
= Total Savings over Tesla's 40 kWh Model S Battery Life
($9,956)

10,000
8
($9,556)

10,000
8
($9,156)

10,000
8
($8,756)

10,000
8
($8,356)

10,000
8
($7,956)

10,000
8
($7,556)

Source: Tesla Motors, EPA, and Maxim Group estimates

In our view, the fuel savings offered over the life of the vehicle are critical to the value proposition that
effectively lowers the net ownership cost of the vehicle itself. Discounting our estimated annual savings of
almost $1,100 per vehicle at a rate of 12%, we estimate the present value of fuel savings from the Model S
over its eight year life totals $5,437. Relative to its $49,900 price, this translates into an implied discount of
(11%). Moreover, this does not take into account the lower maintenance and servicing costs of EVs.
Assuming, $150 in annual maintenance costs the first four years and $350 the last four, we estimate an
additional present value of savings of around $2,000 per car. In our view, this suggests the 40 kWh Model S
is effectively priced more than $6,500 below the sticker price.
Figure 13: Present Value of Fuel Savings Totals ~$5,000 and Maintenance Savings another $2,000
Discounted Cash Flow of Model S Savings:
Estimated Miles Driven per Year
x Model S Electricity Cost Savings per Mile
= Net Cash Flow of Model S Fuel Savings

YEAR 0

Additional Savings from Maintenance/Service

Discounted Cash Flow of Fuel Savings

12.0%

Discounted Cash Flow of Maintenance Savings

Present Value of Model S Fuel Savings
/ Base Price of Model S
= Implied Price Discount from Fuel Savings

$5,437
($49,900)
(10.9%)

YEAR 1
$10,000
$0.11
$1,094

YEAR 2
$10,000
$0.11
$1,094

YEAR 3
$10,000
$0.11
$1,094

YEAR 4
$10,000
$0.11
$1,094

YEAR 5
$10,000
$0.11
$1,094

YEAR 6
$10,000
$0.11
$1,094

YEAR 7
$10,000
$0.11
$1,094

YEAR 8
$10,000
$0.11
$1,094

$150

$150

$150

$150

$350

$350

$350

$350

$977

$872

$779

$696

$621

$554

$495

$442

$134

$120

$107

$95

$199

$177

$158

$141

Present Value of Model S Fuel + Maintenance Savings

/ Base Price of Model S
= Implied Price Discount from Fuel Savings

$6,568
($49,900)
(13.2%)

Source: Tesla Motors and Maxim Group estimates

Bolstering the prospect for fuel savings from EVs is the huge gap between natural gas and oil prices that has
grown ever wider over the last two years as new hydraulic fracturing drilling techniques have vastly
expanded the supply of natural gas in the country, inflated inventories higher, and driven prices lower. If
this disparity was to persistor for that matter if it was inflamed by a spike in global oil pricesit would
only enhance the value proposition of EVsand the Model Sand underpin stronger demand.
As it is far easier for prospective car buyers to compare the all-in cost of an EV vs. a conventional car
through monthly expenditures that include both the cost of the car and fuel (rather than a difficult-tounderstand present value calculation), we believe Model S adoption will be particularly suited for leasing.
Though TSLA handled the leasing of the Roadster on its own, it has decided to outsource leasing of the
Model S, signing an agreement with a third party leasing company, Athlon Car Lease for 150 Model S to be
distributed throughout Europe. With similar leasing deals like this, we believe TSLA will be able to benefit
from an additional revenue stream for its Model S without any strain on its balance sheet.

Maxim Group LLC

14

Tesla Motors, Inc. (TSLA)

Unlike Other EV Peers, TSLA Is Priced In Line with Its Class

The Model S performance does not come without a price. While the three most prominent EVs on the
market in 2012the Nissan Leaf, the Chevy Volt, and the Ford Focushave a base price (net of the U.S.
federal tax credit of $7,500) of around $30,000, the Model S will come with a much higher price tagits
base 40 kWh model coming in at $49,900 and its high-end 85 kWh model at $69,900.
That said, the price gap owes largely to the Model S targeting the higher-end luxury sedan class; relative to
its class, the Model S is priced closer to peers than other EVs. With the Leaf, Focus, and Volt targeting the
compact sedan class, we believe they are essentially priced at roughly a 50% premium to the most popular
cars in the classsuch as the Honda [HMC: $32.62 - Not Rated] Civic and Toyota Corollawhich range
from $18,000 to $24,000. Within the luxury sedan class, the Model S is priced right inline with the base
models of BMWs 5-Series, Mercedes-Benz E-Class, and Audi AG [NSU.DE: 560.00 - Not Rated]s A-5
Series.
Figure 14: TSLA Is Priced More Inline With Its Class than Other EV Peers
Luxury Sedans

Compact Sedans

$60,000
$50,000

$50,490
$49,900
$46,900 $46,300

$40,000
$30,000
$20,000

$36,625
$32,495
$31,645
$29,750 $27,700
$24,000
$22,555$21,625
$18,995 $18,300
$17,990

$10,000

Ho
nd
a
Fi
Fo
tE
rd
le
Fo
ct
ric
cu
s
El
ec
tr i
CO
c
DA
G
M
31
Vo
kW
lt
h
Se
da
Ni
n
ss
an
Le
To
af
yo
ta
Pr
Ho
iu
nd
s
a
M
C
its
iv
ic
ub
Si
is
hi
i- M
iE
V
Do
dg
e
Da
Fo
rt
rd
To
Fo
yo
cu
ta
s
C
or
ol
la
S

er
ce
de
s

ECl
as
s
M
od
BM
el
S
W
5Se
rie
s
Au
di
A5

$0

Source: Company reports

Model S Target of 20,000/Year Translates into Only ~3% of a Niche Market

Due to the slower and lower pace of EV adoption that we forecast, we estimated EVs will remain a niche
market with less than 5% of the auto market by 2020. Distinct from its EV peers, however, TSLA is
targeting only a niche market with 20,000 deliveries (50% domestic/50% international) in 2013.
Unlike the GM Volt and the Nissan Leaf, both of which we believe are targeting the broader mass market of
light passenger vehicle sales in the U.S., TSLAs Model S is honed in on a much narrower market. With a
sleek exterior, high-end components, and a price tag ranging from ~$50,000 to ~$80,000, TSLA is not
seeking the buyer of the Ford Fusion and Toyota Camrywhich are priced at less than half a Model Sbut
rather the Beamer and the Benz driver.
Though a total of 13 million light passenger vehicles were sold in the U.S. in 2011, only about 666,000or
just over 5%-fell within what we define as the luxury class market [x-sports utility vehicles (SUVs)],

Maxim Group LLC

15

Tesla Motors, Inc. (TSLA)

with BMW and Mercedes-Benz representing close to half of the categorys sales in 2011, Lexus, Audi, and
Infinti another 40%, and Jaguar and Cadillac the balance.
As most of these luxury class brands offer a broad subset of models that cross the pricing spectrum from as
little as $30,000 or less to over $100,000 and include both coupes as well as sporsters, even this class is
broader than TSLAs narrow target market. In our view, TSLAs Model S priced (pre-options) between
$49,900 and $69,900 after the federal tax credit is competing specifically with the large luxury sedans
with base prices ranging from $50,000 to $80,000; these models include Mercedes E, S, and CLS classes,
BMWs 5-,6-, and 7-series, Audis A6, A7, and A8, Jaguars KJ amd XF, Infinitis M-Series, the Lexus LS
and GS, as well as Cadillacs DTS and STS and Lincolns MKS. In aggregate, these models sold 232,576
vehicles in the U.S. in 2011.
Figure 15: TSLAs 10,000 U.S. Target Represents 4% of the Large Luxury Sedan Class
70
60
51.5
50
Model S
Target for U.S.
Deliveries
in 2013

40
30
20

6.3

5.7

5.7

5.5

5.4

3.9

3.7

3.3

Jaguar XJ

Jaguar XF

BMW 6-Series

Lexus GS

Cadillac STS

9.6

Mercedes CLS-Class

10

Audi A8

12.3 12.2 11.6 11.3 11.1 10.8

Audi A7

U.S. Shipments in 2011 (thousands)

62.7

Lexus LS

Infiniti M-Series

Audi A6

BMW 7-Series

Cadillac DTS

Lincoln MKS

Mercedes S-Class

BMW 5-Series

Mercedes E-Class

Source: Company reports

However, we believe TSLAs addressable market is ultimately broader than that. While the base price of
small luxury sedanssuch as the Mercedes C-class and BMW 3-Seriesaverages around $30,000$35,000, higher-end or fully-loaded models within this class could run as much as $50,000 or more. In
turn, we believe buyers of premium small luxury sedans could also have their eyes on a Model S and
qualify as TSLAs target market. The small luxury sedan class sold almost 465,000 vehicles in 2011.
Assuming that premium vehicles represented only 15% of that total, we estimate this represents roughly
70,000 additional potential Model S buyers. In combination with the 233,000 large luxury sedans sold last
year, we estimate TSLAs primary addressable market in the U.S. is just over 300,000 cars per year. In turn,
we estimate its target of 10,000 per year in the U.S. represents only 3% of a narrow market segment.

Maxim Group LLC

16

Tesla Motors, Inc. (TSLA)

Figure 16: TSLAs 10,000 Target Represents 3.3% of Its Narrow Addressable Market in the U.S.
BY MODEL
Small-Luxury Sedans ($35k-$50k):
BMW 3-Series
Mercedes-Benz C-Class
Audi A4
Audi A5
Lexus IS
Lexus ES
Infiniti G-Series
Acura TL
Cadillac CTS
Cadillac ATS
Lincoln MKZ
Volvo S80

2008

2009

2010

2011

112,464
72,471
43,343
6,282
49,432
64,135
64,181
46,766
58,774
30,117
11,037

90,960
52,427
37,070
9,800
38,077
48,485
47,174
33,620
38,817
22,081
8,331

100,910
58,785
34,672
16,379
34,129
48,652
58,143
34,049
45,656
22,535
7,224

94,371
69,314
35,234
15,385
32,669
40,873
58,246
31,237
55,042
27,529
4,735

Total Small-Luxury Sedan Sales in U.S.

559,002

426,842

461,134

464,635

x Estimated Premium Segment as % of Total

= Premium Small-Luxury Sedan Market in U.S.

15%
83,850

15%
64,026

15%
69,170

15%
69,695

45,915
6,533
12,276
38,576
17,787
5,775
2,825
11,956
5,121
1,319
15,759
20,255
15,618
30,479
14,790
12,982

40,109
3,549
9,254
43,072
11,199
2,527
11,463
6,786
8,487
1,161
7,430
11,334
8,501
17,330
6,037
17,174

39,488
2,418
12,253
60,922
13,608
2,135
1,521
8,675
6,925
4,278
7,059
12,275
14,618
18,640
4,473
14,417

51,491
3,903
11,299
62,736
12,258
5,665
5,700
6,270
11,124
5,373
5,481
3,746
9,568
10,818
11,589
3,338
12,217

Total Large-Luxury Sedan Sales in U.S.

257,966

205,413

223,705

232,576

Total Addressable Market for Model S in U.S.

341,816

269,439

292,875

302,271

Model S U.S. Sales Volume Targets

/ U.S. Mid-Large Size Luxury Class Market
= Model S Market Share Target

10,000
341,816
2.9%

10,000
269,439
3.7%

10,000
292,875
3.4%

10,000
302,271
3.3%

Large-Luxury Sedans ($50k-$80k):

BMW 5-Series
BMW 6-Series
BMW 7-Series
Mercedes-Benz E-Class
Mercedes-Benz S-Class
Mercedes-Benz CLS-Class
Audi A8
Audi A7
Audi A6
Jaguar XF
Jaguar XJ
Lexus GS
Lexus LS
Infiniti M-Series
Cadillac DTS
Cadillac STS
Cadillac XTS
Lincoln MKS

Source: Company reports and Maxim Group estimates

Maxim Group LLC

17

Tesla Motors, Inc. (TSLA)

As the international light passenger vehicle market is even larger than the U.S. market, we believe its
international target of 10,000 deliveries in 2013 will be even easier to achieve. Total light passenger vehicle
sales in the U.S. of 13 million in 2011 represented only about 17% of the global market for light passenger
vehicles of 78 million last year. In fact, at over 19 million deliveries, the European auto market is close to
50% larger than the U.S. auto market. In turn, we believe TSLAs target for 10,000 international deliveries
in 2013 represents an even smaller share of less than 3% of the global luxury sedan segment.
Figure 17: International Markets Offer Larger Opportunity with Europe 50% Larger then the U.S.

RoW
29%

Japan
6%

U.S.
17%

China
23%

Europe
25%

Source: Polk, HIS Automotive, and Ward Automotive

With over 10,000 reservations in hand today, we believe TSLA is well on its way to achieving its global
delivery target of 5,000 vehicles in 2012 and 20,000 in 2013. Though refundable, Model S reservations
require a down payment of $5,000, which becomes non-refundable when selecting color and options. The
strong early interest, in our view, suggests its 2012-2013 targets are within reach.

Maxim Group LLC

18

Tesla Motors, Inc. (TSLA)

Competitive Risk Budding with BMWs 1-Series and Audis E-Tron

While TSLA has been working on an OEM basis for the development of powertrains by EVs produced by
both Toyota and Mercedes-Benz, it faces direct competition from other luxury auto brandsincluding
Mercedesdeveloping their own BEVs and PHEVs. Within the luxury sedan class, the following EVs have
been developed in either prototype:
Mercedes-Benz SLS AMG E-Cell: Proving it can also do it on its own, Daimler has developed a
prototype electric EV dubbed the SLS AMG E-Cell with a battery size ranging from 48 kWh to 60
kWh, offering a range of ~90 miles and capable of punching from 0 to 60 mph in four seconds.
While this hasnt stopped Mercedes from working with TSLA on an OEM basis on other cars, its
entry into the EV market with its own luxury sedan could pose formidable competition.
BMWs ActiveE 1-Series: BMW has also produced a demonstration BEV. Its all-electric 1-Series
is equipped with a 32 kWh battery that offers an EPA range of 94 miles; however, with horsepower
of 168, it takes up to nine seconds to accelerate from 0 to 60.
Audis E-Tron: Only produced in limited release, Audi also has developed an EV based on the R8
platform under its E-Tron line (which also includes hybrids). Though powerful with 313
horsepower, its 0 to 60 in 4.8 seconds trails TSLAs and Mercedes-Benz.
PHEVs May Take Higher Share than BEVs: Through the range extender offered by a small
back-up internal combustion engine, PHEVs (including Chevy Volt) largely overcome range
anxiety (albeit via lower fuel efficiency) and may be in a better position than pure BEVs to take
early market share. By 2014, some of TSLAs biggest competition may arise from PHEVs such as
BMWs i8, Audis A6 L E-Tron, the Mercedes Benz S500Vision, and Cadillac ELR.
Figure 18: Other Luxury Auto Brands Are Developing their Own BEVs and PHEVs

Mercedes Benz SLS AMG E-Cell:

Audi E-Tron Electric:

BMW i Series:

Fisker Surf:

Source: Audi, BMW, Daimler, and Fisker

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Tesla Motors, Inc. (TSLA)

BATTERY COSTS A MAJOR COMPETITIVE ADVANTAGE

Despite (1) the high cost of battery technology and (2) its 20k annual target implying relatively little scale
compared to that of the major global auto brands, we believe TSLA has a number of cost advantages that
underscore its target for profitability at an annual run rate of 20,000 vehicle deliveries.

