Business Applying Analytics Techniques Tesla

Using Analytic Techniques to Add Meaning to Data

Tesla Overview

Tesla has been the purveyor of the transition into sustainable energy by manufacturing mainstream electric vehicles in the motoring industry. Tesla operates in two separate segments: automotive and energy generation and storage. The automotive segment involves manufacturing, development, design, sales, and leasing electric cars. This segment also involves rendering services, such as non-warranty after-sales vehicle services, retail merchandise, vehicle insurance, and the sale of used vehicles (Tesla, 2022). The energy generation segment involves manufacturing, installing, and leasing solar energy generation and storage products (Tiwari, 2017). After the company’s IPO, the company’s shares have grown exponentially with growing demand for the Tesla vehicles and increased awareness about carbon emissions from gas-powered vehicles. The changing preferences for electric cars have made Tesla the preferred vehicle of choice for people earning more than $100,000 annually.

After going public in 2010, Tesla shares surged to $23.89, a 41% increase in value, while the initial offering was at $17. A decade later, the stock prices have risen by 4,125 %, with an expansion of the company’s operations and successful launch of vehicles, such as the Model S, Model 3, and the Plaid. In the last two years, the share prices have been highly volatile with the economic unpredictability that the Corona Virus pandemic has caused. The ability to offer high performance and range between recharge compared to some of its competitors, such as V.W., BMW, Ford, and G.M., has led to the acquisition of the leading market share in the electric vehicles segment at 66.3% in the last quarter of 2021 (Tesla, 2022). Notably, this has declined from 79.5% in the last quarter of 2020.

Tesla has had challenges with the production of ordered cars since it operates with a Just-in-time production philosophy, leading to delayed deliveries or releases. The lack of manufacturing capacity to meet the demand for Tesla’s cars has been a core challenge, making companies entering the market segment with a faster production chain pose high competition. There have been continued efforts to expand production with the investment in new manufacturing sites across the globe and an expansion of the distribution network. This expansion led to an increase in Tesla’s credit from $598 million in 2013 to $10 billion in 2018 (McDonald, 2021). The debt-to-equity ratio was 1.63%. Despite the burgeoning debt, the company’s market valuation as of August 2019 was $38.817 billion.

The entry into the electric cars segment by seasoned car manufacturers has created familiarity with customers transitioning from gas to electric cars that Tesla as a new car manufacturer, does not enjoy. However, Tesla holds the largest market share by expanding its product line by acquiring the luxury vehicles market share (Tiwari, 2017). However, the limited access of Tesla cars for less than $100,000 annual income, enhancing the production systems to lower the cost incurred for the production of each car will make its cars more affordable to a larger market.

Graphical Representations of Data

Interpretation of the Scatterplots

Figure 1:Highest Daily Share Price for TSLA, March 11th, 2021-2022

Figure 1 shows a scatter plot of the highest stock prices of Tesla Inc. from March 11th, 2021, to March 2022. The y-axis represents dollar stock prices as the dependent variable and the duration on the x-axis as the independent variable. The scatter plot depicts a highly positive relationship between the highest stock prices and time. The scatter plot is non-linear, with the highest stock prices showing a positive relationship with time. Tesla’s highest stock price was in October 2021. There was a continuous increase in prices until October 2021 from May 2021. The prices were volatile between October 2021 and March 2022. The scatter plot has a strong positive relationship with time, indicating fair volatility in the highest stock prices. There has been a significant climb in the value of stocks and small drops towards October 2021, followed by significant dips in December 2021 and February 2022. There were noticeable outliers in October 2021 and February 2021.

Figure 2: Lowest Daily Share Price for TSLA, March 11th, 2021-2022

Figure 2 reveals a scatter plot of the highest stock prices of Tesla Inc. from March 11th, 2021, to March 2022. The y-axis represents dollar stock prices as the dependent variable and the duration (in months) on the x-axis as the independent variable. The scatter plot depicts a highly positive relationship between the lowest stock prices and time. The lowest stock prices were in May 2021. The prices between March 2021 and May 2021 were dynamic, with a spike in April 2021 and a dip in May 2021. The prices were volatile between October 2021 and March 2022. At the beginning of October 2021, there was a moderately negative downward trend in stock prices, with a dip in December and a slight spike in prices in March 2022. However, there was a continuous downward trend from December 2021 to March 2022. The non-linear relationship between time and the stock prices indicates volatility in the stock prices, with the outliers May 2021 and March 2022.

Figure 3: Histogram of adjusted closing stock prices of Tesla, March 11th, 2021-2022

Figure 3 shows several adjusted closing stock prices falling within equally distributed continuous data ranges. The ranges of the adjusted stock prices are on the x-axis, and the number of instances of prices falling within its ranges is shown on the y-axis. Moreover, the histogram is skewed to the right, indicating that most data points fall within the higher ranges of daily adjusted closing stock prices. This indicates the histogram is positively skewed, with the mean being higher than the median showing slight volatility in the adjusted closing stock prices of Tesla.

