The assets owned by a company represent resources that generate future economic benefits for a company. That future economic benefits can be in the form of monetary benefits such as cash.
Other than producing cash, an asset can also help to increase the value of a company in the form of capital gain. Additionally, some assets help to reduce the expenses of a company such as a piece of equipment that saves manpower.
With that said, the assets of a company should not be overlooked when it comes to analyzing the balance sheet. It’s no exception for Tesla (NASDAQ:TSLA).
In fact, it’s even more important to look into the detail of Tesla’s assets because the company relies heavily on assets to operate and to generate sales revenue.
As an investor myself, I will usually try to find out the types of assets that the company owns and how efficient it is using these assets to generate sales or revenue.
Moreover, I will also look into the trend of the assets and find out whether the company has consistently acquired more assets over time.
In line with the growth of the company, the assets should expand when the company grows. If there is a drastic decline in asset value, investors should find out the reason. Some of the reasons can be due to a sale of the assets or the assets may have suffered from an impairment charge.
In this article, we will take an in-depth view of Tesla’s assets and analyze what makes up the company’s total assets. In this aspect, a breakdown of the company’s assets will be studied upon.
Additionally, we will also look at Tesla’s assets efficiency in revenue generation by studying the asset turnover ratio as well as the return on asset ratio.
Without hesitation, let’s get started!
Chart Of Tesla’s Total Assets
The first thing to look at when analyzing Tesla’s assets is to look at the overall assets of the company.
The chart above shows Tesla’s quarterly total assets disclosed in the balance sheets over the previous 6 years from fiscal 2015 to 2021.
As mentioned in prior paragraphs, the trend of the assets is an important aspect of balance sheet analysis.
According to the chart, the trend of the asset plot indicates that Tesla’s total assets have been trending upward over the last 6 years.
As of 3Q 2021, Tesla’s total assets reached an all-time high at $58 billion USD.
The most significant growth in assets occurred in 4Q 2016 when Tesla added more than $10 billion in total assets within a single quarter.
As seen from the chart, Tesla’s total assets doubled in value from about $12 billion in 3Q 2016 to $24 billion in Q4 2016.
The reason for the 2X growth in total assets in 4Q 2016 was mainly due to the acquisition of SolarCity.
In the same quarter, Tesla consolidated the assets from SolarCity into its own balance sheet, resulting in a significant increase in the total assets of the company.
Overall, Tesla’s total assets have been growing on a long-term basis. The growth of the company’s assets has been a result of the expansion of the business.
In other words, Tesla has been adding assets to its balance sheets all these years, and the kind of assets which has been added ranges from tangible or physical assets such as factories, offices and equipment to intangible assets, including digital assets such as bitcoins.
The expansion of assets should bode well for Tesla’s shareholders but it still depends on the assets utilization ratio which we are going to see in subsequent discussions.
Breakdown of Tesla Total Assets
In this section, let’s take a look at what constitutes Tesla’s total assets.
The snapshot above shows Tesla’s total assets extracted from the balance sheet dated Dec 31, 2020.
In fiscal 4Q 2020, Tesla’s total assets were valued at $52 billion based on the snapshot above.
Keep in mind that this amount has grown to as much as $58 billion as of fiscal 3Q 2021 which we saw in the prior chart.
Nevertheless, the total asset value reported in 4Q 2020 consists of $26.7 billion of current assets and $25.4 billion of long-term assets.
This composition shows that Tesla’s total assets were almost equally divided between current and long-term assets.
Tesla’s Current Assets
The snapshot above shows Tesla’s current assets in the balance sheet extracted from the 4Q 2020 annual filings.
From the snapshot, the bulk of Tesla’s current assets were mostly cash and cash equivalents, making up more than 70% of the current assets at $19.4 billion as of 4Q 2020.
At this ratio, the cash and cash equivalents were easily the biggest component of the current assets.
Tesla’s inventory, at roughly $4 billion, was the next biggest item in the current assets.
Together, both cash and inventory alone made up nearly 90% of Tesla’s total current assets.
The composition shows that Tesla needs a large cash position as working capital, and the company also keeps a huge inventory.
