Tesla Motors Inc Doesn’t Have An Inventory Problem

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) facing inventory problems: such rumors have surrounded the company for quarters now. The rumors continue despite the fact that the company gives detailed information on inventory every quarter. A report from Seeking Alpha by Kasteel Research analyzes the inventory information to prove that there is no such problem with Tesla.

Favorable inventory levels

In the last five quarters, Tesla Motors Inc (NASDAQ:TSLA) has witnessed 19% growth in revenue while the inventory growth rate for the same period is just 6%. For the fourth quarter of 2013, revenue for the company was up 42% compared to a decline on 2% in inventory. The author believes that the trend is expected to continue as demand for Tesla’s electric cars is huge, which is the main reason why the revenues are growing faster than the inventory.

From the inventory detail provided by Tesla, it can be noticed that for the last five quarters, finished goods increased at a rate of 2.6% while the raw materials increased by 3%. Fourth quarter numbers are the most interesting, where raw materials were up by 12.3% and finished goods were down by 32.3%. This according to the author proves that Tesla sells it car at a quick pace.

Tesla production constrained

Also, the electronic vehicle maker expects demand to rise in the future, which is evident from the fact that raw materials have increased from $99.7 million to $184.6 million, in the last three quarters. Since bottoming out in the second quarter of 2013, raw materials have almost doubled to $184.6 million. For the same period, finished goods have remained at similar level from $77.8 million to $69.3 million.

As a percentage of total revenues, finished goods are small very small; signifying that the “Tesla is production constrained at the moment,” according to the author.

Tesla Motors Inc (NASDAQ:TSLA) cars are so popular among the fans that one “can sell it straight forward to the market, without asking for deferred payment,” which is reflected in the accounts receivable column. For Tesla, accounts receivable is only 8% of total revenues for the last quarter, indicating the ability of the company to “receive payment from customers without delays,” according to the author.

Overall, Tesla Motors Inc (NASDAQ:TSLA) has an attractive inventory management that has more of raw materials than finished goods, and much lower inventory write-offs.

About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com