Question

what are some specific Market risk (equity, commodities, legal, interest risks) and how it has impacted tesla. what is one of their most successful strategy and major failed strategy?

Answer 1

Market Risk - Market risk is the possibility that an investor will experiencing losses due to overall market performance. Example - If Market goes down the risk of loss in your portfolio is market risk.

There are Few types of Market Risk & their impact on Tesla is explained below: -

a) Equity Risk -  Equity risk is "the financial risk involved in holding equity" in a investment

The risk of falling the share price after your purchase is the equity shares of the company. This may be due to some news or based on the company Performance. The Equity Risk is generally calculated by Standard Deviation. Beta is another relevant risk metric, as it measures the volatility or market risk of a security.

Impact on Tesla - In the month of June 2018, there was any interview with Tesla CEO and he comment "Tesla has cut back on capex projections and slashed 9% of its workforce" This may result in future growth of the company and share prices may fall.

b) Commodities Risk - Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities. (The Risk is mainly that whether the company will able to sell their product in the future market or not. Whether the product will be out of market then what will happen to company)

Impact on Tesla -

Let Assume the government has imposed additional taxes of 500% on purchase of cars to control pollution. Then is may result in sustainable decrease in the company future sale or may affect going concern.

c) Legal Risk: - Legal risk is the risk of financial or reputational loss that can result from lack of awareness or misunderstanding of, ambiguity in, or reckless indifference to, the way law and regulation apply to your business

Impact On tesla:- Tesla cars are ban in Newyork city

d) Interest Risk:-Interest rate risk is the risk that arises for bond owners from fluctuating interest rates.

Impact on Tesla - Tesla has issued bond carrying 4%pa coupon rate for 10 years in the year 2005. But in 2012 the interest rate of similar bond is 2% pa. so the risk here is the rate of interest the company agree to pay now may or may not fall in future is Interest Risk

Most Successful Strategy:- Marketing Strategy

Tesla has made there product as status quo Like other brands BMW, Ford, Mercedes, Volkswagen. Resulting in sales to the customer.

Major Fail Strategy - Cash Burning

Fact:-

Tesla (TSLA) has been burning through cash since its founding. But it kicked that burn into high-gear in 2017 when it began attempting to scale production of its first mass-market product, the Model 3 sedan. Tesla posted a net loss of $2.24 billion in 2017. In Q1 2018, the company posted a net loss of $568 million, with a cash burn of $785 million. That left $2.7 billion in cash on the books going into Q2.