TSLAs Battery and Powertrain Replace a Complex Engine and Drivetrain

Primary difference in the underlying mechanicsand manufacturing costsof an EV and a conventional
gasoline-powered combustible engine automobile lies in the engine and the components that power it.
Breaking automobiles down into three functional categories, EVs are essentially the same in two of three:

Body: On top of the metallic frame itself, the body also includes glass, trim, electrical and other
components, and paint. These components are entirely the same in both an EV and a combustion
engine vehicle.
Chassis: Serving somewhat as the skeleton of a car, the chassis includes the wheels and
suspension, as well as the steering and brake systems. An EVs chassis is not much different than
that of a combustion engine vehicle.
Engine/Powertrain: While the other two components are essentially the same, it is in the
powertrain and engine where the primary difference between an EV and combustion engine
vehicle lie. Composed of the engine, the transmission, drive shafts, and differentials, the
powertrain transforms stored energy to kinetic energy that powers the car.
Figure 19: In a Combustion Engine, Gasoline Powers a Complex Transmission Unit

Source: Cherokee, Honda, Cronulla Sutherland, and

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Tesla Motors, Inc. (TSLA)

All engines essentially require two things: energy storage and energy conversion. In an internal combustion
engine, energy storage costs are small, but the conversion costs are high as the use of gasoline to power the
car requires an immense engine and a fuel injection and complex transmission unit that includes an intricate
gearbox, drive train, and clutch.
While an EV relies upon an energy storage method that is much more expensive than that of a combustion
engine vehicle, it benefits from far lower energy conversion costs. On the one hand, the cost of the battery
pack and the power electronics (and drive inverter) that control the electric current throughout the car can
be quite expensive. However, EVs benefit from some savings from (1) a simple motor that uses electricity
to spin a magnetized component around in circles to generate the energy that ultimately turns a cars wheels
and (2) a single speed gearbox.
Figure 20: Model S Is Powered by a Real-Wheel Motor and Drivetrain with Single-Speed Gearbox

Source: Tesla Motors and Maxim Group

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Tesla Motors, Inc. (TSLA)

Batteries by far represent the largest cost component of TSLAs automobiles. At an estimated cost of
between $300//kWh and $400/kWh, the total cost of the 40 kWh Model S battery pack (battery cells plus
battery management system, electronics, wiring, etc.) is likely around $14,000, or close to 30% the gross
price of the car, and almost $30,000 for the 85 kWh mode, or over 40% the gross price. Additional costs
unique to an EV include the inverter and power electronics. Offsetting this in part is a simpler engine, with
a three-phase induction motor with a copper rotor as well as single-speed gearbox that is far simpler and
cheaper than the transmissions in most combustible engines that use a complex set of gears and, of course,
an exhaust system.
While these cost differentials are inherent in all EVs, TSLAs Model S also benefits from a number of other
cost advantages so far unique only to it. While every EV on the road todayincluding the Tesla Roadster
was designed essentially as a conversion of a combustion engine vehicle, the Model S will be the first massproduced highway-capable EV built from the ground and thus has been designed to maximize all of the
benefits of its electric platform. For instance, as the floor of the car, the battery takes up virtually no space,
while the HVAC is integrated with the batterys thermal management system.
Figure 21: The Battery Represents 30-40% of Production Costs and the Engine/Drivetrain ~10%
100%

7%

100%

Labor &
Assembly

Total Model S
Cost

5%
23%

90%
80%
70%

22%

60%
50%

10%

40%
34%
30%
20%
10%
0%
Battery Pack

Engine &
Drivetrain

Chassis

Body

D&A

Source: Maxim Group estimates

With Fixed Costs at $30m-$40m, a 20k Run Rate to Yield 25% Gross Margin
Though TSLA does not disclose a breakdown of its production cost structure, a build-up of the components
used provides a reasonable approximation of the production cost of a Model S. By our estimates, we believe
at a run rate of 20,000 vehicles, variable costs will represent roughly 85% of the total production cost, with
the battery the largest component at over 30% of the total cost of the vehicle (assuming a current battery
cell cost of $250-$300/kWh). Adding in the motor, gearbox, power electronics, and software, we estimate
the total cost of a powertrain with a 40 kWh battery at around $13,000-$14,000. While the chassis and body
each represent about 20%-25% of the total production costinline with combustible engine automobiles
we believe the engine and drivetrain equate to a much lower 10% of the total cost.

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Tesla Motors, Inc. (TSLA)

By our estimates, with TSLAs manufacturing employment base set to grow from ~250 in 1Q12 to 1,200 to
1,400 in 4Q12, we estimate total labor costs will grow to ~$17 million in 4Q12 and $20 million in 2013,
while D&A will chip in another $14 million or so. In aggregate, we estimate around $30 million to $40
million in fixed costs, or 10%-15% of the total cost or production at a 20k run rate.

Modular Design Based on Small Form Factor Cells Yields Lower Costs
As the battery pack and overall powertrain are both the sources of power and the largest cost component in
an EV, it is this area more than any other that differentiates EV makers. One of the primary obstacles to
higher EV adoption is the higher price points they tend to have relative to their class, owing in large part to
high battery costs. TSLA differentiates with battery costs that we estimate will trend towards $300 kWh,
close to 40% below the $500 kWh costs for both the Leaf and the Volt.
Its advantage largely stems from its use of small form factor cells. Instead of the large cells used in the Leaf
and Volt, TSLA builds its batteries from 6,800 of the small 18650 Cells (measuring 18mm by 65 mm)
used in consumer electronics. This allows TSLA to not only leverage the scale, experience, and know-how
of the global battery giants (currently Panasonic) but alsoowing to greater buyer powersecure lower
pricing as well. In turn, TSLA uses a modular design approach that yields greater flexibility and ultimately
lower costs. Plus, the small form factor has a lower safety risk profile than larger cells.
While EV bulls cling to the hopeand assumptionthat battery costs will continue to decline, we question
whether this is such a certainty. Comparisons abound to semiconductors Moores Law, which prophets that
the performance of semiconductors doubles every two years. However, battery chemistry is entirely
different than the electronics of integrated circuits. While a doubling of the number of transistors that fit on
an integrated circuit effectively lowers costs, batteries are limited by their electrochemical nature. Despite
the widespread assumption that lithium-ion batteries are in the early stages of development, commercial lion battery technology is over 20 years old, with much of the low-hanging fruit of cost improvement already
achieved by the likes of Panasonic, Sony, and Kyocera (which have produced billions of batteries over the
years). While it is sometimes naively hoped that battery cells will follow Moores Law and steadily bring
the average cost of li-on batteries lower, we expect production cost reductions at the cell level to continue at
the moderate historical pace of 6%-7% per year. However, we believe TSLA also benefits
disproportionately from cumulative volume price break points in its contract. In our view, this suggests
gross margins of as high as 30% are possible once it reaches scale in 2H13.

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Tesla Motors, Inc. (TSLA)

POWERTRAIN TECHNOLOGY IS TSLAS CROWN JEWEL

While TSLA is best known as an automaker for its flagship flashy Roadster model, we believe TSLAs core
value lies in its intellectual property and technological prowess with EV powertrain development. While
other automakers have stretched themselves in seeking to develop batteries, TSLAs true differentiation lies
in its primary focus on the development of powertrain technology for EVs. As a leader in a field that
continues to widen the gap with every passing quarter, we believe TSLAs powertrain business represents
tremendous value, not only from the (1) growing high-margin earnings stream from OEM sales for both
development services and powertrain supply, but also (2) the longer-term strategic value TSLA may offer to
the larger global automakers if TSLAs technology lead proves insurmountable and they cant develop
comparable technology at a competitive cost.

OEM Contracts Drive Development Services Revenue and Powertrain Sales

Since launching the first highway-capable EV with the Roadster in 2008, TSLA leapt out the starting gates
with a wide lead over its competition, which took another three years to release an EV. With over 2,100
vehicles on the road, the Roadster is the only EV with four years of real-world experience, providing a
platform for TSLA to build off its portfolio of 59 (and 230 pending) patents and continue to push the
envelope on performance and costs.
This, plus the more than half a billon dollars we estimate was spent on developing EV technology for the
Roadster and Model S, puts TSLA in a lead that we believe will be difficult to surmount. Inspired by
TSLAs powertrain performance and reluctant to spend hundreds of millions of dollars on an as-yet
unproven market, we expect other automakers to use TSLA to develop OEM powertrains for EVs they plan
to develop. These contracts tend to take two forms: (1) development services, the first phase when TSLA is
compensated for the development of a powertrain (representing the development services segment: and (2)
powertrain sales, the second phase that covers the supply of complete powertrains including battery pack,
motor, gearbox electronics, and software (booked within the Auto Sales segment).
Figure 22: Model S Powertrain Is Unique from Other EVs on the Market

Source: Tesla Motors and Motor Trend

Development Deals with Daimler and Toyota Lay the Groundwork for More
Validating the distinction and superiority of TSLAs powertrain technology, the company has signed
multiple OEM contracts with two of the worlds most renowned auto manufacturers: Daimler and Toyota.
Though renowned for its engineering prowess, Daimler selected TSLA to develop the battery pack and
charger in 2009 for its Smart Fortwo electric drive and, in 1Q10, for a pilot fleet for its new all-electric AClass that was released in February 2011. With over 2,100 battery packs delivered to Daimler for its Smart
Fortwo and over 500 for its A-Class, TSLA delivered more than 2,600 battery packs through 2011 year-end.
In addition, development services have generated over $75m in revenue over two years.

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Tesla Motors, Inc. (TSLA)

TSLAs powertrain business really began to take off in 2011 when it signed two new OEM contracts not
only for battery packs, but also to supply the complete integrated electric powertrainenabling TSLA to
develop an even higher performance and cost effective product. On top of a two-phase $69m development
deal with Toyota for its upcoming RAV4 EV, it signed a $100 million contract to supply the complete
powertrain for the RAV4 EV beginning in 2012. While Toyota priced the car at a lofty $49,800 and is
targeting 2,600 deliveries between 2012 and 2015, we believe TSLA has solidified itself as a core partner of
Toyotas for EV development and future contracts to develop the powertrains for the EVs of other models
Toyota may decide to release.

Powertrain Sales Minimal to RAV4, but Could Balloon on New Benz in 2014
While yet to be finalized, TSLA management has disclosed that it is in late-stage discussions with Daimler
over what we believe is a development and powertrain supply contract for a complete powertrain for an all
new electric Mercedes-Benz. Though clearly subject to change until finalized, management expects the
contract to exceed the total $280 million that has been generated in development and powertrain sales to
date. Given TSLAs solid hold of two of the worlds largest automakers and the escalating size of deals, we
expect development services and powertrain sales to be a critical business that we forecast to be a steady
source of revenue and cash flow in the years ahead. More significant, we believe powertrain gross margins
are above vehicle sales at around 40%.

Development/Powertrain Revenue ($m)

Figure 23: OEM Powertrain Contracts Currently Generating ~$100m in Annual Revenue
$40

$37

$35

$33

$30

$31

$29

$28

$30

$34
$29

$28
$25

$25

$30 $30
$25 $25

$20
$20

$16
$13

$15

$16

$14

$13

$12

$9

$10

$5

$5

$2

11

1
2Q 2
12
E
3Q
12
E
4Q
12
E
1Q
13
E
2Q
13
E
3Q
13
E
4Q
13
E
1Q
14
E
2Q
14
E
3Q
14
E
4Q
14
E
1Q
15
E
2Q
15
E
3Q
15
E
4Q
15
E

1Q

11

4Q

11

11

10

Smart Fortwo

3Q

2Q

1Q

10

10

4Q

3Q

2Q

1Q

10

$-

Daimler's A-Class

Toyota RAV4 EV

Daimler's New Benz

Source: Tesla Motors and Maxim Group calculations

To date, TSLAs OEM powertrain deals have been based on a combination of an initial development
services contract and a later powertrain supply contract. Management has expressed its willingness to be
flexible and use whatever business model makes the most sense to monetize its powertrain technology for
all stakeholders involved. In turn, we believe it is possible that TSLA could begin striking licensing deals
instead. While likely yielding lower revenue, we would expect these deals to be even higher margin and
ultimately open up the market to a broader set of available OEM buyers.

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Tesla Motors, Inc. (TSLA)

A Bid for TSLA Would Provide an Auto Major an Immediate Lead in EVs
Given TSLAs wide and expanding lead in EV powertrain technology, we believe TSLA could very well
make for an attractive acquisition candidate, as it may prove a cheaper and immediate entry into the EV
market for one of the global auto majors who has yet to develop comparable powertrain technology.
While TSLAs market capitalization of ~$3 billion and gross debt load of $465 million makes for a hefty $4
billion plus to swallow (assuming a control premium), the long-term strategic value TSLAs technology
may offer its larger, wider-eyed peers may very well be warranted a few years down the road.
Figure 24: Market Capitalization of the Global Auto Major Dwarf TSLAs $3 Billion
$140

$ in billions

$120

$133.1

$109.7

$100
$82.0
$80

$71.4
$64.5

$60

$50.8

$50.8
$43.0
$36.1

$40

$38.2

$33.8

$20
$3.0
$0
($20)

$0.1

($17.8)

Toyota

Daimler

BMW

Nissan

Market Capitalization

Ford

GM

TSLA

Net Debt

Source: Bloomberg and Company Reports

The bear case posits that TSLA does not face direct competition from the global luxury sedan brands
because BMW, Benz, and Audi have yet to be convinced there is a viable opportunity in the EV space, and
the moment it becomes evident they will pounce in with their own development. However, we believe the
costs and challenges of developing a cost-effective and high performance powertrain cannot be glossed
over. Based on various media accounts, we believe the Leaf cost Nissan between $800 million and $1
billion to develop, and the Volt over $1 billion for Chevy. After backing out ~$350 million traditionally
spent on new car development, we estimate $500 million to $700 million spent only on powertrain and
battery pack. Given the proven success and performance of TSLAs battery pack and powertrains, we
believe thateven with a price tag exceeding $4 billionan acquisition of TSLA could provide an easier,
quicker, and more assured entry into the EV space for a larger competitor.

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Tesla Motors, Inc. (TSLA)

EARNINGS LEVERAGE SET TO KICK IN BY 2013-2014

Bringing it all together, we expect the pending release of the Model S and budding opportunities for its
OEM powertrain business to drive a sizable boost in TSLAs revenue base that we forecast to not only drive
TSLA to cross the break-even point in 2013 but also yield significant earnings leverage that could yield
non-GAAP EPS exceeding $1.50 in 2014.

Model S on Path to Drive $1.5b in Revenue and $0.45 Non-GAAP EPS in 2013
Our earnings estimates for 2012 and 2013 rely upon the following assumptions:

Vehicle Sales Exceed 5,000 Target in 2012 and Hit the 20,000 Goal for 2013: With Model S set
to launch earlier than planned in June and reservations exceeding 10,000 through early May, we
estimate deliveries exceed TSLAs target of 5,000 in 2012 by ~550 vehicles. As international sales
kick off in 2013 and TSLA comes down the production experience curve, we forecast that Model S
sales surpass TSLAs 20k target with 10,250 domestic and 9,935 foreign deliveries.
ASPs Trend Towards Higher Price Point and Yield Blended Average of ~$65,000-$70,000: With
the first 1,000 cars rolling out the factory gates to be the higher-priced 300 kWh Signature Series,
we assume blended ASPs are slightly inflated in 2012 at ~$70,000, while we expect greater interest
in longer range and higher-end options to yield average ASPs of $67,000 in 2013.
Total Powertrain/Development Revenue of $110-$120 million Generates High Margins:
Bolstered by $71 million in RAV4 EV revenue and the assumption that TSLA generates $45
million from the pending contract with Daimler to develop the powertrain for the new MercedesBenz, we estimate its OEM powertrain business will generate $117 million in revenue in 2012 ($61
million in powertrain sales booked in the automotive segment and $56 million in the development
services segment). In turn, we estimate the $40 million balance of the RAV4 EV powertain supply
contract and an estimated contribution of $70 million in development services from the pending
Daimler contract yields total powertrain revenue of $110 million in 2013. We estimate gross margin
of 65% for development services and 40% for powertrain supply.
Gross Margins Turn Positive in 2Q12 and Achieve 25% Target by 4Q12: Though we expect
Model S gross margins to remain below 20% in 2H12 as it begins to ramp up to scale, as TSLAs
battery cell supply contract with Panasonic incorporates pricing break points based on cumulative
volume, we expect vehicle gross margin to gradually inch up every quarter from 20.4% in 1Q13 to
24.9% in 4Q13, in line with management targets. Aided by its higher margin powertrain business,
we forecast consolidated gross margin of 19.9% in 2012 and 24.8% in 2013.
Operating Expenses Remain Elevated at $350-$400m but Trend Down as Percent of Sales: While
operating expenses are likely to remain bloated in 2012 on spending ahead of the Model S launch,
we forecast them to fall from the $100 million-$120 million quarterly run rate in 1H12 to around
$80 million to $90 million in 2H12 as ~$15 million to $20 million of quarterly R&D expenses shift
to cost of goods sold and push them down to a $50 million to $55 million run rate in 2H12. In turn,
opex-to-sales should drop from 60% in 3Q12 to 24% in 4Q12 and 24% in 2013.
Essentially No Below-the-Line Expenses Due to Capitalized Interest Tax Benefit from NOLs: As
TSLA capitalizes its interest expense (and thus amortizes it as cost of goods sold) and will likely
not be a cash tax payer until 2014, we assume virtually no non-operating income/expense.

Based on these assumptions, we forecast 2012 revenue of $568 million falls towards the lower end of its
$560 million to $600 million guidance. With gross margin of 19.9% and operating expenses of $387
million, we forecast 2012 operating loss of ($273 million), GAAP EPS of ($2.64), and non-GAAP EPS loss
of ($2.22). This compares to consensus of $553 million in revenue, gross margin of 16.6%, and non-GAAP
EPS loss of ($2.46) as we assume slightly better Model S deliveries/margins but also higher opex.

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27

Tesla Motors, Inc. (TSLA)

For 2013, we forecast revenue rises 158% to $1.5 billion while gross margin edges up to 24.8%. With
operating expenses of $364 million, we forecast 2013 operating income of $10 million, GAAP EPS of
$0.09, and non-GAAP EPS of $0.53. This compares to consensus estimate of $1.67 billion, gross margin of
23.6%, and non-GAAP EPS of $0.66.

