Hello investors , my name is Sagar and in this video, we are going to do something different
as many people wanted videos on US companies . So let´s give it a try
So in this video we are going to talk about Tesla but this is not an analysis video , it´s a case study
but if you would like an analysis video , I can do that as well
We will talk focus on three points
He was born in 1971 in Africa. His mom is a model and dietitian and his father is an engineer
He used to love reading
and he also liked coding a lot
At the age of 12, he created a video game called Blastar and then he sold it for 500 $
which was a huge amount for that time
It was not just coding, he always used to think about several topics
he was so busy in his thoughts that he would completely avoid his family
his doctors ordered tests to check if he was deaf but they realised that he was just interested in science and nothing else
At 17, he moved to Canada to avoid serving in the South African military
He was accepted to a PhD program in energy physics/material science at Stanford University
But he decided to launch his first company to take advantage of the internet boom
the name of the company was Zip2 corporation
this company kept changing their business model every year but eventually, they would alloc companies to post content on the Internet such as maps
Elon Musk knew that the valuations of internet companies are getting stretched
and that´s why in 1999, he decided to sell that company for 340 million $
he only owned 7 % of the company and Musk received 22 million $ for the deal
but instead of enjoying , he decided to invest that money into another company, which he stared called X.com
this was the first online bank
at that time, you either had to pay someone with cash or cheque
but he knew that internet would change everything and makes transactions easier and faster
but everyone loved their banks so he decided to offer 20 $ to everyone who opened an account on his site
and if you refer it to someone, you would get 10 $ more
eventually people realised that it was a fantastic idea and they had more than 200 000 users
but at that time, any internet company could raise capital so they were facing a lot of competition
and one of those companies was Confinity, this comes from confidence and infinity
they had Paypal. When I started my youtube channel and I launched my course, I was using Paypal as a payment option
unlike a bank transfer, that requires many details, with Paypal, you just need the email of another person to send money
Paypal was gaining market share and this is when they decided to merge with X.com
X.com had a lot of cash so they used this cash to improve their product
Paypal´s biggest customer was Ebay . So when you wanted to purchase something from Ebay , you would see Paypal as a payment option
and that´s why Ebay acquiered Paypal for 1.5 billion $
Elon Musk made 180 million $ from this transaction and he decided to invest that money into 3 companies
100 million $ went to SpaceX, 70 million $  went to Tesla and 10 million $ went to Solarcity
Let´s talk about Tesla, which was incorporated in 2003
Unlike what many people think, Tesla had 2 founders : Martin Eberhard and Marc Tarpenning
in 1997, they founded NuvoMedia, which built an early e-book
this was a very innovative product for the 1990´s and they named it the rocketbook
this allowed you to read 10 books in a single device
in 1998, they sold this company was 187 million $. Looks like everyone was making money with internet companies that time
Martin loved sports cars but he was concerned about global warming and dependence on oil
and this is when they thought about electric cars
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and let me know the topic of the next video in the comment section
but to make a car, they needed more investors on board and this is when they approached Elon Musk
He didn´t invest everything at once. There were several rounds of funding and this is how he became the Chairman
I want to share a very funny story. He took Larry Page and Sergei Brin for a ride
as they were still looking for investors because they only had a concept until then
when he took them for a ride, the car wouldn´t do more than 16 km/h
Elon Musk promised that the car actually goes faster and they decided to invest in Tesla
As they had enough money , they built their first product, Tesla roadster . Let´s understand the strategy behind this product
at that time, nobody was thinking about electric cars so they didn´t want to make a product for the everyone
so they wanted to start with a cool and every expensive car first
so they were only targeting  rich clients
and when people actually see these cars, they will notice that it´s very cool
they would launch an affordable version . Why is this so important ?
