Questions for TESLA motors corporation. http://www.sec.gov/Archives/edgar/data/1

Question

Questions for TESLA motors corporation. http://www.sec.gov/Archives/edgar/data/1318605/000119312513327916/d549636d10q.htm

Tesla offers customers who purchase Model S through its financing program a guaranteed buy-back. That is between 36 and 39 months after the purchase date, a customer who purchases a Model S through one of Tesla's two affiliated banks (which do offer competitive interest rates), Tesla will repurchase that customer's automobile at the greater of about 50% of the original purchase price, or the highest resale value of any Merceds Benz, BMW, Audi or Jaguar sold in that same year.

For this question, you should estimate the percentage of vehicles tesla will sell through its financing program, how many of those customers will resell their car to Tesla, and how much Tesla will lose on each repurchased vehicle (presumably, no customer will resell to Tesla a vehicle that is worth more than the buy back price).

Explanation / Answer

1. Tesla offers customers who purchase Model S through its financing program a guaranteed buy-back. That is between 36 and 39 months after the purchase date, a customer who purchases a Model S through one of Tesla's two affiliated banks (which do offer competitive interest rates), Tesla will repurchase that customer's automobile at the greater of about 50% of the original purchase price, or the highest resale value of any Merceds Benz, BMW, Audi or Jaguar sold in that same year.

For this question, you should estimate the percentage of vehicles tesla will sell through its financing program, how many of those customers will resell their car to Tesla, and how much Tesla will lose on each repurchased vehicle (presumably, no customer will resell to Tesla a vehicle that is worth more than the buy back price).

2. Tesla investors believe that when Tesla begins selling mid-priced vehicle ($40,000 range) in about 2017, it will become highly profitable. Assume Tesla plans to sell between 150,000 and 300,000 mid priced vehicles in 2017. Estimate the amount it will need to invest in plant, property and equipment (fixed assets) to have the capacity to produce the number of vehicles you estimate it will sell. You can find Internet articles on the amounts BMW, General Motors, Audi, Daimler Benz and Nissan have spent on their electric vehicles manufacturing facilities. You can also review the balance sheets of those manufacturers to see the plant, property, and equipment on their balance sheet and you can find on the internet their annual sales. That will let you compute the investment in property, plant and equipment needed to produce one vehicle. Do not use General Motors for this part because its property, plant and equipment amounts are distorted by its recent bankruptcy

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