Though R&D a Wildcard, 21% Gross Margin Yields Non-GAAP Break-Even

Based on our 2013 revenue estimate of ~$1.5 billion; we estimate TSLA can achieve GAAP net income
break-even at a gross margin of 24% (and non-GAAP net income break-even at 21%), assuming quarterly
R&D expenses hold around $50 million-$55 million and SG&A trends at about 11% of sales. R&D
expenses, however, remain the biggest wildcard to this estimate as we believe the success of the Model S
will likely yield to a pick-up in R&D expenses as it encourages TSLA into further development.
Figure 25: Non-GAAP Breakeven Can Be Achieved with Gross Margin of 21%
GAAP
$$$-

Non-GAAP
$$46.0
($46.0)

- Operating Expenses

($363.9)

($363.9)

= Gross Profit for Breakeven

$363.9

$317.8

$1,503.9
24.2%

$1,503.9
21.1%

$ in millions

Net Income Breakeven

+ Stock Comp Adustment
= Net Income Break-Even

/ Revenue at 20k Model S

= Implied Gross Margin
Source: Tesla Motors and Maxim Group estimates

Assuming capital expenditures of $150 million per year, we in turn estimate that free cash flow positive can
be achieved with GAAP net income of ~$65 million. After (1) adding back its two primary non-cash
expenses$46 million in stock compensation and $73 million in D&A (once its factory goes into service)
and (2) assuming no working capital contribution from an extension in accounts payable but a ($35
million) drag from a rise in accounts receivable (implying days of sales outstanding of 20-25), we estimate
TSLA could achieve the $150 million in operating cash flow breakeven required to generate positive free
cash flow with capex of $150 million. This implies GAAP EPS of $0.62.
Figure 26: Free Cash Flow Positive Can Be Achieved with GAAP EPS of $0.62
$ in millions

Free Cash Flow [FCF] Breakeven

- Capital Expenditures
= Operating Cash Flow for FCF Breakeven

$($150.0)
$150.0

- Rise in Receivables (DSOs at 20-25)

+ Contribution from Accounts Payable
+ Stock Comp
+ D&A
= GAAP Net Income for Cash Flow Breakeven
/ Shares Outstanding
= EPS for Free Cash Flow Breakeven

($35.0)
$$46.0
$73.3
$65.7
106.2
$0.62

Source: Tesla Motors and Maxim Group estimates

Unlikely to Be a Tax Payer until 2014, NOLs of ~$300m to Yield Tax Benefit
With a balance of $219m balance as of 2011 year-end, we estimate TSLAs net operating loss [NOL]
carryforwards will approach $400 million by the end of 2Q12. In turn, based on our forecast for net income
breakeven to be achieved by 2Q12 and for profit growth through 2014 we estimate that TSLA will become
a full cash payer at a rate of ~25% in mid-2014 at which time its full valuation allowance of NOLs would
be released in a one-time non cash benefit.

Maxim Group LLC

28

Tesla Motors, Inc. (TSLA)

Outlook in 2014-2016 Buoyed by Model X SUV and Gen 3 Mainstream Sedan

While we believe focus need only hone in on the Model S success and outlook for now, TSLA also has a
number of other products up its sleeve that bolsters its longer-term outlook in 2014 and beyond. Next up is
the Model Xan electric SUV based on the Model S platform available with either a 60 kWh or 85 kWh
battery and priced in line with the Model S (at $59,900 and $69,900, respectively, after the Federal tax
credit). Targeting late 2013 production, TSLA expects to begin deliveries in 2014 and is 10,000 to 15,000
per year. Though TSLA will no longer disclose Model X reservations as it hones its focus on the Models in
2012 and 2013, reservations had reached 1,000 as of the end of 1Q12.
Figure 27: TSLA Targets a 2014 Release for its Model X SUV with Winged Doors

Source: Tesla Motors

Assuming battery cell costs continue to trends down towards the $200/kWh, TSLA plans on launching its
Generation III powertrain which it aims to use as a platform for a mainstream sedan priced at around
$30,000. Management also hopes to later release a next-generation Roadster as well.

Maxim Group LLC

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Tesla Motors, Inc. (TSLA)

CASH OF $287M A SUFFICIENT BRIDGE TO AT LEAST 2014

To achieve TSLAs grandiose aspirations of (1) developing an altogether new class of car that has yet to
prove its viability in the marketplace and (2) penetrating a global market dominated by experienced, deeppocketed global brands, the company requires a great deal of cash. However, with development costs and
capital expenditures for its Model S not largely behind it and cash receipts likely set to come rolling in
following the June 2012 launch, we believe the cash drain will moderate. Armed with ~$360 million in
financing from its Department of Energy [DOE] loan, we believe TSLA should have more than enough
cash to get through 2013 when the achievement of its targets could yield cash flow breakeven.

Almost $700m in Free Cash Flow Losses Have Accumulated Since 2009
With TSLA a virtual start-up founded in 2003 that launched its first commercial product in 2008, it has
been spending heavily on product development and generated steady and consistent losses since going
public. Moreover, spending on R&D, factory construction, new equipment, store expansion, and the buildout of a manufacturing force requires out-of-pocket cash.
All in, weighed down by operating losses totaling $539 million since 2009, operating cash flow has been
negative in at least each of the last 13 quarters, yielding a total $373 million drain over that period. In turn,
dragged down further by the $450 million in capital expenditures we estimate for the development of the
Model S, TSLA has generated a cumulative free cash flow drag of $691 million since 2009.
Figure 28: Free Cash Flow Losses Have Picked Up since 2010 on Model S Capex
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12

Cash Flow ($ millions)

$-

($12)
($16)
($15)
($20)
($23)
($17)
($27)
($29)
($26)
($40)
($30)
($35) ($33)
($20)

($22) ($21)
($34)

($46)
($51)
($54)

($60)

($27)

($43)
($50)
($64)

($80)

($77)

($81)
($90)

($100)
($120)

($118)

($140)

Free Cash Flow

Operating Cash Flow

Source: Tesla Motors and Maxim Group calculations

However, with much of the losses generated over the last few years stemming from spending on the
development of the Model S, we expect cash burn to abate following the launch in June 2012. Though we
expect cash burn in 2Q12 to exceed $100 million, we expect free cash flow losses to moderate considerably
after the Model S launch with some periods likely generating cash.

Maxim Group LLC

30

Tesla Motors, Inc. (TSLA)

Over $300m Has Been Raised through Equity Financing Since its IPO
To help fund its voracious cash appetite over the last few years, TSLA has opportunistically relied upon
equity financing on more than one occasion. Concurrent with its IPO in July 2010 (which raised net
proceeds of $185 million), TSLA also sold 2.9m shares at the IPO price of $17/share and subsequently
raised $30 million through the sale of 1.4 million shares to Panasonic in November 2010. More recently,
TSLA issued 6.1 million shares in a secondary offering in June 2011 when it simultaneously sold key
shareholders, CEO Elon Musk and Daimlers Blackstar unit, an additional two million shares. All in, we
estimate TSLA has raised $312 million through equity financing since its IPO.
Figure 29: TSLA Has Issued 12.5m Shares to Raise an Additional $312m Since its IPO
Date
July 2010
June 2011
June 2010
Nov. 2010
June 2011
June 2011

IPO
Secondary
Toyota
Panasonic
Elon Musk
Blackstar

Shares
11.9
6.1
2.9
1.4
1.4
0.6

Price

= Net Proceeds ($m)

$184.5
$172.7
$50.0
$30.0
$40.7
$18.3

$17.00
$21.15
$28.73
$28.73

Total Equity Financing

24.4

$496.2

Equity Financing (Post IPO)

12.5

$311.7

Source: Tesla Motors and Maxim Group calculations

DOE Loans Demand ~$70m in Annual Cash Interest and Principal Payments
In July 2009, TSLA was awarded $465 million in low-cost loans as part of the DOEs Advanced
Technology Vehicle Manufacturing Program [ATVM] program. While the loans require 20% matching
cash contributions, we expect TSLA to fully draw down it down in 2Q12. Six months after the Model S
factory is expected to go in service, principal payments are scheduled to begin in December 2012 at a rate
we estimate to be $12.7 million per quarter. Along with interest expense of ~$20 million, we estimate
annual cash debt service payments of ~$70 million per year.
Figure 30: Quarterly Principal Payments of $12.5m on Its $465m DOE Loan to Begin in 4Q12

DOE Loan Balance ($ millions)

$500

$465 $465

$452

$450
$400

$440

$427

$414

$402

$389

$361

$376

$363

$350
$300

$276

$250

$225

$200

$134

$150

$102
$100

$30

$50

$72

$45 $57

E
3Q
14

2Q
14

1Q
14

4Q
13

3Q
13

2Q
13

1Q
13

4Q
12

3Q
12

12

2Q
12

1Q

11
4Q

11
3Q

11
2Q

11
1Q

10

10
4Q

10

3Q

2Q

1Q

10

$-

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

31

Tesla Motors, Inc. (TSLA)

Model X Capex to Be Much Lower as It Builds Off the Model S Platform

One wildcard to TSLAs cash flow outlook is of course its capital expenditure budget. Notably, we expects
its capex to rise along with the success of the Model S as this would more than likely encourage the
development of further cars. With the Model X targeted for late-2013 production, we expect continued
capex on its development. However, as it is based on the Model S platform, we believe it will cost much
less to develop, and we estimate $130 million in capex in 2013.

Cash Balance of $287 Million Offers Large Cushion

Despite the negative cash flow to date, TSLAs balance sheet remains bolstered by $287 million in cash.
While this balance includes $43 million in restricted cash, this will become unrestricted once principal
payments on the DOE loan begin in December 2012.
Figure 31: Cash Balance Ended 1Q12 at $287 Million

Cash & Securities ($ millions)

$400
$17

$350

$61
$32
$43

$300
$25

$146

$250

$65

$200

$25

$78
$48

$150

$319
$255

$100
$50

$4

$219

$213
$7

$5

$70

$62

$47

4Q09

1Q10

2Q10

$97

$100

$101

3Q10

4Q10

1Q11

$-

Cash and Cash Equivalents

2Q11

Marketable Securities

3Q11

4Q11

1Q12

Restricted Cash

Source: Tesla Motors and Maxim Group calculation

Even as we forecast another quarter of heavy cash burn totaling $113 million in 2Q12, net of the $104.5
million available balance on its DOE loan that we expect to be drawn down, we estimate TSLA will enter
into the Model S launch with around $260 million in cash. While we expect cash burn to continue, we
believe TSLA has more than enough cash to see it through 2014 when the potential success of its Model S
platform and the blossoming of its OEM powertrain business could be sufficient to bridge it to breakeven.

Maxim Group LLC

32

Tesla Motors, Inc. (TSLA)

DCF & $1.5B POWERTRAIN VALUE POINT TO $50 STOCK

Valuing TSLA is a challenging feat that admittedly requires a leap of faith that first and foremost depends
upon the success of the Model S. While we believe TSLAs current valuation can be justified based on its
outlook for vehicle sales, we believe this doesnt reflect the core value of its underlying IP and technology
assets. TSLA is more than an auto maker, and its valuation, in our view, should reflect that.

Stock Currently Trades at 11x the Consensus EPS Estimate of $2.57

While operating and cash flow losses reported in 2011 and expected in 2012 deem it impossible to value
TSLA on near-term earnings, the earnings leverage achieved when Model S reaches scale is expected to
quickly yield a turnaround in profits in 2013 that should only be bolstered in 2014. With a 2013E Street
non-GAAP EPS estimate of $0.66, TSLA is trading at a hefty 43.6x P/E. However, with EPS expected to
jump to $2.57 the following year, it is trading at more reasonable 11.2x P/E on 2014E.
Figure 32: TSLA Trades at 44x 2013E and 11x 2014E Consensus Estimates
Consensus P/E:
Current Stock Price
/ EPS Estimate
= P/E Ratio

2013E
$28.77
$0.66
43.6x

2014E
$28.77
$2.57
11.2x

Source: Tesla Motors, ThomsonOne, and Maxim Group calculations

Market Cap of ~$3.5b Reflects Vehicle Sales Outlook Not Technology Value
When examined purely on near-term earnings and cash flow from the Model S and Model X, we believe
TSLA seems reasonably valued at its current market capitalization of around $3.0 billion. Based on our
assumptions that TSLA hits its 2013 targets and sells over 33,000 cars in 2014we believe TSLA seems
reasonable on our more conservative non-GAAP EPS estimates of $0.53 in 2013 and $1.86 in 2014,
implying a P/E of 15.4x our 2014 estimate, which we believe is modest in light of its growth prospects.
Figure 33: Discounted Cash Flow Solely of Core Vehicle Sales Supports a $35 Stock
DCF of Vehicle Sales

Annual
2016E
2017E

2013E

2014E

2015E

2018E

Terminal

CAGR

FY

FY

FY

FY

FY

FY

FY

2014-18

$1,393.9
22.1%
$308.6

$2,102.1
25.2%
$529.8

$2,364.6
28.0%
$661.7

$2,553.8
30.0%
$766.1

$2,758.1
30.0%
$827.4

$2,978.8
30.0%
$893.6

14.0%

- Operating Expenses
= Operating Income

$363.9
($55.3)

$402.7
$127.1

$490.3
$171.3

$529.6
$236.6

$571.9
$255.5

$617.7
$275.9

11.3%
21.4%

+ Stock Compensation Expense

+ D&A

$46.0
$73.3

$48.4
$73.3

$50.8
$77.0

$53.3
$80.8

$56.0
$84.9

$58.8
$89.1

5.0%
5.0%

Model S Cash Flows

$64.0

$248.8

$299.1

$370.7

$396.4

$423.8

14.2%

- Capital Expenditures

($130.0)

($123.5)

($100.0)

($100.0)

($100.0)

($100.0)

(5.1%)

Unlevered Free Cash Flows

($66.0)

$125.3

$199.1

$270.7

$296.4

$323.8

$ in millions
Vehicle Sales Revenue
x Gross Margin
Vehicle Sales Gross Margin

Perpetual UFCF Growth Rate ("G")

Terminal EBITDA Multiple
Terminal Value
Weighted Average Cost of Capital

2.5%
11.4x
$3,319.3
12.5%

NPV of Unlevered Free Cash Flows

+ Present Value of Terminal Value
= Enterprise Value
- Year End Net Debt (Cash)
= Equity Value
/ Diluted Shares Outstanding
= Equity Value Per Share

$673.4
$3,319.3
$3,992.7
$264.3
$3,728.4
106.2
$35.10

9.1%

$331.9

26.8%

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

33

Tesla Motors, Inc. (TSLA)

However, we believe TSLAs current valuation reflects solely its near-term earnings and cash flow outlook
and not the core underlying technology asset value that we believe represents the core of TSLAs value.
Supporting this, we apply a discounted cash flow analysis solely to vehicle sales (i.e., excluding powertrain
and development services revenue) based on our estimates for 25,200 Model S sales in 2014 and 26,400 in
2015 and 8,000 and 12,000 for the Model X, respectively, and the assumption that vehicle gross margins
reach 30% by 2016 and that vehicle sales absorb 100% of TSLAs operating expenses, stock compensation
expense, D&A, and net debt. Applying a 2.5% terminal growth rate and a 12.5% discount rate, we estimate
an enterprise value of TSLAs vehicle sales business of $4.0 billion and an equity market cap of around
$3.7 billion, or $35.00 per share.

Powertrain Business Adds Another $1.5b to TSLAs Core Underlying Value

However, this valuation excludes the value of its OEM powertrain business and its core underlying
technology and IP. To value the powertrain business, we use a sum-of-the-parts build of both (1) an
EV/EBITDA multiple based of its core earnings stream and (2) the value of its technology assets.
As TSLAs development services and powetrain supply segments are lumpy, we use a four-year average of
our revenue and EBITDA estimates for these businesses; as all of TSLAs opex and D&A were reflected in
the vehicle services DCF, we estimate EBITDA for its powertrain business are close to gross margin at
~65%. Applying a 10x EV/EBITDA multiple to reflect both the growth outlook for the OEM addressable
market and its defensive and high margin nature of its business, we estimate a $750 million value to the
revenue and earnings stream of TSLAs powertrain business.
Given the proven distinctiveness and success of TSLAs powertrain technology in the marketplaceand
the value this may hold to other auto makerswe believe any valuation of TSLA must also reflect its IP
and technology assets. Based on both (1) TSLAs total development costs to date of roughly $500 million
for the Model S, $150 million for the Roadster, and ~$100 million for the Model X, we estimate TSLA has
spent upwards of $750 million on the development of both powertrain and the specific auto models over the
last few years. Similarly, based on various media accounts and management commentary, we believe that
General Motors spent over $1 billion to develop the Chevy Volt and Nissan between $800 million and $1
billion on the Nissan Leaf. After backing out the traditional $300 million-$400 million it takes Nissan to
traditionally develop a car, this suggests $500 million to $700 million on powertrain and battery
development. In turn, applying a premium to TSLAs powetrain technology based on its high performance
and proven success, we assign it a valuation of $750 million to TSLAs technology assets, implying a total
value of TSLAs powertrain business and technology of $1.5 billion.
Figure 34: 10x Multiple EBITDA Plus $750m in Asset Value Supports $1.5b Powertrain Valuation
Development Services Revenue
+ Powertrain Supply Revenue
= Estimated Revenue of Powertrain Business

2012
$56
$61
$117

2013
$70
$40
$110

2014
$10
$45
$55

2015
$50
$130
$180

Avg.
$46
$69
$116

x Estimated EBITDA Margin

= Estimated EBITDA of Powertrain Business

65%
$76

65%
$72

65%
$36

65%
$117

65%
$75

x EV/EBITDA Multiple
= Estimated EV of Powertrain Business

10.0x
$762

10.0x
$715

10.0x
$358

10.0x
$1,170

10.0x
$751

+ Technology Asset Value

$750
= Sum-of-the-Parts Valuation of Powertrain Business$1,512

$750
$1,465

$750
$1,108

$750
$1,920

$750
$1,501

Source: Tesla Motors and Maxim Group estimates

All in, with the $3.7 billion supported by our DCF of vehicle sales and our $1.5 billion valuation of its
powertrain business/technology, we believe TSLA would be fairly valued at $5.2 billion, or ~$50/share.

Maxim Group LLC

34

Tesla Motors, Inc. (TSLA)

INSIDER AND STRATEGIC HOLDINGS LEAVE 65M FLOAT

Due to high insider ownership (punctuated by CEO Mr. Musks 27.2 million shares) and the sale of shares
over the last couple years to strategic investors, we estimate approximately 36% of TSLAs shares are not
freely tradable.