if you start by targeting everyone, nobody would buy it
first they would target rich clients and make it a cool brand and this would attract more users
but as they won´t be able to afford it, they would launch an affordable version
more people would buy it but still not  everyone and then they would launch a cheaper version
so this is how they wanted to make Tesla cool and this was perfect for them because they didn´t know how to make cars
so they wouldn´t be able to make 1 lakh cars in the first year itself . They would use this experience to build better cars
The first product was Tesla Roadster and they were targeting very rich people as the price was 100 000 dollars
They partnered with Lotus as they liked one of their models
so Tesla would use their battery and Lotus would help them with the body
the concept was good but there was one simple problem . Lotus didn´t know the size of the battery
so one Tesla had the car, they were unable to fit the battery as the size was huge
and they ended up modifying everything and it only had 5 % in common with the Lotus model
the cumulative cap ex and research for the first Tesla Roadster was nearly 125 million dollars
and they were losing money every time they sold their product and they needed funding to survive
Daimler gave them 50 million dollars and they got a small stake of this company
US Department of energy also gave them 465 million dollars
Tesla went public in 2012 and they raised more than 200 million dollars
even thought they didn´t make money on Tesla Roadster, they gained a lot of experience and they knew how to make batteries
and this would help them launch more models faster
but initially, they didn´t have any strategy as they were sending emails and calling their clients
but as they were going to launch more products, they started to plan their own strategy
and they wanted to do something different
the first point was dealers. Normally, car manufacturers sell their cars to dealers
and if we want to buy a car, we would go to a dealer and check the car
and we can also negotiate the price a bit but Tesla wanted to create a cool brand
so they started opening their own premium outlets to control the entire experience of a customer
plus their outlets were in major metropolitan markets
and the same outlets could help you with service as well
and it´s not possible to negotiate price and you can order a card with 3 or 4 clicks
but there is on important point. In the case of dealers, they also keep a very big inventory with several models and they end up giving discounts on unsold models
but in the case of Tesla, you can see their models but they don´t keep inventory
their next model was Model S
they already knew how to make the battery but they also wanted a universal platform so they can launch their next models on this as well
many car companies use different platforms for several models although now they are trying to fit all models into similar platforms
Tesla thought about this from the beginning but it was mainly because they didn´t have a lot of money . They did change some things in the next models
Model S was cheaper than Roadster and they are targeting more people but they didn´t have money to advertise this product
even now, they don´t spend on advertising unlike other companies
and we can see that in Tijorifinance
as they also cover US stocks now
you just have to click US companies above and then type Tesla
I will go lower and look at operational metrics
I will click ad spend and first you will only see Tesla
but we can add Ford and General motors
If we compare this with their sales
GM spends 2.7 % and Ford spends 2.3 %
but Tesla only spends 0.11 %, which is nearly 0
So how are they advertising ? Elon Musk has many followers on Twitter and that´s free advertising
plus youtubers love talking about Tesla as it´s so cool and Tesla knew this would work
they also used a very interesting trick. When they launched their new model, they asked for a 5 000 dollars deposit . Why is this so important ?
Tesla didn´t know how many people would buy this product so with the deposit, they could understand the demand of this product
of course, many people paid the deposit and then they didn´t buy the car at the end  as it´s refundable
but at least they had an idea about the demand
and they used this money to run the business as they weren´t making any profit
Unlike other car companies, they didn´t offer many options to customise the car
their main options were different battery configurations
as model S was very successful , they decided to launch another model
known as Model X and it has very cool doors as you can see and it was taller than the previous model
unlike other car companies, revenue was growing rapidly, which is what their investors always wanted
you can see that in the chart
but they were never profitable
as they spend a lot on research
they want to improve their performance
but their investors are not worried
but their end goal was to create affordable models
and that´s when they launched model 3 and Y. These models shared the same platform
They actually wanted to name it Model E but Ford already had that name so they changed it to model 3
these models are very important for Tesla  because they want to target a wider audience
and that´s why they started their factory in China because it´s the biggest electric car market
and we can see that in Tijorifinance
you can see the location wise segment
you can see USA contributes 51 %
but if you click historic below , you can see China in red
you can see China contributes 23 % now
and if you would like to use Tijrofinance , I will leave the link below
Some people agree with this and some people don´t. There are 2 of them and they are related to Elon Musk
Elon Musk tweeted that he was going to take Tesla private and many investors got excited
but the reality was that he didn´t have the money to take it private because in the tweet
he mentioned that he had enough capital to take it private but this wasn´t true and he ended up paying a big fine
and he had to step down from his position for some time
the second controversy is also related to Elon Musk. In 2016, Tesla announced that they were going to acquire Solarcity
but the same day, the stock fell more than 10 %. Let me explain why .
In the beginning, I mentioned that when Paypal got acquired, Elon Musk got 180 million dollars and he invested 10 million dollars in Solarcity
he was actually the biggest shareholder of Solarcity
His cousins started this business and this company used to sell solar roofs
but they weren´t making any money because the business model wasn´t good at all.
They used to get their products from China and this is something normal
the problem was that sold their product as subscription so as a customer, you can pay in instalments
So they had a one time expensive but they used to charge the customer in instalments
so the expenses were high and they always needed money to continue the business and they had a very high amount of debt
but Tesla bought this company and they promised that it would help Tesla but it made their balance sheet worse
and after one year, his cousins left the business and that´s why people didn´t like this decision
but finally , the company is profitable as they are selling many units now
so if you would like to know how I analyse companies and how I get this information
or you would like to understand the financials of a company such as income statement and balance sheet
and how to value companies , you can join my course, which is in Hindi and English and it´s in video format
if you would like to learn more, I will leave the link in the description
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