Chart of Tesla’s Current Assets
The chart above represents Tesla’s quarterly total current assets from fiscal 2015 to 2021.
As you can see from the chart, Tesla’s current assets also have increased tremendously over the last 6 years.
As of 2021 3Q, Tesla’s current assets came in at $25 billion USD.
Of that amount, more than 60% or $16 billion was cash and cash equivalents.
When Tesla expands its businesses, its working capital will grow too and this is what we are seeing in the chart above.
Tesla’s growing working capital has been a result of several factors, including a growing workforce, an expanding inventory level and an increasing number of Gigafactory.
A trend worth pointing out is that Tesla’s current assets grew the most in fiscal 2020, notably from $15 billion to as much as $20 billion.
The significant growth of Tesla’s current assets or working capital in this particular period was most likely driven by the COVID-19 pandemic and it shows that Tesla has significantly shored up its liquidity to maintain financial flexibility.
Tesla’s Long-Term Assets
According to the Q4 2020 quarterly filing, Tesla long-term or non-current assets was roughly $25.4 billion, making up about 49% of the company’s total assets.
Of all the assets in this category, the largest component went to the Property, Plant and Equipment which was valued at nearly $13 billion as of Q4 2020.
The Solar Energy System took 2nd place and was valued at $6 billion.
The Solar Energy System is a tangible asset that generates recurring leasing revenue for Tesla.
Similarly, the Operating Lease Vehicles, valued at around $3 billion, is another tangible or fixed asset that produces recurring leasing revenue for Tesla.
These are high-quality long-term assets that provide immersed economic benefits for the company in the long run.
Chart Of Tesla’s Long-Term Assets
The chart above shows Tesla’s quarterly long-term assets from fiscal 2015 to 2021.
The long-term assets may have grown at a slightly lower rate than the current assets.
Nevertheless, Tesla’s long-term assets clocked at $33 billion as of 2021 3Q, an all-time high for the company.
Also worth pointing out is that Tesla’s long-term assets grew quite significantly in fiscal 2021, suggesting that the company has acquired more long-term assets in its balance sheets.
As mentioned, Tesla’s long-term assets consist of tangible and revenue-generating assets such as operating leases and property.
These are valuable assets to the company and the growing trend in long-term assets is a good indicator that the company is doing well financially.
Chart Of Tesla’s Tangible Assets
Tesla’s tangible assets look at the company’s fixed or physical assets such as the property, plant and equipment as well as the operating lease right-of-use assets.
These are properties owned and leased by Tesla, including land, offices, warehouses, factories, machinery, etc.
This category of assets helps Tesla to house employees, produce cars and make batteries and is an indicator of an expansion if it is growing.
According to the chart, Tesla’s total tangible assets have been on a rise and reached as much as $19 billion as of fiscal 3Q 2021, a record high for the company.
The growing trend of tangible assets indicates that Tesla has been expanding.
Therefore, it’s good to see that this category of assets has been growing.
In short, Tesla has been acquiring factories, machinery, land, offices, warehouses, etc. when it is expanding its operations.
Chart Of Tesla’s Operating Lease Vehicles
Tesla’s operating lease vehicles assets are another category of long-term assets that relate to the company’s leasing revenue.
In this aspect, Tesla is the lessor whereas its customers are the lessees. Tesla leases its vehicles such as the Model 3 and collects recurring leasing revenue from these leased assets.
However, there was a sudden decline in the asset values in 1Q18. The decline was attributed to the change in accounting standards in which a portion of this asset was re-classified to revenue immediately upon the adoption of the new standards.
Thereafter, Tesla’s operating leased vehicles’ assets have been on a rise and reached a new high of $4.2 billion as of fiscal Q3 2021.
The increase in this asset category means that Tesla’s leasing revenue will also be increasing.
Therefore, the rise in this asset class is another good indicator that Tesla’s businesses have been doing quite well.
Chart Of Tesla’s Solar Energy Systems
Similarly, the Solar Energy System is another type of fixed or hard asset that generates recurring leasing revenue for Telsa.