Only 62% of Shares Outstanding, or 65m, Are Freely Floating

Summing up the 8.1 million shares held by Daimler affiliate Blackstar, the 2.9 million shares purchased by
Toyota concurrent with the IPO and the subsequent purchase of 1.4 million shares by Panasonic in
November 2010, strategic shareholders control roughly 12% of TSLAs shares outstanding. Including the
27.7 million shares, or 26.5% held by insiders, we estimate a freely-trading float of only 64.6 million share,
or 62% of its total 105 million diluted shares outstanding.
Figure 35: Due to Insider and Strategic Holdings, Only 62% of TSLAs Shares Are Freely Floating
120

Shares Outstanding (millions)

104.8

100

80
64.6

60
27.7

40

20

8.1
1.4

2.9

0
Panasonic

Toyota

Blackstar
(Daimler)

Insider Holdings

Float

Total Oustanding

Source: Bloomberg, Tesla Motors, and Maxim Group calculations

Maxim Group LLC

35

Tesla Motors, Inc. (TSLA)

NEGATIVE SENTIMENT COULD GET QUICKLY UNWOUND

With TSLAs success dependent upon pulling off two improbable feats(1) developing a revolutionary
new EV and (2) competing with the global auto giants it should come as no surprise it is shrouded in
doubts and strikingly negative investor sentiment. As we believe TSLA is poised to march through 2012
and into 2013 firing on all cylinders, generating widespread hype and positive reviews, signing a major
powertrain deal for the new Mercedes-Benz and ultimately surpassing its targets, we believe this negative
sentiment will turn around abruptly and power the stock higher.

Sentiment at a Negative Extreme with Short Interest at Over 36% of Float

Steadily rising since its IPO in June 2010, short interest in TSLAs stock stood at 23.5 million shares as of
April 30, 2012, just off its historical high of 25.2 million from a few months prior. At 36% of the float, it
would take approximately 20 days to cover (vs. its three-month average daily trading volume of 1.2 million
shares).
Figure 36: Short Interest Has Risen Along with the Stock
28
24

Stock Price

$35

20
$30
16
$25
12
$20
$15
Jun-10

Short Interest (millions)

$40

4
Sep-10

Dec-10

Mar-11

TSLA Stock Price

Jun-11

Sep-11

Dec-11

Mar-12

TSLA Short Interest

Source: Bloomberg and Maxim Group calculations

With short interest at over 36% of the float and representing 20 days to cover, we believe the stage is set for
a snapback in TSLAs stock upon any positive developments and upside surprises.

Maxim Group LLC

36

Tesla Motors, Inc. (TSLA)

REVVED UP AND READY FOR GAINS

A month ahead of TSLAs Model S launch, we believe the fireworks are about to start. While Street
estimates assume the Model S is launched successfully and essentially meets TSLAs delivery and gross
margin targets, we believe broader investor sentiment suggests prevalent doubts. With closer to 36% of the
float short, we believe positive news can quickly unwind this sentiment.
Figure 37: Historically an Event-Driven Stock, TSLA Has Many Catalysts Ahead in 2012-2013
$40

Major Abu Dhabi

Owner Sell 7.3m
Shares

IPO Lock-Up
Expiration

TSLA Stock Price

$35

GM Announces
PHEV Cadillac

$30

$25
Common
Stock FollowOn Offering

$20

$15
6/29/2010

Panasonic
Invests
$30m
9/29/2010 12/29/2010 3/29/2011

6/29/2011

TSLA
Opens 3
Stores in
NA

2 Key Engineers
Leave TSLA Assures Is
Not the Chief

9/29/2011 12/29/2011 3/29/2012

Source: Tesla Motors and Maxim Group estimates

All in, we question some of the most optimistic forecasts surrounding EV penetration in the U.S. and
around the globe over the next three years. While we believe EVs are poised to remain a niche market early
on, TSLAs Model S is targeting only a small share of a niche segment. With the hottest EV on the market,
we believe TSLA is set to awe consumers, impress investors, and undermine its doubters. As TSLA
potentially zooms past its targets in 2013 and sets wider-eyed expectations for 2014 and the value of its
powertrain business is better recognized, we expect the stock to march upward to our $50 target. While the
longer-term acceptance of TSLAs vehicles and ultimately the viability of its business model still remain
open-ended questions, we believe that these are questions for another day. With the Model S engines
warming up and getting ready to roll out to the showrooms, we believe the stock is ready to roll along with
the ride.

Maxim Group LLC

37

Tesla Motors, Inc. (TSLA)

RISKS TO OUR CALL

Aside from general market and other economic risks, specific risks to our Buy rating on Tesla Motors
include:

EV Adoption Fails to Gain Traction and Impedes Model S Sell-Through: Given the numerous
obstacles EV adoption face, we expect EV penetration to be slower and lower than many hope.
While we believe TSLAs target market is a small enough niche for it to meet, its success
nonetheless depends on consumer acceptance of EVs. If concerns about range, battery life, safety,
charging time, and the lack of a widespread charging network restrain consumer interest in EVs, it
could put our forecasts for the Model S and Model X at risk.

Introduction of New EVs from Global Auto Majors Proves Too Much for TSLA to Match: While
we believe the Model S is poised to outpace TSLAs targets (given the small share of its target
segment), larger luxury sedan brands are developing EVs of their own. If BMW, Audi, or Benz
(developed without TSLAs powertrain) significantly gain traction, this could put our estimates,
TSLAs cash flow prospects, and our rating at risk.

Battery technology proves less durable: With the Roadster offering 2,100 cars on the road and four
years of experience, we believe the durability and performance of TSLAs battery packs and
powertrain have a proven track record. Nevertheless, with (1) no EVs on the market for the full 8year life of their warranty and (2) the Model S being designed as the first EV from the ground-up,
there still remains uncertainty surrounding the cars and batterys true durability. If TSLA cars lose
power or die prematurely, it could severely undercut TSLAs business model and prospects.

Switch to natural gas fleet gains steam on low prices: Though EVs have grabbed a lot of attention
from the media and public, the obstacles to higher adoption are aplenty. With a plentiful domestic
supply of natural gas priced at all-time lows, we believe a seismic shift in domestic energy usage
could be on the horizon. If this change in energy policy entails a shift to a natural gas domestic
fleet, we believe this would severely threaten EVsand TSLAs growth prospects.

Tight Supply of Battery Cells Could Crimp Production and/or Margins: While we believe
TSLAs current agreement with Panasonic to supply it with enough battery cells to produce 80,000
vehicles over the next four years is within TSLAs production targets, upside could be limited by
available battery cell supply. Due to its dependence upon one supplier for its battery cells, TSLA is
vulnerable to the loss or disruption of core component supply

Competition from Entry of Other Automakers into EV Segment Proves too Formidable for TSLA
to Overcome: While TSLA produced the first commercial highway-capable EV, it certainly will not
be the only one. In fact, its success has arguably ushered in the entry of formidable competitors,
General Motors, Nissan, Toyota, Daimler, BMW, and Honda. Given the scale, spending power, and
reach of these global automakers, the competition may prove too fierce for TSLA to hit its
production targets, putting our rating and estimates at risk.

Shareholder dilution from future equity offerings: While management believes it has enough
liquidity to avoid the need for future financing and our own cash flow forecasts suggest TSLA
has sufficient liquidity to make it through at least 2014, we note that it has a long history of cash
burn and opportunistic equity offerings. If TSLA was to raise capital through another equity
financing, current shareholders would face dilution and our EPS estimates would be at risk.

Maxim Group LLC

38

Tesla Motors, Inc. (TSLA)

APPENDIX A: ELECTRIC VEHICLE MODEL

Figure 38: Maxim Forecasts EV Deliveries in the U.S. Rise to 49k in 2012 and 105k in 2013
in 000s
Electric Vehicle Annual Shipments:
Nissan's Leaf
GM's Volt
Ford's Focus Electric
Tesla's Roadster
Tesla's Model S
Tesla's Model X
Toyota's RAV4
Toyota's Scion IQ Electric
Mitsubishi's i-MiEV
Honda's Fit Electric
CODA
BMW's ActiveE 1 Series
BMW i3
Audi E-Tron
Fiat 500 Electric
Porsche 918
Other
Total Electric Vehicles in the U.S.
/ Total U.S. Auto Market
= EV Share of Total U.S. Auto Market
% of Total:
Nissan's Leaf
GM's Volt
Ford's Focus Electric
Tesla's Roadster
Tesla's Model S
Tesla's Model X
Toyota's RAV4
Toyota's Scion IQ Electric
Mitsubishi's i-MiEV
Honda's Fit Electric
CODA
BMW's ActiveE 1 Series
BMW i3
Audi E-Tron
Audi E-Tron
Fiat 500 Electric
Porsche 918
Other
Total Evs

2008

2009

2010

2011

2012E

2013E

2014E

2015E

0.1
-

0.3
-

0.0
0.3
0.4
-

9.7
7.7
0.0
0.4
0.1
-

11.0
22.4
8.0
5.0
0.5
0.1
1.1
0.2
0.7
-

17.6
25.7
12.0
6.8
1.0
1.0
0.3
1.4
5.5
0.3
4.0
-

25.5
31.5
18.0
0.0
6.9
13.5
1.1
0.5
1.8
9.9
0.4
8.4
-

32.4
36.2
27.0
0.0
7.1
15.1
0.3
0.9
2.1
11.9
0.5
10.5
-

30.0

35.0

50.0

0.1

0.3

0.7

17.8

49.0

105.5

152.6

194.1

13,493

10,601

11,772

13,041

13,500

13,838

14,183

14,538

0.0%

0.0%

0.0%

0.1%

0.4%

0.8%

1.1%

1.3%

-%
-%
-%
100.0%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%

-%
-%
-%
100.0%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%

2.7%
46.9%
-%
50.4%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%

54.4%
43.1%
0.0%
2.0%
-%
-%
-%
-%
0.4%
-%
-%
-%
-%
-%
-%
-%
-%

22.5%
45.7%
16.3%
-%
10.2%
-%
1.0%
0.2%
2.2%
-%
0.5%
1.4%
-%
-%
-%
-%
-%

16.7%
24.4%
11.4%
-%
6.4%
0.9%
0.9%
0.3%
1.3%
5.2%
0.3%
-%
3.8%
-%
-%
-%
-%

16.7%
20.7%
11.8%
0.0%
4.5%
8.8%
0.7%
0.3%
1.2%
6.5%
0.2%
-%
5.5%
-%
-%
-%
-%

16.7%
18.7%
13.9%
0.0%
3.7%
7.8%
0.1%
0.5%
1.1%
6.1%
0.2%
-%
5.4%
-%
-%
-%
-%

-%

-%

-%

-%

-%

28.4%

22.9%

25.8%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Source: Company Reports and Maxim Group estimates

Maxim Group LLC

39

Tesla Motors, Inc. (TSLA)

APPENDIX B: TSLAS CARS IN PRODUCTION

Figure 39: Tesla Model S 85 kWH Battery Pack Floor

Source: Tesla Motors

Figure 40: The Body of the Tesla Model S Being Placed onto the Battery Pack System

Source: Tesla Motors and Fast Company

Maxim Group LLC

40

Tesla Motors, Inc. (TSLA)

FINANCIAL MODEL
Figure 41: TSLA Automobile Segment Operating Model (1/2)
Revenue:

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12E

3Q12E

4Q12E

1Q13E

2Q13E

3Q13E

4Q13E

1Q14E

2Q14E

3Q14E

4Q14E

2010

2011

2012E

2013E

2014E

2015E

Roadster:
Roadster Units
x Roadster ASP (in $ 000s)
= Roadster Revenue

130
$139
$18.1

132
$145
$19.1

151
$121
$18.2

165
$121
$20.0

131
$156
$20.5

190
$145
$27.6

184
$154
$28.4

150
$168
$25.3

99
$181
$17.9

105
$180
$18.9

77
$180
$13.9

49
$180
$8.8

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

578
$0.131
$75.5

655
$0.155
$101.7

330
$0.180
$59.5

$-

$-

$-

1,067

1,199

1,350

1,515

1,646

1,836

2,020

2,170

2,269

2,374

2,451

2,500

2,500

2,500

2,500

2,500

2,500

2,500

2,500

2,500

1,515

2,170

2,500

2,500

2,500

2,500

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

20
$0.077
$1.5

980
$0.077
$75.9

4,557
$0.069
$314.0

4,203
$0.067
$283.2

2,460
$0.067
$165.8

2,076
$0.067
$139.9

1,512
$0.067
$101.9

3,071
$0.067
$207.0

3,137
$0.067
$211.4

3,333
$0.067
$224.6

3,529
$0.067
$237.8

$-

$-

5,557
$0.070
$391.4

10,250
$0.067
$690.9

13,069
$0.067
$880.8

13,526
$0.067
$911.7

Model S Vehicles Sold Internationally

x Model S ASP
= Model S International Revenue

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

850
$0.071
$60.2

2,583
$0.071
$182.8

2,981
$0.071
$210.9

3,521
$0.071
$249.2

2,860
$0.071
$202.4

2,921
$0.071
$206.7

3,103
$0.071
$219.6

3,286
$0.071
$232.6

$-

$-

$-

9,935
$0.071
$703.1

12,170
$0.071
$861.3

12,901
$0.071
$913.0

Total Model S Revenue

$-

$-

$-

$-

$-

$-

$-

$-

$-

$1.5

$75.9

$314.0

$343.4

$348.6

$350.8

$351.1

$409.4

$418.1

$444.2

$470.4

$-

$-

$391.4

$1,393.9

$1,742.1

$1,824.6

/ Blended ASP
= Global Model S Vehicle Deliveries

$0.077
20

$0.077
980

$0.069
4,557

$0.068
5,053

$0.069
5,043

$0.069
5,056

$0.070
5,033

$0.069
5,931

$0.069
6,057

$0.069
6,436

$0.069
6,815

$0.070
5,557

$0.069
20,185

$0.069
25,239

$0.069
26,427

Cumulative Model S Delivered

20

1,000

5,557

10,610

15,653

20,709

25,742

31,673

37,731

44,167

50,981

5,557

25,742

50,981

77,408

Cumulative Model S Pre-Orders (Units)

x Model X ASP
= Implied Revenue from Pre-Orders ($ million)

$-

$-

$-

$-

$-

5,350
$0.077
$414

6,500
$0.077
$503

8,000
$0.077
$619

9,800
$0.077
$759

11,000
$0.077
$851

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

1,880
$0.045
$84.6

1,920
$0.045
$86.4

2,040
$0.045
$91.8

2,160
$0.045
$97.2

$-

$-

$-

$-

8,000
$0.045
$360.0

12,000
$0.045
$540.0

$$-

$$-

$$-

$$-

$$-

$$-

$$-

$$-

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

1,000
$0.041
$41.0

= Vehicle, Options and Related Sales

$18.1

$19.1

$18.2

$20.0

$20.5

$27.6

$28.4

$25.3

$17.9

$20.4

$89.7

$322.8

$343.4

$348.6

$350.8

$351.1

$494.0

$504.5

$536.0

$567.6

$75.5

$101.7

$450.8

$1,393.9

$2,102.1

$2,364.6

Powertrain Component & Related Sales:

Daiimler's New Benz Program
Toyota's RAV4 Program
Daimler's A-Class Program
Daimler's Smart fortwo Program

$$$$2.5

$$$$4.8

$$$$5.1

$$$5.5
$3.7

$$$7.9
$5.3

$$$6.9
$4.6

$$$8.9
$5.9

$$$4.4
$3.0

$$0.3
$1.1
$-

$$10.0
$$-

$$25.0
$$-

$$25.0
$$-

$$15.0
$$-

$$10.0
$$-

$$10.0
$$-

$$5.0
$$-

$$$$-

$$$$-

$20.0
$$$-

$25.0
$$$-

$$$5.5
$16.1

$$$28.1
$18.7

$$60.3
$1.1
$-

$$40.0
$$-

$45.0
$$$-

$130.0
$$$-

Cumulative Roadsters Delivered

Model S:
Model S Vehicles Sold in U.S.
x Model S Blended Average ASP
= Model S U.S. Revenue

Model X:
Model X Units
x Model X ASP
= Model X Revenue
Cumulative Model X Pre-Orders (Units)
x Model X ASP
= Cumulative Model X Pre-Orders ($ million)

= Powertrain Component and Related Sales

$2.5

$4.8

$5.1

$9.2

$13.2

$11.5

$14.8

$7.4

$1.4

$10.0

$25.0

$25.0

$15.0

$10.0

$10.0

$5.0

$-

$-

$20.0

$25.0

$21.6

$46.9

$61.4

$40.0

$45.0

$130.0

Total Automotive Sales Revenue

$20.6

$24.0

$23.4

$29.2

$33.6

$39.0

$43.2

$32.7

$19.2

$30.4

$114.7

$347.8

$358.4

$358.6

$360.8

$356.1

$494.0

$504.5

$556.0

$592.6

$97.1

$148.6

$512.2

$1,433.9

$2,147.1

$2,494.6

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

41

Tesla Motors, Inc. (TSLA)

Figure 42: TSLA Automobile Segment Operating Model (2/2)

Cost of Goods Sold:

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

No of Stores
Roadster:
Weighted Average Battery Size
x Cell Cost per kWh
= Battery Cell Cost ($ per Unit)