Figure 4: Histogram showing the stock volume of Tesla, March 11th, 2021-2022

Figure 3 shows several instances of Tesla’s daily stock volumes being sold and bought on a continuous range of data. The number of stock volumes falling within the ranges is marketed on the y-axis, while the ranges of stock volume are marked on the x-axis. The histogram is skewed to the left, indicating the majority of the daily stock volume data points fall within the lower ranges of the stock volume. This indicates the histogram is positively skewed, with the mean being higher than the median. Since 80% of the data points fall in the lower ranges of the stock volume, the histogram is skewed to the right, indicating unequal distribution and difficulty in speculating the daily stock volume of Tesla.

Descriptive Statistics

Adjusted Closing Stock Prices

The mean of Tesla’s adjusted closing stock process is 807.0315 U.S. dollars which indicates a healthy market standing of Tesla’s stock. The price is indicative of a good performance of the company among its competitors. Further, it is indicative of the company’s stable growth in revenue throughout the year. The median for the period evaluated was 744.305, which indicates the central figure in the adjusted closing stock prices distribution for the period examined, 744.305 U.S. dollars, which is less than the mean with a slightly significant difference. This difference signifies a high incidence of Tesla’s adjusted closing stock prices fluctuation. The adjusted closing stock’s standard deviation is 172.388, representing the volatility in stock pricing that illustrates a high level of risk involved when investing in the stock. The Tesla stock traded at a range as low as approximately USD 600 per share to approximately twice during this period; recently, it traded at approximately USD 800, which indicates the stock nearly round-tripped in the past year. The high standard deviation suggests a high level of risk is prevalent when investing in its shares.

Daily Traded Stock Volume

The mean of Tesla’s daily traded stock volume from March 11th, 2021, to March 2022 is 25,817,505. This volume is large and is indicative of the high liquidity of Tesla’s stock. Companies with a daily traded volume of less than 10,000 are considered low-volume stocks. Tesla’s daily traded stock volume is indicative of the high demand for Tesla stocks; thus, it is a highly valued publicly traded company. The median stock volume is 24,226,900, which is less than the mean and signifies the presence of outliers. This denotes there are significantly higher spikes in the daily tradeable stock volume. The standard deviation is 9,358,742, which indicates high volatility in the data set and signifies a considerable lack of consistency in the volume of Tesla’s stock.

Conclusion

According to Tiwari (2017), Tesla’s presence in the public capital market has been characterized by appreciation in the prices of Tesla stock and growth in the volume of the daily traded stock. The scatter plot indicates a period of steady growth in the adjusted closing prices of the Tesla stock and high volatility from August 2021 to February 2020, followed by a downward trend until March 2022. While the rate of high volatility often depicts a high risk associated with a stock, the economic conditions prevalent during this period were altered by the economic lockdown across the globe to control the spread of the Covid-19 pandemic. In general, there has been an appreciation of the stock from the first to the last period examined.

The effect of the pandemic on the economy is expected to proceed for the next two years, with recovery being expected from 2023 to 2025. The demand for cars overall is expected to recover gradually in this period and more stability in the stock as the economic impact of Covid-19 ease. Therefore, the high volatility in the treads occurred simultaneously with the pandemic. Before the economic lockdown, there was a steady increase in the adjusted closing stocks between April 2021 and October 2021. Consequently, investment in Tesla should be not be informed by the decline high standard deviation since there had been a steady growth between the first quarter and the third quarter of the stock. The adjusted closing stock’s standard deviation is 172.388, indicating asymmetry in the adjusted closing prices’ distribution.

The high volatility of the stock often indicates unexpected earnings by a firm or unfortunate news about the firm. In the case of Tesla stocks, the volatility is caused by the unexpected earnings by the organization as the company market valuation in the past has grown exponentially and has been characterized by such volatility and a steady increase in the price of the stock after that (Amason, 2011). However, there have been concerns about the growing concern about the company’s debt, which the company has been leveraging to expand its production by the construction of new manufacturing plants. To increase the revenue generation in the firm, the company has to employ an innovative approach to production to alleviate the challenges experienced by the customers with delayed deliveries and a high cost that limits the purchase of its products to higher and high-income earners (Tiwari, 2017). Expansion of Tesla’s target market will make its cars and services more accessible to a larger market in the U.S. and overseas. Employing a cost leadership strategy will make it possible to offer premium products at consumer-friendly prices. Notably, Tesla has taken the initiative to construct new manufacturing plants in the U.S. and China.