Tesla's Financial Management Issues: A Problem Solving and Decision Making Approach

This presentation highlights Tesla's management issues which have led towards a financial crisis of the organisation. Alternative ways to find success for Tesla are provided.

Problem Solving and Decision-
Making
Based on Tesla Inc.

Introduction
In this assessment, Tesla Inc. is chosen and Tesla has been facing the issue of
financial management.
Elon Musk, the co-founder of Tesla is considered responsible for the financial crunch
of the organisation.
The purpose of the presentation is to highlight the Tesla's management issues which
have led towards a financial crisis of the organisation.
A secondary research is carried out in order to analyse Tesla's management problem
and alternative ways to find the success for Tesla are provided.

Brief Overview of Tesla
Tesla Inc. was founded in the year 2003 and it is an
American Multinational organisation based in California.
Tesla Inc. is known for manufacturing electric vehicles,
solar panel and a lithium-ion battery.
The CEO of the organisation is Elon Musk and Tesla Inc. is
famous for offering electric cars at an affordable price.
Production output of Tesla Inc. is 101,312 till the year 2017
and revenue of the organisation touched US$11.75 billion.
Tesla Inc. has been enjoying various types of State subsidy
and this organisation is named after the electrical engineer
Nikola Tesla.
The mission statement of Tesla Inc. is to accelerate the
world's transition into the sustainable energy.

Identifying management problem
Tesla Inc. continues to burn through cash at the staggering rate and Tesla Inc. may run out of cash
before ending of the year 2018. Elon Musk published the balance sheet of the organisation's
financial performance and it clearly showed an ugly reality glamorous image of the organisation.
Bloomberg's report stated that Tesla is burning through $6,500 in a minute and Bloomberg's report
also stated that Tesla has not made the profit since the year 2010.
Tesla failed to meet the production target of mass-market Model 3 sedan.
1. Tesla involved in the assisted-driving feature and one of the employees died for that.
Musk entered into the public dispute because of the federal safety issue.
2. Tesla’s flying-stock has been dropped almost 27% and this 15 years old company may
lead to the bankruptcy.
3. Free cash-flow of the organisation is negative for the six consecutive quarters.
4. Tesla started its journey with only 899 employees and today it had more than 40,000
employees.

Research Question
This presentation is expected to find out the reasons
behind the financial crunch of the organisation Tesla Inc.
and the management's role in leading towards the financial
issue of the organisation. Elon Musk is ambitious and his
managerial decision is heading towards Tesla’s issues.
The research questions are as follows:
 Does Tesla burn its own cash for managerial wrong
decisions?
 What does Elon Musk play the role behind Tesla’s recent
financial crunch?
 What could be possible solutions to Tesla's financial
management issue?

Designing a research programme
Secondary data is gathered to understand the managerial decision-making
issue of Tesla. Secondary data are collected from the websites, journals, online
articles, online magazines, government reports, blogs published by Tesla and
newspapers.
This research is followed by the qualitative data analysis process. Qualitative
data are mainly observable.
This research is followed by an experimental research type and it mainly
focuses on the research problem.
In this research, the researchers have followed the thematic data analysis
process.
The gathered data have been segregated into a few themes so that the
managerial problems and financial crunches of Tesla can be easily understood.

Carrying out a research
Tesla has always been taken a kitchen-sink approach to shaping the fiancé of
the organisation and the decision of the organisation has been largely taken
by Elon Musk.
Tesla has always used public face to raise the money and the first few years
of the organisation were scraped by the venture and private capital funds.
From the Series A, Tesla raised 7.5 million and Elon Musk contributed $6.3
billion. Tesla also got $40 million deal on when they have been struggled to
survive during the recession of 2008.
BBC Report stated that since its $225 million first sale of stock in June 2010,
Tesla has fund-raised by offering stock and convertible securities, monetising
leases and floating junk bond- the kind of thing any automaker may do.
Tesla has additionally been phenomenally fortunate in financial management.
Tesla's spotless vitality mission additionally separates it.
The U.S. Bureau of Energy granted Tesla a $465 million credit in 2010, which
Tesla satisfied early and in full in 2013.