3Q11

4Q11

17

20

1Q12

2Q12E

3Q12E

4Q12E

1Q13E

2Q13E

3Q13E

4Q13E

1Q14E

2Q14E

3Q14E

4Q14E

$-

$-

$-

$-

$-

$-

$-

$-

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

54
$400.0
$21,600

$2,160
$5,250
$3,150
$1,167
$33,327

$2,160
$5,250
$3,150
$1,341
$33,501

$2,160
$5,250
$3,150
$1,134
$33,294

$2,592
$5,250
$3,150
$1,131
$33,723

$2,160
$5,250
$3,150
$1,646
$33,806

$2,160
$5,250
$3,150
$1,734
$33,894

$2,160
$5,250
$3,150
$1,117
$33,277

$2,160
$5,250
$3,150
$1,302
$33,462

$2,160
$5,250
$3,150
$532
$32,692

$2,700
$6,300
$3,780
$638
$35,018

$2,160
$6,300
$3,780
$638
$34,478

$2,160
$6,300
$3,780
$638
$34,478

$11,770
$5,750
$5,927
$2,250
$59,024.4

$11,770
$5,750
$4,742
$1,688
$57,450.7

$10,476
$5,750
$3,793
$1,266
$54,578.4

$10,476
$5,750
$3,035
$1,266
$54,248.5

$10,476
$6,325
$3,338
$1,392
$55,336.6

$9,323
$6,325
$2,671
$1,044
$53,256.8

$8,298
$6,325
$2,136
$783
$50,819.6

$7,385
$6,325
$1,709
$587
$49,468.0

$7,385
$6,325
$1,709
$587
$48,698.0

$8,862
$7,590
$2,051
$587
$54,108

$8,862
$7,590
$2,051
$587
$53,568

$8,862
$7,590
$2,051
$587
$53,568

$-

$-

$-

$-

$-

$-

$-

$-

x No. of Roadsters Delivered

= Total Roadster Variable Cost ($m)

130
$7.7

132
$7.6

151
$8.2

165
$9.0

131
$7.2

190
$10.1

184
$9.4

150
$7.4

99
$4.8

105
$5.7

77
$4.1

49
$2.6

$-

$-

$-

$-

$-

$-

$-

$-

Labor
+ D&A
+ Other
= Total Roadster Fixed Cost ($m)

$5.3
$1.9
$0.5
$7.7

$7.1
$2.2
$0.5
$9.8

$4.9
$2.8
$0.5
$8.1

$5.9
$2.6
$0.5
$9.0

$8.2
$3.2
$0.5
$11.8

$9.2
$3.9
$0.5
$13.5

$10.2
$3.9
$0.5
$14.5

$8.6
$4.3
$0.5
$13.4

$4.1
$3.7
$0.5
$8.3

$7.7
$0.6
$0.5
$8.8

$6.5
$0.6
$0.5
$7.7

$3.3
$2.7
$0.5
$6.5

$-

$-

$-

$-

$-

$-

$-

$-

Total Roadster Cost of Revenue ($m)

$15.4

$17.4

$16.4

$17.9

$19.1

$23.7

$23.9

$20.8

$13.1

$14.5

$11.8

$9.1

50
$450.0
$22,275

50
$450.0
$22,275

50
$450.0
$22,275

50
$400.0
$19,800

50
$400.0
$19,800

50
$350.0
$17,325

50
$350.0
$17,325

50
$350.0
$17,325

50
$340.0
$16,830

50
$340.0
$16,830

50
$325.0
$16,088

+ Other Battery Pack Components

+ Power Electronics
+ Gearbox
+ Software
= Total Powertrain Cost

$3,119
$1,082
$757
$141
$27,373

$3,119
$1,077
$754
$140
$27,364

$3,119
$1,071
$750
$139
$27,354

$2,376
$1,066
$746
$139
$24,126

$2,376
$1,061
$742
$138
$24,117

$2,079
$1,055
$739
$137
$21,335

$2,079
$1,050
$735
$137
$21,326

$2,079
$1,045
$731
$136
$21,316

$2,020
$1,040
$728
$135
$20,752

$2,020
$1,034
$724
$134
$20,742

$1,931
$1,029
$720
$134
$19,901

+ Body
+ Transmission
+ Chassis (x-Powertrain)
+ Other
= Total Model S Variable Cost ($ per Unit)

$11,021
$2,533
$9,408
$1,000
$51,336

$11,021
$2,533
$9,408
$1,000
$51,326

$11,021
$2,533
$9,408
$1,000
$51,316

$11,021
$2,533
$9,408
$1,000
$48,089

$11,021
$2,533
$9,408
$1,000
$48,079

$11,021
$2,533
$9,408
$1,000
$45,298

$11,021
$2,533
$9,408
$1,000
$45,288

$11,021
$2,533
$9,408
$1,000
$45,278

$11,021
$2,533
$9,408
$1,000
$44,714

$11,021
$2,533
$9,408
$1,000
$44,705

$11,021
$2,533
$9,408
$1,000
$43,864

x No. of Model S Delivered

= Total Model S Variable Cost ($m)

20
$1.0

980
$50.3

4,557
$233.8

5,053
$243.0

5,043
$242.5

5,056
$229.0

5,033
$227.9

5,931
$268.6

6,057
$270.9

6,436
$287.7

6,815
$298.9

Labor
+ D&A
+ Other
= Total Model S Fixed Cost ($m)

$0.5
$0.8
$$1.4

$14.1
$3.2
$5.0
$22.3

$17.2
$13.7
$2.5
$33.4

$17.2
$13.7
$2.5
$33.4

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

$20.3
$13.7
$2.5
$36.5

Total Model S Cost of Revenue ($m)

$2.4

$72.6

$267.3

$276.4

$279.0

$265.6

$264.5

$305.1

$307.4

$324.2

$335.4

+ Other Battery Pack Components

+ Power Electronics
+ Gearbox
+ Software
= Total Powertrain Cost
+ Body
+ Transmission
+ Chassis (x-Powertrain)
+ Other
= Total Roadster Variable Cost ($ per Unit)

Model S:
Weighted Average Battery Size (65% 40; 25% 60)
x Cell Cost per kWh
= Battery Cell Cost ($ per Unit)

Model X COGS

$77.8

$76.0

$73.4

$72.9

Total Vehicle Sales Cost of Goods Sold

$15.4

$17.4

$16.4

$17.9

$19.1

$23.7

$23.9

$20.8

$13.1

$16.9

$84.4

$276.4

$276.4

$279.0

$265.6

$264.5

$382.9

$383.4

$397.7

$408.3

Powertrain Revenue
x (1 - Powertrain Gross Margin)
= Powertrain Cost of Goods Sold

$2.5
40%
$1.5

$4.8
40%
$2.9

$5.1
40%
$3.1

$9.2
40%
$5.5

$13.2
40%
$7.9

$11.5
40%
$6.9

$14.8
40%
$8.9

$7.4
40%
$4.4

$1.4
40%
$0.8

$10.0
30%
$7.0

$25.0
40%
$15.0

$25.0
40%
$15.0

$15.0
40%
$9.0

$10.0
40%
$6.0

$10.0
40%
$6.0

$5.0
40%
$3.0

$40%
$-

$40%
$-

$20.0
40%
$12.0

$25.0
40%
$15.0

Total Automotive Sales Cost of Goods Sold

$16.9

$20.3

$19.5

$23.4

$27.0

$30.5

$32.8

$25.2

$13.9

$23.9

$99.4

$291.4

$285.4

$285.0

$271.6

$267.5

$382.9

$383.4

$409.7

$423.3

$2.7
15.1%

$1.8
9.3%

$1.8
10.1%

$2.1
10.5%

$1.4
6.9%

$3.9
14.2%

$4.6
16.0%

$4.5
17.7%

$4.8
26.7%

$4.4
23.2%

$2.1
14.8%

($0.3)
(3.7%)

$-

$-

$-

$-

$-

$-

$-

$-

Model S Gross Profit ($m)

Model S Gross Margin (%)

$-

$-

$-

$-

$-

($0.9)
(55.1%)

$3.2
4.3%

$46.7
14.9%

$67.0
19.5%

$69.6
20.0%

$85.3
24.3%

$86.6
24.7%

$104.3
25.5%

$110.7
26.5%

$120.0
27.0%

$134.9
28.7%

Model X Gross Profit ($m)

Model X Gross Margin (%)

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$84.6
100.0%

$86.4
100.0%

$91.8
100.0%

$97.2
100.0%

$5.3
40.0%

$4.6
40.0%

$5.9
40.0%

$3.0
40.0%

$0.5
40.0%

$3.0
30.0%

$10.0
40.0%

$10.0
40.0%

$6.0
40.0%

$4.0
40.0%

$4.0
40.0%

$2.0
40.0%

$-

$-

$8.0
40.0%

$10.0
40.0%

Gross Margin:
Roadster Gross Profit ($m)
Roadster Gross Margin (%)

Powertrain Gross Profit ($m)

Powertrain Gross Margin (%)

$1.0
40.0%

$1.9
40.0%

$2.1
40.0%

$3.7
40.0%

Total Automotive Sales Gross Profit ($m)

$3.7

$3.7

$3.9

$5.8

$6.7

$8.5

$10.5

$7.4

$5.3

$6.5

$15.3

$56.4

$73.0

$73.6

$89.3

$88.6

$188.9

$197.1

$219.8

$242.1

Automotive Segment Gross Margin (%)

18.1%

15.5%

16.7%

19.8%

19.8%

21.8%

24.2%

22.8%

27.6%

21.5%

13.3%

16.2%

20.4%

20.5%

24.7%

24.9%

38.2%

39.1%

39.5%

40.9%

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

42

Tesla Motors, Inc. (TSLA)

Figure 43: TSLA Development Services Segment Operating Model

Title
Development Services Contracts:
Daimler's New Electric Mercedes Benz
Toyota's RAV4 Phase 1 powertrain system
Toyota's RAV4 Phase 0 powertrain system
Daimler's A-Class Program
Daimler's Freightliner
Other

Deal Value

Date Signed

$125.0
$61.4
$9.0
$14.4

TBA
Oct. 2010
July 2010
1Q10

Total Development Services Revenue

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12E

3Q12E

4Q12E

1Q13E

2Q13E

3Q13E

4Q13E

1Q14E

2Q14E

3Q14E

4Q14E

2009

2010

2011

2012E

2013E

2014E

$14.0
$1.2
$$$0.2

$12.5
$6.5
$$$0.2

$14.3
$$$$0.1

$6.6
$$$$0.1

$$10.7
$$$$-

$$$$$$-

$20.0
$$$$$-

$25.0
$$$$$-

$15.0
$$$$$-

$15.0
$$$$$-

$20.0
$$$$$-

$20.0
$$$$$-

$10.0
$$$$$-

$$$$$$-

$$$$$$-

$$$$$$-

$$$$$$-

$$3.3
$1.3
$14.4
$0.6
$-

$$47.4
$7.7
$$$0.6

$45.0
$10.7
$$$$-

$70.0
$$$$$-

$10.0
$$$$$-

$$0.2
$-

$4.2
$0.2
$-

$0.4
$7.4
$0.1
$-

$3.3
$0.9
$2.8
$0.1
$-

$0.2

$4.4

$7.9

$7.1

$15.4

$19.1

$14.4

$6.7

$10.9

$-

$20.0

$25.0

$15.0

$15.0

$20.0

$20.0

$10.0

$-

$-

$-

$-

$19.7

$55.7

$55.7

$70.0

$10.0

$125
63%
$79

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$55.0%
$-

$20.0
55.0%
$11.0

$25.0
55.0%
$13.8

$15.0
70.0%
$10.5

$15.0
70.0%
$10.5

$20.0
70.0%
$14.0

$20.0
70.0%
$14.0

$10.0
55.0%
$5.5

$55.0%
$-

$55.0%
$-

$55.0%
$-

$$-

$$-

$$-

$45.0
55.0%
$24.8

$70.0
70.0%
$49.0

$10.0
55.0%
$5.5

Toyota's RAV4 Phase 1 Revenue

x Gross Margin
= Toyota's RAV4 Phase 1 Gross Profit

$61
50%
$31

$-%
$-

$-%
$-

$-%
$-

$3.3
75.0%
$2.5

$14.0
75.2%
$10.5

$12.5
43.9%
$5.5

$14.3
47.0%
$6.7

$6.6
6.1%
$0.4

$10.7
45.8%
$4.9

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$$-

$3.3
75.0%
$2.5

$47.4
48.8%
$23.1

$10.7
45.8%
$4.9

$$-

$$-

Toyota's RAV4 Phase 0 Revenue

x Gross Margin
= Toyota's RAV4 Phase 0 Gross Profit

$9
68%
$6

$-%
$-

$-%
$-

$0.4
55.0%
$0.2

$0.9
60.0%
$0.6

$1.2
70.0%
$0.8

$6.5
70.0%
$4.5

$70.0%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$$-

$1.3
58.5%
$0.8

$7.7
70.0%
$5.4

$$-

$$-

$$-

Daimler's A-Class Program

x Gross Margin
= Daimler's A-Class Gross Profit

$14
70%
$10

$-%
$-

$4.2
57.8%
$2.4

$7.4
69.4%
$5.1

$2.8
88.2%
$2.5

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$$-

$14.4
69.7%
$10.0

$$-

$$-

$$-

$$-

Daimler's Freightliner Revenue

x Gross Margin
= Daimler's Freighliner Gross Profit

$1
55%
$0

$0.2
55.1%
$0.1

$0.2
55.1%
$0.1

$0.1
55.1%
$0.1

$0.1
55.1%
$0.0

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$-%
$-

$$-

$0.6
55.1%
$0.3

$$-

$$-

$$-

$$-

Gross Margin:
Daimler's New Electric Benz Revenue
x Gross Margin
= Daimler's New Electric Benz Gross Profit

Total Development Services Gross Profit

Total Development Services Gross Margin

Total Powertrain Contract:

Daimler's New Electric Mercedes Benz :
Powertrain Component Sales
Development Services
Total Benz Program Powertain Contract

$100.0
$70.4

Daimler's A-Class Program:

Powertrain Component Sales
Development Services
Total A-Class Program Powertrain Contract

$34.7
$14.4

Daimler's Smart fortwo Program:

Powertrain Component Sales
$34.9
Development Services (Offset to R&D)
$14.5
Total Smart fortwo Program Powertrain Contract

$0.1

$2.6

$5.4

$5.6

$11.4

$10.0

$6.7

$0.4

$4.9

$-

$11.0

$13.8

$10.5

$10.5

$14.0

$14.0

$5.5

$-

$-

$-

$-

$13.6

$28.5

$29.6

$49.0

$5.5

$35.0

57.6%

68.5%

78.0%

73.8%

52.3%

46.7%

6.0%

44.8%

#DIV/0!

55.0%

55.0%

70.0%

70.0%

70.0%

70.0%

55.0%

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

69.3%

51.2%

53.2%

70.0%

55.0%

70.0%

$-

$-

$-

$-

$-

$-

$-

$-

$-

$$-

$20.0
$20.0

$25.0
$25.0

$15.0
$15.0

$15.0
$15.0

$20.0
$20.0

$20.0
$20.0

$10.0
$10.0

$$-

$20.0
$$20.0

$25.0
$$25.0

$$$-

$$$-

$$$-

$$45.0
$45.0

$$70.0
$70.0

$45.0
$10.0
$55.0

$130.0
$$130.0

$15.2
$15.2

$18.9
$18.9

$14.3
$14.3

$6.6
$6.6

$25.0
$$25.0

$15.0
$$15.0

$10.0
$$10.0

$10.0
$$10.0

$5.0
$$5.0

$-

$4.2
$4.2

$25.0
$$25.0

$-

$0.4
$0.4

$10.0
$$10.0

$-

$$-

$0.3
$10.7
$11.0

$-

$$-

$-

$-

$-

$-

$$$-

$$4.6
$4.6

$$55.1
$55.1

$60.3
$10.7
$71.0

$40.0
$$40.0

$$$-

$$$-

$6.9

$8.9

$4.4

$1.1

$4.2
$4.2

$7.4
$7.4

$5.5
$2.8
$8.3

$7.9

$$-

$7.9

$6.9

$8.9

$4.4

$1.1

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$$$-

$5.5
$14.4
$19.9

$28.1
$$28.1

$1.1
$$1.1

$$$-

$$$-

$$$-

$2.5
$$2.5

$4.8
$$4.8

$5.1
$$5.1

$3.7
$$3.7

$5.3
$$5.3

$4.6
$$4.6

$5.9
$$5.9

$3.0
$$3.0

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$-

$$23.2
$23.2

$16.1
$$16.1

$18.7
$$18.7

$$$-

$$$-

$$$-

$$-

$-

Total Powertrain/Development Revenue

$2.5

$9.0

$12.9

$16.2

$28.4

$30.4

$29.2

$14.0

$12.1

$10.0

$45.0

$50.0

$30.0

$25.0

$30.0

$25.0

$10.0

$-

$20.0

$25.0

$23.2

$40.7

$101.9

$117.1

$110.0

$55.0

$130.0

July 2011

May 2009

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

$50.0

55.1%

$175.0
$125.0

Toyota's RAV4 Program:

Powertrain Component Sales
Development Services
Total RAV4 Program Powertrain Contract

2015E

43

Tesla Motors, Inc. (TSLA)

Figure 44: TSLA Income Statement (1/2)