This category of assets has to do with Tesla’s solar energy generation systems that are built and then leased to its customers under the Power Purchase Agreement (PPA).
Again, the solar energy system is another type of cash-producing asset that may provide clues about where Tesla’s solar business is heading in the future.
Accordingly, Tesla’s solar energy systems assets have been on a decline in the last 3 years after reaching its peak in 1Q 2018 at nearly $6.4 billion.
As of 2021 3Q, Tesla’s solar energy systems have declined to only $5.8 billion in value, a new low for the company.
For your information, the decline in value of this asset has been mainly attributed to the depreciation charge against this asset all these years.
While depreciation charges have been recorded against this asset class, Tesla probably has not been leasing new solar energy systems over the years and thereby, causing the decline in this asset class.
Additionally, the unprofitable operations in the energy segment also may have contributed to the decline in this asset class.
For whatever reasons, the declining solar energy systems assets do not bode well for the energy sector and investors probably should keep track of this asset class from time to time.
Chart Of Tesla’s Asset Turnover Ratio
The asset turnover ratio measures Tesla’s asset utilization efficiency. The higher the ratio, the better the asset usage is.
Here is the equation that is used to calculate the asset turnover ratio:
Assets Turnover Ratio = (Trailing 12-Months Revenue / Total Assets) x 100%
The following chart shows Tesla’s asset turnover ratio from fiscal 2015 to 2021 on a quarterly basis.
According to the chart, Tesla’s asset turnover ratio has steadily risen since 4Q 2016 after trending down substantially in 2015.
The declining ratio in 2016 was largely due to the acquisition of SolarCity in which a significant amount of assets were added to Tesla’s balance sheets.
However, the ratio began its meteoric rise from fiscal 2016 to 2021, hitting a record high of more than 80% as of fiscal 2021 Q3.
At a ratio of 80%, Tesla generates about $0.80 dollar of sales for every $1 dollar of assets, which in my opinion is pretty extraordinary.
Comparing this figure with that of General Motors, Tesla’s result was much better off.
For your information, GM’s asset turnover ratio was significantly less than 80%.
Chart Of Tesla’s Return On Assets Ratio
Tesla’s return on assets ratio has been quite extraordinary over the years as seen in the chart above.
For example, Tesla’s return on assets ratio has been on a rise and it has turned around from negative to positive figures, indicating that the company has started to generate values for shareholders when the ratio is positive.
As of fiscal 3Q 2021, Tesla’s return on assets ratio clocked at 8%, a record high for the company.
This figure was nearly twice as much as that of General Motors in fiscal 3Q 2021.
GM’s return on assets ratio was only 4.4% as of fiscal 3Q 2021.
Since Tesla’s return on assets ratio has been much better than that of GM, Tesla’s asset usage is far better off than General Motors.
Tesla’s total assets have been on a rise, reaching an all-time high at nearly $60 billion as of fiscal 2021 3Q.
The expansion of Tesla’s businesses globally has made the growth of the company’s total assets possible in the last several years.
Therefore, Tesla’s total assets have been growing and the growth indicates that the company’s operations have been expanding as well.
Similarly, Tesla’s long-term assets consist of mostly cash-generating assets such as operating leased vehicles and solar energy systems, which provide the company with stable leasing revenue in the long run.
On the other hand, Tesla’s current assets type was mostly in cash or highly liquid assets such as cash and cash equivalents.
As of fiscal 3Q 2021, Tesla’s long-term and current assets have reached all-time highs at $33 billion and $25 billion, respectively.
From the asset turnover ratio, Tesla uses its assets quite efficiently, judging from the improving ratio which reached 80% as of 3Q 2021.
Also, Tesla’s return on assets ratio has been on a rise and was double the figure of General Motors as of Q3 2021.
Between fiscal 2019 to 2021, the expanding asset base coupled with the improving ratios have turned Tesla’s stock into a multi-bagger stock where the company’s market valuation exceeded $1 trillion as of 2021.
References and Credits
1. All financial figures in this article were obtained and referenced from annual and quarterly filings which are available in the following link: Tesla Earnings Releases.
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