Contd…
No other automobile manufacturer has so far possessed the capacity to
persuade stakeholders regarding fans to put store cash behind a progressive
plan or exploit government sponsorships for emanation free vehicles to the
extent that Tesla has.
Tesla finished 2017 with $3.4 billion in real money available and $9.4 billion
in exceptional obligation, a demonstration of Musk's obtaining ability.
Numerous examiners trust that Tesla should fund-raise once more.
At the point when Musk previously presented the lower-valued car in March
2016, fans remained in long queues at Tesla stores.
After two years, the slower-than-anticipated pace of creation implies that the
greater part of the in excess of 450,000 reservation holders are as yet
pausing.

Contd…
Financial Management is the use of general standards of
administration to the money related belonging of an
undertaking.
Legitimate administration of Tesla Inc.’s fund gives
quality fuel and standard administration to guarantee
proficient working.
Tesla funds are not legitimately managed Tesla Inc. will
confront obstructions that may have extreme
repercussions on its development and advancement.

Analysis of research findings
 Theme 1: Tesla is facing loss
Tesla is facing its financial loss due to the insufficient management of
financial practices that stimulate the company to face loss in annual profit
in comparison to the expectation.
Tesla the electric car innovators burned through around US$ 739.5 million
that can be counted as AUD $ 999 million in cash in the last three months
and it reaches to around $727.5 million net loss as the company continues
to crank more vehicles in the last few years.
The hyper-ambitious electric-vehicle and the renewable-energy business
enterprise which is struggling to solve the production issue of Model 3
electric sedan reported to face a loss of around 4784,6 million in the year
2017 which is deeper than that of the year 2017.
In the report of Financial Times (2018), it can be stated that the company
targets to develop around 6000 Model 3s a week by the end of the June.
Tesla’s net loss

 Theme 2: Elon Musk’s cash debt
The loss in financial profit of the hyper-ambitious electric
vehicle company is the huge amount of debt that comes
due in the year 2018 while developing the electric car
concept Model 3 sedan.
The needs for cash are so dire that the concerned company
Tesla has reportedly asked suppliers for partial refunds
However, it is common for car makers to suppliers in the
existing market for discounts with the accelerating output,
however; the outright refunds of Tesla are definitely
concerning.
The revenue per employee of the concerned organisation is
very low and thereby, the debt condition of Elon Musk’s is
certainly alarming.
Tesla’s debt

 Theme 3: Financial reality collides Elon’s
Musk Vision
The vision of the company ‘to accelerate the world's
transition into sustainable energy' collide the reality when
the company faces a huge loss while developing an
electric car which is completely an innovative idea of Elon
Musk in comparison to the normal gasoline cars.
However, for Mr Musk the share price can be considered as
the personal vindication as it may help the perennially
loss-making company to keep returning to Wall Street for
the purpose of gaining more cash so as to reach the target
effectively.
From the record of company's main data schedule, it can
be stated that the management performs only 110 hours
per week in the last quarter of the year
Employee-per revenue of the organisation is less
Employee-per-revenue

Identifying alternatives and
make recommendations
From the above-held discussion, a range of recommendations can be
provided in the following section so that, it can be possible for the
aforementioned organisation to meet the key operational financial
targets efficiently.
 Recommendation 1: The change in Elon Musk’s leadership
One of the first attempts to reach the mass market is the change in
Musk's leadership. It is worth noting that, one of the reasons for Musk's
failure is the ineffective leadership while managing employees for
meeting the financial target.
Hence, on prior decision making, it is required for Elon Musk to
stimulate rational approach so as to predict positive reckoning from the
employees including other stakeholders.

 Recommendation 2: Improvement in per-week working hours
and follow cash-flow minutely
One of the reasons for crunching the financial condition is the insufficient
working hours. Hence, it can be stated that it is required for the
organisation to improve the working hours (more than 110 hours per week)
so as to improve the production of Model 3 sedan.
Cash flow is important which makes the business run.
 Recommendation 3: Recruitment of competent employees
From the above-held discussion, it can be observed that the reason behind
financial loss is the quality of the electric vehicles and the recruiting of
extra employees.
Hence, in prior to improving the sale of production requires the
improvement is product quality and this can be achieved through
competent employees.
The management of the company needs to recruit more strategically so as
to improve more employee engagement and hence the production.

Conclusions
It can, therefore, be concluded that the proper
management of employees and appropriate leadership is
required on prior to reaching the target and gaining
financial profitability in the existing and target market.
The assessment has shown how the lack of management
decision-making reduces the efficiency of Tesla's ability
and hence the financial leadership initiative of the
company.
The rational approach of Elon Musk and more working
hours can help the company to pay the debt and reach
the financial target significantly.

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