Quarterly

Fiscal Year Ending December 31

2010

2011

2012E

2013E

2014E

Annual
2012E

2009

2010

2011

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2QE

3QE

4QE

1QE

2QE

3QE

4QE

1QE

2QE

3QE

4QE

FY

FY

FY

FY

FY

FY

FY

Automotive Sales Revenue

Development Services Revenue

$20.6
$0.2

$24.0
$4.4

$23.4
$7.9

$29.2
$7.1

$33.6
$15.4

$39.0
$19.1

$43.2
$14.4

$32.7
$6.7

$19.2
$10.9

$30.4
$-

$114.7
$20.0

$347.8
$25.0

$358.4
$15.0

$358.6
$15.0

$360.8
$20.0

$356.1
$20.0

$494.0
$10.0

$504.5
$-

$556.0
$-

$592.6
$-

$111.9
$-

$97.1
$19.7

$148.6
$55.7

$512.2
$55.9

$1,433.9
$70.0

$2,147.1
$10.0

$2,494.6
$50.0

Total Revenue

$20.8

$28.4

$31.2

$36.3

$49.0

$58.2

$57.7

$39.4

$30.2

$30.4

$134.7

$372.8

$373.4

$373.6

$380.8

$376.1

$504.0

$504.5

$556.0

$592.6

$111.9

$116.7

$204.2

$568.1

$1,503.9

$2,157.1

$2,544.6

Automotive Sales Cost of Revenue

Development Services Cost of Revenue
Total Cost of Revenues

$16.9
$0.1

$20.3
$1.9

$19.5
$2.5

$23.4
$1.6

$27.0
$4.0

$30.5
$9.1

$32.8
$7.7

$25.2
$6.3

$13.9
$6.0

$23.9
$-

$99.4
$9.0

$291.4
$11.3

$285.4
$4.5

$285.0
$4.5

$271.6
$6.0

$267.5
$6.0

$382.9
$4.5

$383.4
$-

$409.7
$-

$423.3
$-

$102.4
$-

$80.0
$6.0

$115.5
$27.2

$428.7
$26.3

$1,109.4
$21.0

$1,599.3
$4.5

$1,755.0
$15.0

$17.0

$22.1

$21.9

$25.0

$31.0

$39.7

$40.4

$31.5

$20.0

$23.9

$108.4

$302.6

$289.9

$289.5

$277.6

$273.5

$387.4

$383.4

$409.7

$423.3

$102.4

$86.0

$142.6

$454.9

$1,130.4

$1,603.8

$1,770.0

Automotive Sales Gross Profit

Development Services Gross Profit

$3.7
$0.1

$3.7
$2.6

$3.9
$5.4

$5.8
$5.6

$6.7
$11.4

$8.5
$10.0

$10.5
$6.7

$7.4
$0.4

$5.3
$4.9

$6.5
$-

$15.3
$11.0

$56.4
$13.8

$73.0
$10.5

$73.6
$10.5

$89.3
$14.0

$88.6
$14.0

$111.1
$5.5

$121.1
$-

$146.4
$-

$169.2
$-

$9.5
$-

$17.1
$13.6

$33.1
$28.5

$83.5
$29.6

$324.6
$49.0

$547.8
$5.5

$739.7
$35.0

Gross Profit

$3.9

$6.3

$9.3

$11.3

$18.0

$18.5

$17.2

$7.8

$10.2

$6.5

$26.3

$70.1

$83.5

$84.1

$103.3

$102.6

$116.6

$121.1

$146.4

$169.2

$9.5

$30.7

$61.6

$113.2

$373.6

$553.3

$774.7

Research & Development

$13.3

$15.4

$26.7

$37.6

$41.2

$52.5

$54.1

$61.2

$68.4

$84.8

$50.9

$55.0

$52.2

$52.5

$52.7

$53.0

$53.8

$54.1

$54.3

$54.6

$19.3

$93.0

$209.0

$259.0

$210.4

$216.8

$279.9

G&A Expenses
Selling Expense
Selling, General, and Administrative

$11.9
$4.7
$16.6

$15.8
$6.4
$22.2

$13.4
$7.0
$20.4

$17.2
$8.2
$25.3

$12.0
$12.3
$24.2

$11.6
$13.1
$24.7

$14.6
$13.0
$27.6

$18.7
$8.9
$27.6

$21.5
$9.1
$30.6

$21.6
$9.1
$33.5

$20.6
$10.1
$30.7

$20.7
$14.9
$35.6

$21.0
$16.8
$37.8

$21.3
$16.8
$38.1

$21.6
$17.1
$38.7

$21.9
$16.9
$38.9

$22.0
$22.7
$44.7

$22.1
$22.7
$44.9

$22.3
$25.0
$47.3

$22.4
$26.7
$49.0

$21.1
$21.1
$42.2

$58.3
$26.3
$84.6

$56.9
$47.2
$104.1

$84.4
$43.2
$127.6

$85.8
$67.7
$153.5

$88.8
$97.1
$185.9

$95.9
$114.5
$210.4

$ in millions

2013E

2014E

2015E

Operating Expenses

$29.9

$37.6

$47.1

$63.0

$65.4

$77.2

$81.7

$88.8

$99.0

$118.3

$81.5

$90.5

$90.0

$90.6

$91.5

$91.8

$98.5

$98.9

$101.6

$103.6

$61.4

$177.6

$313.1

$386.6

$363.9

$402.7

$490.3

Operating Income (Loss)

($26.0)

($31.4)

($37.8)

($51.6)

($47.3)

($58.7)

($64.5)

($80.9)

($88.8)

($111.8)

($55.3)

($20.4)

($6.5)

($6.4)

$11.8

$10.8

$18.1

$22.2

$44.8

$65.6

($51.9)

($146.8)

($251.5)

($273.4)

$9.7

$150.6

$284.3

$0.0
($0.2)
($3.2)

$0.0
($0.5)
($6.7)

$0.1
($0.3)
$3.2

$0.1
$$0.2

$0.0
$($1.5)

$0.0
$($0.1)

$0.1
$($0.6)

$0.1
($0.0)
($0.5)

$0.1
($0.1)
($1.1)

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.1
($0.1)
$-

$0.2
($2.5)
($1.4)

$0.3
($1.0)
($6.6)

$0.3
($0.0)
($2.6)

$0.4
($0.3)
($1.1)

$0.4
($0.3)
$-

$0.4
($0.3)
$-

$0.4
($0.3)
$-

($29.4)

($38.5)

($34.9)

($51.4)

($48.8)

($58.8)

($65.0)

($81.4)

($89.8)

($111.7)

($55.2)

($20.4)

($6.4)

($6.4)

$11.8

$10.8

$18.1

$22.2

$44.8

$65.6

($55.7)

($154.2)

($253.9)

($274.4)

$9.8

$150.7

$284.4

Interest Income
Interest Expense
Other Income (Expense), Net
Income (Loss) before Income Taxes
Income Tax Expense (Benefit)
GAAP Net Income (Loss)

$0.1

$0.0

$0.1

($0.0)

$0.2

$0.1

$0.1

$0.1

$0.1

$-

$-

$-

$-

$-

$-

$-

$-

$-

$11.2

$16.4

$0.0

$0.2

$0.5

$0.1

$-

$27.6

$71.1

($29.5)

($38.5)

($34.9)

($51.4)

($48.9)

($58.9)

($65.1)

($81.5)

($89.9)

($111.7)

($55.2)

($20.4)

($6.4)

($6.4)

$11.8

$10.8

$18.1

$22.2

$33.6

$49.2

($55.7)

($154.3)

($254.4)

($274.5)

$9.8

$123.1

$213.3

Diluted GAAP EPS

($4.04)

($5.04)

($0.38)

($0.54)

($0.51)

($0.60)

($0.63)

($0.78)

($0.86)

($1.06)

($0.53)

($0.19)

($0.06)

($0.06)

$0.11

$0.10

$0.17

$0.21

$0.31

$0.46

($7.94)

($3.04)

($2.53)

($2.64)

$0.09

$1.15

$1.99

Basic GAAP EPS

($4.04)

($5.04)

($0.38)

($0.54)

($0.51)

($0.60)

($0.63)

($0.78)

($0.86)

($1.06)

($0.53)

($0.19)

($0.06)

($0.06)

$0.11

$0.10

$0.17

$0.21

$0.31

$0.45

($7.94)

($3.04)

($2.53)

($2.64)

$0.09

$1.14

$1.99

Non-GAAP Derivation:
GAAP Operating Income (Loss)

($26.0)

($31.4)

($37.8)

($51.6)

($47.3)

($58.7)

($64.5)

($80.9)

($88.8)

($111.8)

($55.3)

($20.4)

($6.5)

($6.4)

$11.8

$10.8

$18.1

$22.2

$44.8

$65.6

($51.9)

($146.8)

($251.5)

($273.4)

$9.7

$150.6

$284.3

+ Stock Compensation Expense

= Non-GAAP Operating Income (Loss)

$3.4
($22.6)

$6.1
($25.2)

$3.8
($34.0)

$7.8
($43.8)

$5.9
($41.4)

$6.9
($51.8)

$7.9
($56.6)

$8.7
($72.2)

$10.7
($78.1)

$10.9
($100.9)

$11.0
($44.2)

$11.2
($9.2)

$11.2
$4.8

$11.4
$5.0

$11.6
$23.4

$11.8
$22.6

$11.8
$29.9

$12.0
$34.2

$12.2
$56.9

$12.4
$78.0

$($51.9)

$21.2
($125.7)

$29.4
($222.1)

$43.8
($229.7)

$46.0
$55.7

$48.4
$199.0

$50.8
$335.1

+ Non-Operating Income (Expense)

+ Change in Fair Value of Warranty
= Non-GAAP Operating Income (Loss)

($3.4)
$2.3
($23.7)

($7.1)
$6.4
($26.0)

$3.0
($3.1)
($34.1)

$0.3
($0.6)
($44.1)

($1.4)
$1.4
($41.4)

($0.0)
$0.3
($51.5)

($0.5)
$0.3
($56.8)

($0.4)
$0.6
($72.0)

($1.1)
($0.2)
($79.3)

$0.0
$($100.9)

$0.0
$($44.2)

$0.0
$($9.2)

$0.0
$$4.8

$0.0
$$5.0

$0.0
$$23.4

$0.0
$$22.6

$0.0
$$29.9

$0.0
$$34.2

$0.0
$$57.0

$0.0
$$78.0

($3.8)
$($55.7)

($7.3)
$5.0
($128.0)

($2.4)
$2.8
($221.8)

($1.0)
($0.2)
($230.8)

$0.1
$$55.8

$0.1
$$199.1

$0.1
$$335.2

Diluted Non-GAAP EPS

($3.24)

($3.41)

($0.37)

($0.47)

($0.44)

($0.53)

($0.55)

($0.69)

($0.76)

($0.96)

($0.42)

($0.09)

$0.05

$0.05

$0.22

$0.21

$0.28

$0.32

$0.53

$0.72

($7.93)

($2.52)

($2.21)

($2.22)

$0.53

$1.86

$3.12

7.3
7.3

7.6
7.6

92.3
92.3

94.2
94.2

95.2
95.2

97.8
97.8

104.1
104.1

104.4
104.4

104.8
104.8

104.9
104.9

105.1
105.1

105.3
105.3

105.4
105.6

105.6
105.7

105.7
105.9

105.9
106.1

106.4
106.6

107.0
107.1

107.5
107.7

108.0
108.2

7.0
7.0

50.7
50.7

100.4
100.4

103.9
103.9

106.2
106.2

106.8
106.8

107.3
107.3

Diluted Shares Outstanding

Basic Shares Outstanding

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

44

Tesla Motors, Inc. (TSLA)

Figure 45: TSLA Income Statement (2/2)

Operating Metrics:
% of Revenue :
Automotive Sales
Development Services
Powertrain & Development
Margins:
Automotive Sales Gross Margin
Development Services Gross Margin
Consolidated Gross Margin
Operating Income Margin
Net Income Margin
Expense Ratios:
Research & Development
General and Administrative Expenses
Selling Expenses
Selling, General, and Administrative Expenses
Total Operating Expense Ratio
Tax Rate
Q/Q % Growth:
Automotive Sales Revenue
Development Services Revenue
Total Revenue

2010

2011

2012

2013

2014

2009

2010

2011

2012E

2013E

2014E

2015E

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2QE

3QE

4QE

1QE

2QE

3QE

4QE

1QE

2QE

3QE

4QE

FY

FY

FY

FY

FY

FY

FY

98.9%
1.1%

84.4%
15.6%

74.7%
25.3%

80.4%
19.6%

68.6%
31.4%

67.1%
32.9%

75.0%
25.0%

83.0%
17.0%

63.8%
36.2%

100.0%
-%

85.2%
14.8%

93.3%
6.7%

96.0%
4.0%

96.0%
4.0%

94.7%
5.3%

94.7%
5.3%

98.0%
2.0%

100.0%
-%

100.0%
-%

100.0%
-%

100.0%
-%

83.2%
16.8%

72.7%
27.3%

90.2%
9.8%

95.3%
4.7%

99.5%
0.5%

98.0%
2.0%

13.1%

32.6%

41.7%

44.9%

58.3%

52.6%

50.7%

35.8%

40.7%

32.8%

33.4%

13.4%

8.0%

6.7%

7.9%

6.6%

2.0%

-%

3.6%

4.2%

0.3%

35.4%

50.2%

20.6%

7.3%

2.5%

7.1%

18.1%
55.1%
18.5%

15.5%
57.6%
22.0%

16.7%
68.5%
29.8%

19.8%
78.0%
31.2%

19.8%
73.8%
36.8%

21.8%
52.3%
31.8%

24.2%
46.7%
29.9%

22.8%
6.0%
19.9%

27.6%
44.8%
33.8%

21.5%
21.5%

13.3%
55.0%
19.5%

16.2%
55.0%
18.8%

20.4%
70.0%
22.4%

20.5%
70.0%
22.5%

24.7%
70.0%
27.1%

24.9%
70.0%
27.3%

22.5%
55.0%
23.1%

24.0%
24.0%

26.3%
26.3%

28.6%
28.6%

8.5%
8.5%

17.6%
69.3%
26.3%

22.3%
51.2%
30.2%

16.3%
53.0%
19.9%

22.6%
70.0%
24.8%

25.5%
55.0%
25.6%

29.7%
70.0%
30.4%

3.1%
3.1%

2.9%
2.9%

3.6%
3.6%

4.4%
4.4%

8.0%
6.0%

11.1%
8.3%

0.6%
0.7%

7.0%
5.7%

11.2%
8.4%

63.7%
57.2%
22.5%
79.7%
143.4%

54.3%
55.7%
22.5%
78.2%
132.5%

85.5%
42.9%
22.5%
65.4%
150.9%

103.7%
47.4%
22.5%
69.9%
173.5%

84.0%
24.4%
25.0%
49.4%
133.3%

90.3%
20.0%
22.5%
42.5%
132.8%

93.8%
25.4%
22.5%
47.9%
141.7%

155.4%
47.5%
22.5%
70.0%
225.4%

226.7%
71.4%
30.0%
101.4%
328.1%

278.5%
71.1%
30.0%
110.0%
388.5%

37.8%
15.3%
7.5%
22.8%
60.5%

14.7%
5.5%
4.0%
9.5%
24.3%

14.0%
5.6%
4.5%
10.1%
24.1%

14.0%
5.7%
4.5%
10.2%
24.2%

13.8%
5.7%
4.5%
10.2%
24.0%

14.1%
5.8%
4.5%
10.3%
24.4%

10.7%
4.4%
4.5%
8.9%
19.5%

10.7%
4.4%
4.5%
8.9%
19.6%

9.8%
4.0%
4.5%
8.5%
18.3%

9.2%
3.8%
4.5%
8.3%
17.5%

17.2%
18.8%
18.8%
37.7%
54.9%

79.7%
49.9%
22.5%
72.4%
152.1%

102.3%
27.9%
23.1%
51.0%
153.3%

45.6%
14.9%
7.6%
22.5%
68.1%

14.0%
5.7%
4.5%
10.2%
24.2%

10.0%
4.1%
4.5%
8.6%
18.7%

11.0%
3.8%
4.5%
8.3%
19.3%

-%

18.3%

25.0%

74.9%

178.2%

164.7%

43.4%

18.0%

-%

-%

-%

-%

-%

-%

-%

-%

-%

25.0%

25.0%

10.8%
#DIV/0!
12.0%

16.4%
1853.3%
36.5%

(2.6%)
78.0%
10.0%

24.9%
(9.8%)
16.1%

15.3%
116.5%
35.1%

16.1%
24.3%
18.6%

10.8%
(24.6%)
(0.9%)

(24.4%)
(53.6%)
(31.7%)

(41.1%)
63.1%
(23.4%)

58.2%
(100.0%)
0.9%

276.7%
#DIV/0!
342.4%

203.2%
25.0%
176.7%

3.0%
(40.0%)
0.2%

0.1%
-%
0.1%

0.6%
33.3%
1.9%

(1.3%)
-%
(1.2%)

38.7%
(50.0%)
34.0%

2.1%
(100.0%)
0.1%

10.2%
#DIV/0!
10.2%

6.6%
#DIV/0!
6.6%

Automotive Sales Cost of Goods Sold

Development Services Cost of Goods Sold
Total Cost of Revenue

0.3%

20.2%

(4.0%)

20.3%

15.2%

13.2%

7.3%

(22.9%)

(44.8%)

71.6%

315.8%

193.1%

(2.1%)

(0.1%)

(4.7%)

(1.5%)

43.2%

0.1%

6.9%

3.3%

Research and Development Expense

Selling, General, and Administrative Expenses
Operating Expenses

62.9%
0.1%
20.8%

16.2%
33.9%
26.0%

73.2%
(8.0%)
25.3%

40.9%
24.1%
33.6%

9.4%
(4.5%)
3.8%

27.6%
2.1%
18.2%

3.0%
11.7%
5.8%

13.2%
(0.2%)
8.6%

11.7%
11.0%
11.5%

24.0%
9.5%
19.5%

(40.0%)
(8.5%)
(31.1%)

8.0%
16.0%
11.0%

(5.0%)
6.2%
(0.6%)

