Impact Investing Mid-term Assignment

Introduction:

Tesla, Inc. was founded in July 2003 by American entrepreneurs Martin Eberhard and Mark
Tarpenning. In February 2004, Tesla raised $7.5 million with the help of Series A funding,
out of which $6.5 million was invested by Elon Musk. With this investment Elon Musk
became the largest shareholder of Tesla and the chairman of the board of directors.

Tesla wanted to prove that people did not have to compromise on anything when driving an
electric vehicle and focuses on the mission of boosting the world’s transition from non-
renewable energy to sustainable energy. The faster the shift from fossil fuels to zero
emission, the better for the environment and humans. To contribute more towards this
thought of zero emission, Tesla also manufactures energy solutions like solar panels,
powerpack, Powerwall, that help in generation, consumption, and storage of renewable
energy. All these energy solutions are the elements contributing towards Tesla’s mission.

Structure of Tesla:

Like any other organization, Tesla’s overall

functioning and more importantly its effectiveness
depends on the organizations structure and its ability to
implement new strategies that bring in growth and
improvement. With increasing growth comes more
challenges like applying strategies for competitive
advantage. The corporations structure helps top
management to respond to these challenges efficiently.
Tesla adopts a significant function-based structure where a group of functional departments
(among which a few are heads of the corporation) overlook all the operations.

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Rithvik Shetty, 19020363, IBM’19
Tesla aims to sustain a strong managerial control over the functions that affect the operations.
Tesla’s corporate structure enables the head departments to control operations and provide
decisions. It gives them a centralized control over the corporation.

This structure provides an advantage to Tesla of smoother and easier implementation of new
strategies including other geographical strategies as the head department makes most of the
decisions for all other locations. The regional division helps in making regional strategies and
market tactics.

A structural reform that I would suggest in this case would be increasing the independent
decision-making ability of regional divisions because a centralized control resists immediate
decision-making, and increases the response time for catering an issue.

Tesla’s Finance:

As mentioned earlier under the heading ‘Introduction’ Tesla used Series A funding and raised
$7.5 million. Tesla now has become one the of the world’s largest electric vehicle
manufacturer and most of its revenue is generated from that sector. In the second quarter of
2021, net income for tesla increased 813.2%. Their revenue increased to $12billion. The
gross profit increased 127.6% and was $2.9 billion. It exceeded the $1 billion mark in terms
of net income. Its market capitalization went from $76 billion to $669 billion.

Measure and Manage impact:

As Tesla is majorly involved in the

production of vehicles, it is extremely
important to determine the ways in
which the vehicle impacts the
environment. Not just the vehicles
lifecycle impact after manufacturing,
but it is also necessary to account its
impact while manufacturing and
recycling.

Tesla produces all electric vehicles that do not have a traditional combustion engine and does
not need fuel to run. Electricity generation and its transportation are major contributors of
greenhouse gas emissions. To avoid this Tesla partially relies on solar power and batteries.
Measuring environmental impacts is done by using statistics of the number of vehicles Tesla
sold, and the amount of distance they travelled. This data is compared with the traditional
combustion vehicles that how much they would emit if travelled the same distance. As Tesla
also produces other energy solutions, they measure the amount of energy produced as
compared to the amount used. For example, in 2018 Tesla Solar energy generated 13.25tWh
from which 5.26tWh was used.

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Rithvik Shetty, 19020363, IBM’19
The most important part of the Tesla vehicle is the battery and
plays a major role in Tesla’s impact management. When a
vehicle reaches the end of the lifecycle, what happens with the
battery? It is possible for Tesla to manage this because, the
materials inside a lithium-ion battery are recyclable and can be
refined to recover valuable elements that can be used again.
A better way to be more impactful towards the environment
can be increasing the battery’s longevity. This can be done
either by a new innovation of a better battery and also by
continuous updates of the cars software that increases
efficiency and providing after sales services like battery
servicing.

An increasing production volume creates a more complex process that generates more wastes
that need to be catered by Tesla. For example, new assembly factories need parts and material
to be sent. This increases packaging waste which is unnecessary. Therefore, Tesla tries
building localized factories. This not only reduces waste and cost of transportation but also
creates jobs in the region. Tesla designs innovative and practical factories that help in
reducing excess waste and improve the flow of materials.

Is it an Impact investment?

A way of judging an investment in any organization can be in many ways. Analyzing the
amount of revenue an organization generates from an impact intended work will clearly show
the organizations effectiveness towards being sustainable. The basis of judgment in this case
ca be done by seeing whether Tesla’s impact work is aligned with UNs sustainable
development goals (SDG).
The year 2020 was undoubtedly a very good year for Tesla. It reached a mark of producing 1
million vehicles annually and its stock price skyrocketed and market capitalization drastically
increased. It is worth more than the biggest automobile manufacturers combined.
As established earlier, Tesla is an all-electric vehicle it evidently is contributing towards
reducing environmental impact, but this alone cannot be used to declare Tesla as an impact
investment. Tesla has caused a few disagreements like their issues with the labor force. These
yellow flags were slowly solved or changed into minor problems. Tesla’s sustainable impacts
are amplified as the market for electric vehicles continuous to grow. This aligns with the
SDG of ensuring access to reliable, affordable, and sustainable energy. As now Tesla focuses
on building its most affordable car, it will not only increase its sales but also be accessible for
all.
As an impact investor, both the ends of the spectrum are included when investing in Tesla.
On one hand it will generate positive returns, and on the other hand it contributes to the
production and usage of sustainable energy. Therefore, considering all the above-mentioned
analysis of Tesla, it can be considered as an impact investment.

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References:

1. “About Tesla.” Tesla, https://www.tesla.com/about. 

2. “Tesla, Inc..” Encyclopædia Britannica, Encyclopædia Britannica, Inc.,

https://www.britannica.com/topic/Tesla-Motors. 

3. Lee, Dave. “Tesla: Elon Musk Reveals Latest 'Masterplan'.” BBC News, BBC, 21 July
2016, https://www.bbc.com/news/technology-36852725. 

4. Farley, Alan. “How Tesla Makes Money: Most Revenue Comes from Electric Car
Sales.” Investopedia, Investopedia, 8 Oct. 2021, https://www.investopedia.com/tesla-
s-largest-revenue-source-is-automotive-sales-4799069. 

5. Hh. “Tesla Motors Inc: An Organisational Performance Analysis.” ToughNickel,

ToughNickel, 20 Nov. 2017, https://toughnickel.com/industries/Tesla-Motors-Incs-
organisational-performance-analysis. 

6. “Www.tesla.com.” Impact Report 2020, https://www.tesla.com/ns_videos/2020-tesla-

impact-report.pdf. 

7. “2019 Impact Report.” Impact Report 2019, https://www.tesla.com/2019-impact-

report. 

8. “Electric Cars, Solar & Clean Energy | Tesla.” Impact Report 2018,

https://www.tesla.com/ns_videos/2018-tesla-impact-report.pdf. 

9. “Tesla, Inc..” Wikipedia, Wikimedia Foundation, 19 Oct. 2021,

https://en.wikipedia.org/wiki/Tesla,_Inc. 

10. Meyer, Pauline. “Tesla Inc.'s Organizational Structure & Its Characteristics
(Analysis).” Panmore Institute, 8 Sept. 2018, http://panmore.com/tesla-motors-inc-
organizational-structure-characteristics-analysis. 

11. “Goal 7 | Department of Economic and Social Affairs.” United Nations, United

Nations, https://sdgs.un.org/goals/goal7. 
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Rithvik Shetty, 19020363, IBM’19