Comparing Tesla With Toyota

Tesla (NASDAQ:TSLA) stock is up by almost 2.5x over the last three months, making it the world’s second most valuable automaker, behind Toyota, which in many respects is the benchmark of profitability and efficiency in the auto industry. In this analysis, we compare Tesla’s key revenue, margin, and operating metrics with Toyota’s.

• Toyota’s automotive revenues stood at about $253 billion in 2019, compared to about $21 billion for Tesla.
• Tesla’s Gross Margins stood at 21% in 2019, down from 25% in 2016, although they remain higher than Toyota’s margins of 17%.
• Tesla’s SG&A and R&D expenses, as a % of revenues, are higher compared to Toyota’s, although they have been declining at a fast pace, as the company scales up its revenues.
• Being a more mature business, Toyota remains well ahead of Tesla in terms of manufacturing efficiency, producing more vehicles per employee, while utilizing its fixed assets and inventory more effectively.

Note: Toyota’s FY ends March, while Tesla’s ends in December. We have excluded numbers from Toyota’s financing business for the purpose of this analysis.

#2. Gross Margins & Operating Expenses

#2.1 Gross Margins

• Tesla’s Gross Margins stood at 21% in 2019, down from 25% in 2016, as the company scales-up production of the lower-priced Model 3.
• However, it is possible that margins will improve going forward, driven by growing volumes and higher automation.
• Toyota’s margins stood at about 17% in 2019.

#2.2 Operating Expenses

• Tesla’s SG&A and R&D expenses, as a % of revenues, are higher compared to Toyota’s although they have been declining at a fast pace, as the company scales up its revenues.

#3. Other Operating Metrics

#3.1 Working Capital Ratios

• Inventory turnover ratio is calculated as the cost of goods sold divided by average inventory. A higher ratio indicates that a company is more efficient in managing its inventory.
• Toyota’s turnover ratio stood at 9x versus 5x for Tesla in 2019.
  Days of sales outstanding is a measure of how quickly a company collects money from its customers. Tesla appears to be ahead of Toyota in this regard, with its receivable collection period standing at 20 days versus 30 for Toyota.

#3.2 Vehicles Delivered Per Full-Time Employee

• We estimate that Tesla has delivered about 9 vehicles per full-time employee over 2019, compared to about 24 for Toyota. (Note that we use total employees for Toyota, including its finance operations)
• However, Tesla should be able to scale-up this metric meaningfully, given that it has been increasingly automating its production facilities.

#3.3 Fixed Asset Turnover & Capital Expenditure

• Fixed Asset Turnover is calculated as revenues divided by average fixed assets and measures how efficiently a company utilizes its assets. A higher number is typically better.
• The Fixed Asset turnover ratio for Toyota stood at 2.7x, versus 1.9x for Tesla, although Tesla’s metric has been trending steadily higher.
• Tesla’s CapEx stood at $1.3 billion, about a tenth of Toyota’s 14 billion in 2019 CapEx.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams| Product, R&D, and Marketing Teams