0.5%
0.9%
0.7%

0.5%
1.7%
1.0%

0.5%
0.3%
0.4%

1.5%
15.1%
7.3%

0.5%
0.3%
0.4%

0.5%
5.4%
2.7%

0.5%
3.7%
2.0%

Operating Income
Net Income (Loss)
Diluted EPS

13.4%
21.8%
18.7%

20.6%
30.5%
24.7%

20.6%
(9.3%)
(92.5%)

36.5%
47.0%
43.9%

(8.3%)
(4.7%)
(5.7%)

24.1%
20.4%
17.2%

9.8%
10.5%
3.8%

25.5%
25.2%
24.8%

9.7%
10.3%
9.9%

25.9%
24.3%
24.1%

(50.6%)
(50.6%)
(50.6%)

(63.1%)
(63.2%)
(63.2%)

(68.3%)
(68.4%)
(68.5%)

(0.0%)
(0.0%)
(0.2%)

(283.0%)
(284.1%)
(283.8%)

(8.6%)
(8.5%)
(8.7%)

67.6%
67.4%
66.6%

22.7%
22.7%
22.1%

101.6%
51.1%
50.4%

46.6%
46.6%
45.8%

(1.4%)
(0.4%)

(11.0%)
5.4%

(48.7%)
(31.4%)

57.0%
95.2%

63.4%
6685.0%
135.6%

62.8%
331.7%
104.8%

85.2%
82.9%
84.6%

12.0%
(5.8%)
8.5%

(42.8%)
(29.1%)
(38.5%)

(22.0%)
(100.0%)
(47.7%)

165.3%
38.6%
133.6%

964.3%
273.2%
846.8%

1762.3%
37.3%
1137.8%

1077.8%
#DIV/0!
1127.0%

214.6%
-%
182.7%

2.4%
(20.0%)
0.9%

37.8%
(33.3%)
35.0%

40.7%
(100.0%)
35.0%

54.1%
(100.0%)
46.0%

66.4%
(100.0%)
57.6%

659.3%

4.3%

Automotive Sales Cost of Goods Sold

Development Services Cost of Goods Sold
Total Cost of Revenue

(26.5%)
(26.0%)

(18.4%)
(10.9%)

(48.6%)
(42.0%)

39.3%
48.6%

59.9%
3861.8%
82.8%

50.6%
386.4%
79.1%

68.3%
209.1%
84.3%

7.9%
302.7%
26.3%

(48.3%)
49.1%
(35.6%)

(21.7%)
(100.0%)
(39.7%)

203.6%
17.0%
168.1%

1054.5%
78.6%
859.6%

1948.3%
(25.3%)
1352.5%

1091.9%
#DIV/0!
1110.7%

173.1%
(33.3%)
156.0%

(8.2%)
(46.7%)
(9.6%)

34.2%
-%
33.6%

34.5%
(100.0%)
32.4%

50.9%
(100.0%)
47.6%

58.3%
(100.0%)
54.8%

544.8%

(21.9%)

44.4%

271.2%

158.8%

44.2%

9.7%

Research and Development Expense

Selling, General, and Administrative Expenses
Operating Expenses

67.0%
151.0%
105.2%

694.2%
169.3%
269.3%

2023.9%
90.4%
293.1%

362.0%
53.0%
154.9%

210.3%
46.0%
119.0%

240.8%
11.3%
105.3%

102.6%
35.2%
73.4%

62.7%
8.7%
41.0%

66.2%
26.3%
51.4%

61.4%
35.5%
53.1%

(5.9%)
11.0%
(0.2%)

(10.2%)
29.1%
2.0%

(23.7%)
23.5%
(9.1%)

(38.1%)
13.7%
(23.4%)

3.6%
26.4%
12.2%

(3.6%)
9.2%
1.5%

3.0%
18.4%
9.5%

3.0%
17.7%
9.2%

3.0%
22.0%
11.1%

3.0%
26.2%
12.8%

(64.1%)
78.2%
(20.6%)

382.3%
100.6%
189.0%

124.7%
23.1%
76.3%

23.9%
22.6%
23.5%

(18.8%)
20.3%
(5.9%)

3.0%
21.1%
10.7%

29.1%
13.2%
21.8%

Operating Income
Net Income (Loss)
Diluted EPS

56.7%
84.3%
74.8%

287.8%
254.4%
223.0%

781.7%
657.0%
(42.5%)

125.3%
111.9%
(84.0%)

82.1%
65.8%
(87.3%)

87.3%
52.9%
(88.0%)

70.4%
86.3%
65.2%

56.7%
58.7%
43.2%

87.5%
83.6%
66.8%

90.3%
89.7%
76.7%

(14.3%)
(15.1%)
(16.0%)

(74.8%)
(75.0%)
(75.2%)

(92.7%)
(92.8%)
(92.9%)

(94.2%)
(94.3%)
(94.3%)

(121.4%)
(121.4%)
(121.3%)

(153.0%)
(153.1%)
(152.8%)

(380.3%)
(381.8%)
(379.1%)

(444.2%)
(445.9%)
(441.5%)

279.2%
184.0%
179.3%

507.9%
355.1%
346.1%

(33.9%)
(32.7%)
(36.3%)

182.9%
176.9%
(61.7%)

71.3%
64.8%
(16.7%)

8.7%
7.9%
4.2%

(103.5%)
(103.6%)
(103.5%)

1454.1%
1157.4%
1143.0%

88.8%
73.3%
73.5%

Y/Y % Growth
Automotive Sales Revenue
Development Services Revenue
Total Revenue

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

45

Tesla Motors, Inc. (TSLA)

Figure 46: TSLA Balance Sheet

Quarterly

Fiscal Year Ending December 31

2009

2010

2011

2012E

2013E

2014E

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2QE

3QE

4QE

1QE

2QE

3QE

4QE

1QE

2QE

3QE

4QE

Assets:
Cash and Cash Equivalents
Short-Term Marketable Securities
Restricted Cash
Account Receivable
Inventory
Prepaid Expenses and Other Current Assets

$69.6
$$$3.5
$23.2
$4.2

$61.5
$$$5.9
$28.6
$4.5

$47.3
$$$6.5
$29.5
$6.7

$96.6
$$88.1
$8.1
$39.5
$8.9

$99.6
$$73.6
$6.7
$45.2
$10.8

$100.7
$$42.9
$20.3
$50.8
$12.2

$319.4
$$11.3
$23.3
$54.3
$9.5

$213.3
$65.1
$55.3
$18.3
$49.2
$11.0

$255.3
$25.1
$23.5
$9.5
$50.1
$9.4

$218.6
$25.0
$39.2
$13.6
$55.4
$7.1

$191.7
$25.0
$39.2
$6.7
$59.8
$8.4

$160.6
$25.0
$39.2
$32.3
$54.2
$7.6

$220.0
$25.0
$$67.1
$39.3
$6.1

$144.4
$25.0
$$85.9
$43.5
$5.8

$87.1
$25.0
$$97.1
$40.5
$5.8

$104.4
$25.0
$$106.6
$33.3
$5.6

$112.2
$25.0
$$101.5
$38.3
$5.5

$110.0
$25.0
$$110.9
$50.4
$7.7

$70.4
$25.0
$$121.1
$46.0
$7.7

$49.3
$25.0
$$139.0
$53.3
$8.2

$70.6
$25.0
$$154.1
$59.3
$8.5

Total Current Assets

$100.6

$100.6

$90.0

$241.1

$235.9

$226.9

$417.8

$412.1

$372.8

$358.9

$330.8

$318.9

$357.5

$304.6

$255.6

$274.9

$282.5

$304.0

$270.1

$274.8

$317.4

Operating Lease Vehicles, Net

Property, Plant and Equipment, Net
Restricted Cash
Other Assets

$$23.5
$3.6
$2.8

$$26.9
$7.5
$10.4

$$33.2
$5.4
$19.4

$5.7
$37.2
$57.5
$20.1

$8.0
$114.6
$4.9
$22.7

$9.1
$143.4
$4.9
$22.9

$10.5
$189.6
$5.4
$22.8

$11.7
$248.1
$5.8
$22.6

$11.8
$298.4
$8.1
$22.4

$12.0
$364.1
$3.8
$22.2

$12.1
$409.9
$3.8
$22.2

$12.2
$455.6
$3.8
$22.2

$12.2
$469.3
$$22.2

$12.3
$481.5
$$22.2

$12.4
$495.7
$$22.2

$12.4
$510.2
$$22.2

$12.5
$526.0
$$22.2

$12.5
$526.0
$$22.2

$12.6
$526.0
$$22.2

$12.7
$532.5
$$22.2

$12.7
$537.4
$$22.2

Total Assets

$130.4

$145.3

$148.0

$361.6

$386.1

$407.3

$646.2

$700.3

$713.4

$761.1

$778.8

$812.8

$861.2

$820.6

$785.9

$819.7

$843.2

$864.7

$830.9

$842.2

$889.8

Liabilities & Shareholders' Equity:

Accounts Payable
Accrued Liabilities
Deferred Revenue
Capital Lease Obligations, Current Portion
Reservation Payments
Deferred Development Compensation
Long-Term Debt, Current Portion

$15.1
$14.5
$1.4
$0.3
$26.0
$0.2
$-

$18.2
$7.9
$6.7
$0.3
$26.0
$$-

$25.6
$8.4
$8.1
$0.3
$26.2
$$-

$27.0
$10.7
$3.5
$0.3
$27.9
$$-

$29.0
$20.9
$4.6
$0.3
$30.8
$$-

$49.7
$19.8
$3.8
$0.3
$39.4
$$-

$57.2
$25.0
$3.1
$0.3
$53.2
$$-

$53.6
$32.7
$2.3
$0.4
$65.2
$$-

$56.1
$32.1
$2.3
$1.1
$91.8
$$7.9

$64.3
$33.6
$2.6
$1.7
$113.3
$$20.2

$71.7
$29.9
$2.6
$1.7
$141.6
$$38.1

$135.5
$75.9
$2.6
$1.7
$122.7
$$50.8

$136.2
$121.1
$2.6
$1.7
$147.2
$$50.8

$144.9
$87.0
$2.6
$1.7
$139.9
$$50.8

$139.0
$86.8
$2.6
$1.7
$118.9
$$50.8

$136.0
$83.3
$2.6
$1.7
$148.6
$$50.8

$128.5
$82.0
$2.6
$1.7
$170.9
$$50.8

$174.3
$77.5
$2.6
$1.7
$145.3
$$50.8

$168.7
$76.7
$2.6
$1.7
$108.9
$$50.8

$176.2
$81.9
$2.6
$1.7
$81.7
$$50.8

$169.3
$84.7
$2.6
$1.7
$61.3
$$50.8

Total Current Liabilities

$57.5

$59.1

$68.6

$69.3

$85.6

$113.0

$138.7

$154.2

$191.3

$235.7

$285.7

$389.2

$459.6

$426.9

$399.8

$423.0

$436.6

$452.2

$409.4

$394.9

$370.4

Common Stock Warrant Liability

Convertible Preferred Stock Warrant Liability
Capital Lease Obligations, Less Current Portion
Deferred Revenue, Less Current Portion
Long-Term Debt, Less Current Portion
Other Long Term Liabilities

$$1.7
$0.8
$1.2
$$3.5

$$10.4
$0.7
$1.4
$29.9
$3.9

$$16.7
$0.6
$2.1
$45.4
$5.0

$6.7
$$0.6
$2.5
$56.6
$6.1

$6.1
$$0.5
$2.8
$71.8
$12.3

$7.5
$$0.4
$3.1
$102.5
$13.1

$7.8
$$0.4
$3.2
$134.2
$13.4

$8.2
$$0.7
$3.5
$225.0
$14.6

$8.8
$$2.8
$3.1
$268.3
$14.9

$8.7
$$3.7
$3.1
$340.3
$15.7

$8.7
$$3.7
$3.1
$426.9
$8.6

$8.7
$$3.7
$3.1
$414.2
$6.9

$8.7
$$3.7
$3.1
$401.5
$18.1

$8.7
$$3.7
$3.1
$388.8
$29.4

$8.7
$$3.7
$3.1
$376.1
$40.8

$8.7
$$3.7
$3.1
$363.4
$52.4

$8.7
$$3.7
$3.1
$350.7
$64.1

$8.7
$$3.7
$3.1
$338.0
$64.7

$8.7
$$3.7
$3.1
$325.3
$64.1

$8.7
$$3.7
$3.1
$312.5
$69.0

$8.7
$$3.7
$3.1
$299.8
$104.6

$64.7

$105.4

$138.5

$141.7

$179.0

$239.6

$297.7

$406.1

$489.4

$607.2

$736.7

$825.8

$894.7

$860.5

$832.1

$854.2

$866.9

$870.3

$814.3

$791.9

$790.3

$319.2
$0.0
$7.1
$($260.7)

$319.2
$0.0
$10.9
$($290.2)

$319.2
$0.0
$18.9
$($328.7)

$$0.1
$583.5
$($363.6)

$$0.1
$621.9
$($415.0)

$$0.1
$631.6
$($463.9)

$$0.1
$871.2
$($522.8)

$$0.1
$881.9
($0.0)
($587.9)

$$0.1
$893.3
($0.0)
($669.4)

$$0.1
$913.0
($0.0)
($759.3)

$$0.1
$913.0
$($871.0)

$$0.1
$913.0
$($926.2)

$$0.1
$913.0
$($946.6)

$$0.1
$913.0
$($953.0)

$$0.1
$913.0
$($959.4)

$$0.1
$913.0
$($947.6)

$$0.1
$913.0
$($936.8)

$$0.1
$913.0
$($918.7)

$$0.1
$913.0
$($896.5)

$$0.1
$913.0
$($862.9)

$$0.1
$913.0
$($813.7)

$ in millions

Total Liabilities
Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Total Stockholders' Equity (Deficit)

$65.7

$39.9

$9.4

$219.9

$207.0

$167.7

$348.5

$294.1

$224.0

$153.9

$42.1

($13.1)

($33.4)

($39.9)

($46.3)

($34.5)

($23.6)

($5.5)

$16.7

$50.3

$99.5

Total Liabilities & Shareholders' Equity

$130.4

$145.3

$148.0

$361.6

$386.1

$407.3

$646.2

$700.3

$713.4

$761.1

$778.8

$812.8

$861.2

$820.6

$785.9

$819.7

$843.2

$864.7

$830.9

$842.2

$889.8

Balance Sheet Metrics

Cash Per Share
Book Value Per Share

$9.85
$9.30

$8.43
$5.47

$6.19
$1.24

$1.05
$2.38

$1.06
$2.20

$1.06
$1.76

$3.27
$3.56

$2.05
$2.83

$2.45
$2.15

$2.09
$1.47

$1.83
$0.40

$1.53
($0.12)

$2.09
($0.32)

$1.37
($0.38)

$0.83
($0.44)

$0.99
($0.33)

$1.06
($0.22)

$1.03
($0.05)

$0.66
$0.16

$0.46
$0.47

$0.65
$0.92

1.7x
1.2x

1.7x
1.0x

1.3x
0.7x

3.5x
1.4x

2.8x
1.2x

2.0x
0.9x

3.0x
2.3x

2.7x
1.4x

1.9x
1.3x

1.5x
0.9x

1.2x
0.7x

0.8x
0.4x

0.8x
0.5x

0.7x
0.3x

0.6x
0.2x

0.6x
0.2x

0.6x
0.3x

0.7x
0.2x

0.7x
0.2x

0.7x
0.1x

0.9x
0.2x

Working Capital
Days Sales Outstanding
Payable Days
Days of Inventory

$43.1
17
73
0

$41.5
26
79
0

$21.4
20
81
0

$171.8
23
78
254

$150.3
17
72
183

$113.9
37
91
79

$279.0
36
88
17

$257.9
28
84
86

$181.5
22
128
54

$123.2
41
192
117

$45.1
20
212
116

($70.3)
22
91
26

($102.1)
16
33
0

($122.3)
21
35
0

($144.2)
23
33
0

($148.1)
25
32
0

($154.0)
24
31
0

($148.2)
20
31
0

($139.3)
22
30
0

($120.1)
23
29
0

($53.0)
23
26
0

Net Debt
Debt-to-Equity
Total Debt-to-Capitalization

($73.2)
0.0%
0.0%

($39.1)
74.9%
42.8%

($7.2)
480.6%
82.8%

($185.6)
25.7%
20.5%

($106.2)
34.7%
25.8%

($46.0)
61.1%
37.9%

($201.9)
38.5%
27.8%

($114.4)
76.5%
43.3%

($35.6)
123.3%
55.2%

$73.9
234.3%
70.1%

$205.3
1103.5%
91.7%

$236.4
-3552.8%
102.9%

$207.4
-1352.6%
108.0%

$270.2
-1102.7%
110.0%

$314.8
-922.3%
112.2%

$284.8
-1201.8%
109.1%

$264.3
-1697.8%
106.3%

$253.8
-7017.3%
101.4%

$280.7
2255.0%
95.8%

$289.0
723.0%
87.8%

$255.0
352.5%
77.9%

NOPAT
Return on Invested Capital
Return on Assets
Return on Average Equity

($22.7)
-

($25.9)
-

($31.4)
-

($37.8)
-

($51.7)
-

($47.2)
-

($58.6)
-

($64.4)
-

($80.8)
-

($88.7)
-

($111.8)
-

($55.3)
-

($20.4)
-

($6.5)
-

($6.4)
-

$11.8
4.7%
5.8%
5.9%

$10.8
4.2%
5.1%
5.2%

$18.1
6.9%
8.4%
8.5%

$22.2
8.3%
10.7%
10.5%

$55.9
20.9%
16.0%
16.1%

$82.0
29.9%
22.1%
22.7%

Current Ratio
Cash Ratio

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

46

Tesla Motors, Inc. (TSLA)

Figure 47: TSLA Cash Flow Statement

Fiscal Year Ending December 31

Quarterly
2010

2011

2012E

2013E

1Q

2Q

2010
3Q

4Q

1Q

2Q

3Q

4Q

1Q

2QE

3QE

4QE

1QE

2QE

3QE

4QE

1QE

2QE

3QE

4QE

FY

FY

FY

FY

FY

Cash Flows from Operating Activities:

Net Income (Loss)

($29.5)

($38.5)

($34.9)

($51.4)

($48.9)

($58.9)

($65.1)

($81.5)

($89.9)

($111.7)

($55.2)

($20.4)

($6.4)

($6.4)

$11.8

$10.8

$18.1

$22.2

$33.6

$49.2

($154.3)

($254.4)

($277.2)

$9.8

$123.1

Depreciation and Amortization

Change in Fair Value of Warrant Liabilities
Gain on Extinguishment of Convertible Notes and Warrants
Discounts & Premiums on Short-Term Marketable Securities
Stock-Based Compensation
Excess Tax Benefit from Stock-Based Compensation
Loss on Abandonment of Fixed Assets
Inventory Write-Downs
Interest on Convertible Notes
Other
Changes in Operating Assets and Liabilities

$2.1
$2.3
$$$3.4
$$$0.1
$$($5.8)

$2.5
$6.4
$$$6.1
$$$0.2
$$$3.1

$3.1
($3.1)
$$$3.8
$$$0.3
$$($15.2)

$2.9
($0.6)
$$$7.8
($0.1)
$0.0
$0.3
$$$6.7

$3.5
$1.4
$$$5.9
$$$0.4
$$0.0
($5.6)

$4.3
$0.3
$$$6.9
$$$0.3
$$0.2
$24.3

$4.3
$0.3
$$$7.9
$$$0.8
$($0.2)
$30.5

$4.8
$0.6
$($0.1)
$8.7
$$0.3
$0.4
$($0.0)
$39.7

$4.2
($0.2)
$$$10.7
$$$$$$25.1

$4.2
$$$$10.9
$$$$$$33.2

$4.3
$$$$11.0
$$$$$$71.5

$18.3
$$$$11.2
$$$$$$51.9

$18.3
$$$$11.2
$$$$$($55.4)

$18.3
$$$$11.4
$$$$$($35.4)

$18.3
$$$$11.6
$$$$$$21.1

$18.3
$$$$11.8
$$$$$$13.7

$18.3
$$$$11.8
$$$$$($8.1)

$18.3
$$$$12.0
$$$$$($48.6)

$18.3
$$$$12.2
$$$$$($40.3)

$18.3
$$$$12.4
$$$$$($45.9)

$10.6
$5.0
$$$21.2
($0.1)
$0.0
$1.0
$$($11.2)

$16.9
$2.8
$($0.1)
$29.4
$$0.3
$1.8
$$$88.9

$31.0
($0.2)
$$$43.8
$$$$$$181.7

$73.3
$$$$46.0
$$$$$($56.1)

$73.3
$$$$48.4
$$$$$($142.9)

($2.4)
($5.5)
($0.3)
$0.3
$3.1
($6.6)
($0.2)
$5.5
($0.1)
$0.4

($0.5)
($3.5)
($0.5)
($0.8)
($1.6)
$6.6
$$2.1
$0.3
$1.1

($1.6)
($13.8)
($2.3)
($0.3)
$4.4
$$($4.2)
$1.6
$1.1

$1.4
($5.6)
($1.9)
$0.4
($6.1)
$13.3
$$1.4
$2.9
$0.9

($13.6)
($7.0)
($1.4)
($0.4)
$7.7
$$($0.5)
$8.7
$0.8

($3.0)
($6.0)
$1.6
($0.0)
$18.4
$$($0.6)
$13.8
$0.3

$5.1
$2.1
($1.3)
$0.0
$11.9
$$($0.5)
$12.0
$1.2

$8.7
($2.8)
$0.9
$0.0
($6.1)
$12.3
$($0.3)
$26.5
$0.4

($4.1)
($5.6)
$2.3
$0.1
$8.2
$1.5
$$0.2
$21.6
$0.8

$6.9
($4.4)
($1.3)
$$7.4
($3.7)
$$$28.3

($25.6)
$5.5
$0.8
$$63.8
$46.0
$$($19.0)

($34.8)
$14.8
$1.5
$$0.7
$45.2
$$$24.5

($18.8)
($4.2)
$0.3
$$8.7
($34.1)
$$($7.4)

($11.3)
$2.9
$0.0
$($6.0)
($0.1)
$$($21.0)

($9.5)
$7.2
$0.2
$($3.0)
($3.6)
$$$29.7

$5.1
($5.0)
$0.1
$($7.5)
($1.2)
$$$22.3

($9.3)
($12.1)
($2.3)
$$45.8
($4.6)
$$($25.6)

($10.2)
$4.3
$0.1
$($5.6)
($0.8)
$$($36.3)

($17.9)
($7.3)
($0.5)
$$7.5
$5.3
$$($27.2)

($15.1)
($6.1)
($0.3)
$($6.8)
$2.7
$$($20.4)

($3.2)
($28.5)
($5.0)
($0.5)
($0.2)
$13.3
($0.2)
$4.8
$4.7
$3.5

($2.8)
($13.6)
($0.2)
($0.3)
$31.9
$12.3
$($1.9)
$61.0
$2.6

($57.6)
$10.3
$3.4
$0.1
$80.1
$89.0
$$0.2
$55.5
$0.8

($34.4)
$0.8
$0.6
$($7.7)
($39.0)
$$$23.7
$-

($52.5)
($21.2)
($3.0)
$$40.8
$2.6
$$($109.6)
$-

$ in millions

Accounts Receivable
Inventory & Operating Lease Vehicles
Prepaid Expenses and Other Current Assets
Other Assets
Accounts Payable
Accrued Liabilities
Deferred Development Compensation
Deferred Revenue
Reservation Payments
Other Long-Term Liabilities

2011

2012E

2013E

2014E

2014E

Net Cash Flow Provided by (Used in) Operations

($27.3)

($20.2)

($46.0)

($34.3)

($43.3)

($22.5)

($21.5)

($27.1)

($50.1)

($63.4)

$31.6

$61.1

($32.3)

($12.1)

$62.8

$54.6

$40.1

$4.0

$23.8

$34.0

($127.8)

($114.4)

($20.8)

$73.1

$101.9

Cash Flows from Investing Activities:

Purchase of Marketable Securities
Maturities of Short-Term Marketable Securities
Payments Related to Acquisition of Fremont
Purchases of Property and Equipment Excluding Capital Lease
Withdrawal Out of (Transfer to) Our Dept. of Energy Account
Increase in Other Restricted Cash

$$$($5.5)
$($3.9)

$$$($9.8)
$$2.1

$$($58.7)
($7.8)
($88.1)
($0.1)

$$($6.5)
($17.1)
$14.5
$0.6

$$$($20.5)
$30.7
($0.1)

$$$($54.3)
$31.7
($0.5)

($65.0)
$$($68.8)
($44.1)
($0.3)

$$40.0
$($54.3)
$31.8
($2.3)

$$$($68.0)
$($11.5)

$$$($50.0)
$$-

$$$($50.0)
$$-

$$$($32.0)
$$43.0

$$$($30.6)
$$-

$$$($32.5)
$$-

$$$($32.8)
$$-

$$$($34.1)
$$-

$$$($29.6)
$$-

$$$($30.9)
$$-

$$$($32.1)
$$-

$$$($30.9)
$$-

$$($65.2)
($40.2)
($73.6)
($1.3)

($65.0)
$40.0
$($197.9)
$50.1
($3.2)

$$$($200.0)
$$31.5

$$$($130.0)
$$-

$$$($123.5)
$$-

Net Cash Flow Provided by (Used in) Investing Activities

($9.4)

($7.7)

($154.7)

($8.5)

$10.1

($23.1)

($178.2)

$15.3

($79.4)

($50.0)

($50.0)

$11.0

($30.6)

($32.5)

($32.8)

($34.1)

($29.6)

($30.9)

($32.1)

Cash Flows from Financing Activities:

Proceeds from Issuance of Common Stock in Public Offering
Proceeds from Issuance of Common Stock in Private Placement
Proceeds from Issuance of Series F Conv. Pref. Stock, net of $122 costs
Proceeds from Issuance of Series E Conv. Pref. Stock, net of $556 costs
Principal Payments on Capital Leases and Other Debt
Proceeds from Long-Term Debt and Other Long-Term Liabilities
Proceeds from Issuance of Convertible Notes and Warrants
Proceeds from Exercise of Stock Options & Other Stock Issuance
Excess Tax Benefit from Stock-Based Compensation
Deferred Common Stock & Loan Facility Issuance Costs

$$$$($0.1)
$29.9
$$0.4
$($1.6)

$$$$($0.1)
$15.5
$$0.2
$($1.9)

$188.8
$50.0
$$($0.1)
$11.1
$$0.2
$($0.2)

$$30.0
$$($0.1)
$15.3
$$0.6
$0.1
($0.0)

$$$$($0.1)
$30.7
$3.7
$$$-

$172.4
$59.1
$$($0.1)
$31.7
($3.7)
$4.9
$$-

($0.0)
$$$($0.1)
$90.8
$$2.9
$$-

$$$$($0.2)
$51.3
$$2.7
$$-

$$$$$$72.0
$$20.8
$$-

$$$$$$86.6
$$$$-

$$$$$($12.7)
$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

$$$$($12.7)
$$$$$-

Net Cash Flow Provided by (Used in) Financing Activities

$28.6

$13.7

$249.9

$45.8

$34.3

$264.3

$93.6

$53.8

$93

$87

($13)

($13)

($13)

($13)

($13)

($13)

($13)

($13)

Net Increase in Cash & Cash Equivalents

($8.1)

($14.2)

$49.3

$3.0

$1.1

$218.7

($106.1)

$41.9

($36.7)

($26.8)

($31.1)

$59.4

($75.5)

($57.3)

$17.3

$7.8

($2.2)

($39.6)

Cash & Cash Equivalents (BoP)

Cash & Cash Equivalents (EoP)

$69.6
$61.5

$61.5
$47.3

$47.3
$96.6

$96.6
$99.6

$99.6
$100.7

$100.7
$319.4

$319.4
$213.3

$213.3
$255.3

$255.3
$218.6

$218.6
$191.7

$191.7
$160.6

$160.6
$220.0

$220.0
$144.4

$144.4
$87.1

$87.1
$104.4

$104.4
$112.2

$112.2
$110.0

$110.0
$70.4

Cash Flow Metrics:

Cash Flow from Operating Activities
- Capital Expenditures
Free Cash Flow

($27.3)
($5.5)
($32.8)

($20.2)
($9.8)
($30.1)

($46.0)
($7.8)
($53.7)

($34.3)
($17.1)
($51.4)

($43.3)
($20.5)
($63.8)

($22.5)
($54.3)
($76.8)

($21.5)
($68.8)
($90.3)

($27.1)
($54.3)
($81.4)

($50.1)
($68.0)
($118)

($63.4)
($50.0)
($113)

$31.6
($50.0)
($18)

$61.1
($32.0)
$29

($32.3)
($30.6)
($63)

($12.1)
($32.5)
($45)

$62.8
($32.8)
$30

$54.6
($34.1)
$20

$40.1
($29.6)
$10

$4.0
($30.9)
($27)

Source: Tesla Motors and Maxim Group estimates

Maxim Group LLC

47

($180.3)

($175.9)

($168.5)

($130.0)

($123.5)

$$$$($12.7)
$$$$$-

$188.8
$80.0
$$($0.3)
$71.8
$$1.4
$0.1
($3.7)

$172.4
$59.1
$$($0.4)
$204.4
$$10.5
$$-

$$$$($12.7)
$145.9
$$20.8
$$-

$$$$($50.8)
$$$$$-

$$$$($50.8)
$$$$$-

($13)

($13)

$338.0

$446.0

$154.0

($50.8)

($50.8)

($21.0)

$21.3

$29.9

$155.7

($35.3)

($107.8)

($72.5)

$70.4
$49.3

$49.3
$70.6

$69.6
$99.6

$99.6
$255.3

$255.3
$220.0

$220.0
$112.2

$112.2
$39.7

$23.8
($32.1)
($8)

$34.0
($30.9)
$3

($127.8)
($40.2)
($168.0)

($114.4)
($197.9)
($312.3)

($20.8)
($200.0)
($220.8)

$73.1
($130.0)
($56.9)

$101.9
($123.5)
($21.6)

Tesla Motors, Inc. (TSLA)

DISCLOSURES
As of:

Maxim Group LLC Stock Rating System

% of Cove rage
Unive rse
Expe cte d Pe rformance *

5/21/2012
% of Ratings
for which Firm provide d

with RatingBanking Se rvice s in the last 12 months

Buy

Expected total return of 15% or more over next 12 months

68.0%

10.3%

Hold

Expected total return of plus or minus 14% over next 12 months

20.0%

5.0%

Se ll

Expected total negative return of at least 15% over next 12 months

12.0%

0.0%

* Relative to Nasdaq Composite.

An Under Review (UR) rating represents a stock that the Firm has temporarily placed under review due to a material change.

Maxim Group makes a market in Audi AG, BMW Group, Daimler AG, Ford Motor Inc., General
Motors, Honda Motor Inc., Mitsubishi, NRG Energy, Toyota, and Tesla Motors, Inc.
We, Aaron Chew and Francesco Citro, attest that the views expressed in this research report accurately
reflect our personal views about the subject security and issuer. Furthermore, no part of our compensation
was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this
research report.
The research analyst(s) primarily responsible for the preparation of this research report have received
compensation based upon various factors, including the firms total revenues, a portion of which is
generated by investment banking activities.
Valuation Methods: The valuation methodology used in deriving our rating and price target on TSLA is
based on a sum-of-the-parts analysis. Specifically, we use (1) a DCF of vehicle sales only (assuming they
absorb 100% of opex, capex, and D&A) which points to a $3.7 billion equity valuation, (2) a $750 million
valuation awarded to the revenue and earnings stream of its powertrain business (both development services
and powertrain supply) based on a 10x EV/EBITDA multiple of our average estimate over the next four
years, and (3) a $750 million valuation awarded to TSLAs powertrain technology and IP assets based on
both the funds invested to date to develop its technology and spending comps for other EV technology such
as Nissans Leaf and GMs Volt. This supports a valuation of $5.2 billion, or $50 per share.
Price Target and Investment Risks: Aside from general market and other economic risks, specific risks to
our Buy rating on TSLA would arise if: (1) EV adoption fails to gain traction and impedes model s sellthrough, (2) the introduction of new EVs from global auto majors proves too much for TSLA to match, (3)
battery technology proves less durable, (4) low natural gas prices encourage the development of a natural
gas rather than an EV fleet, (5) battery cells costs do not decline at the same rate or magnitude as
anticipated, (6) competition from entry of other automakers into EV segment proves too formidable for
TSLA to overcome, and (7) future equity offerings dilute equity shareholders.

Maxim Group LLC

48

Tesla Motors, Inc. (TSLA)

RISK RATINGS
Risk ratings take into account both fundamental criteria and price volatility.
Speculative
Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues,
lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is
expected to be significantly above the industry.
Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk
category, the price volatility is expected to be significant with the possibility that the investment could
eventually be worthless.
Speculative stocks may not be suitable for a significant class of individual investors.
High
Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and
earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is
expected to be above the industry.
Price volatility: The price volatility of companies falling within this category is expected to be above the
industry.
High-risk stocks may not be suitable for a significant class of individual investors.
Medium
Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and
earnings visibility, positive cash flow, and is fairly liquid.
Accordingly, both price volatility and fundamental risk are expected to approximate the industry average.
Low
Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and
earnings visibility, positive cash flow, and is fairly liquid.
Accordingly, both price volatility and fundamental risk are expected to be below the industry.

Maxim Group LLC

49

Tesla Motors, Inc. (TSLA)

DISCLAIMERS
Some companies that Maxim Group LLC follows are emerging growth companies whose securities
typically involve a higher degree of risk and more volatility than the securities of more established
companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some
investors. Investors must make their own determination as to the appropriateness of an investment in any
securities referred to herein, based on their specific investment objectives, financial status and risk tolerance.
This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned
herein. This publication is confidential for the information of the addressee only and may not be reproduced
in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of
Maxim Group, LLC (Maxim).
Information and opinions presented in this report have been obtained or derived from sources believed by
Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. The
aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. Maxim accepts no
liability for loss arising from the use of the material presented in this report, except that this exclusion of
liability does not apply to the extent that such liability arises under specific statutes or regulations applicable
to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment.
Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach
different conclusions from, the information presented in this report. Those reports reflect the different
assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no
obligation to ensure that such other reports are brought to the attention of any recipient of this report.
Past performance should not be taken as an indication or guarantee of future performance, and no
representation or warranty, express or implied, is made regarding future performance. Information, opinions
and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are
subject to change without notice. The price, value of and income from any of the securities mentioned in
this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may
have a positive or adverse effect on the price or income of such securities. Investors in securities such as
ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities
recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company;
(2) are not deposits or other obligations of any insured depository institution; and 3) are subject to
investment risks, including the possible loss of principal invested. Indeed, in the case of some investments,
the potential losses may exceed the amount of initial investment and, in such circumstances, you may be
required to pay more money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Maxim Group LLC

50

Tesla Motors, Inc. (TSLA)

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51