What Is Tesla’s Organizational Structure?

Tesla
Organizational Structure In A Nutshell
Business / By Gennaro Cuofano / February 20, 2023
Tesla is characterized by a functional organizational structure with aspects of
a hierarchical structure. Tesla does employ functional centers that cover all
business activities, including finance, sales, marketing, technology,
engineering, design, and the offices of the CEO and chairperson. Tesla’s
headquarters in Austin, Texas, decide the strategic direction of the company,
with international operations given little autonomy.

Understanding Tesla’s organizational structure

Tesla is an automotive company like no other, headed by the enigmatic Elon
Musk and consistently pushing the boundaries of what many in the industry
believe is possible. As a result, it should come as no surprise that
the organizational structure of the company is more difficult to define when
compared to its peers.

Musk provides little information on how the organization is structured or on

the executives that make up Tesla’s senior management. He has made
comments in the past that speak of a desire to incorporate a
flat organizational structure – a desire no doubt reinforced by his inability to
delegate. Indeed, according to a report published by tech news site The
Information in 2018, Musk had no fewer than 29 executives reporting
directly to him.

From what information does exist, it is likely Tesla uses a dominant

functional organizational structure. For instance, there may be a group of
employees structured around sales with another structured around
engineering. The company may also exhibit other structures or indeed no
structure whatsoever, with some former employees noting there was very
little bureaucracy or politics in the workplace. To speak to someone from
another department, for example, all they needed to do was walk over there
and start a conversation.

A lack of structure can also be seen in the way Musk refers to himself as
“Technoking” of Tesla to demonstrate how little importance he places on the
title of CEO.

Function-based hierarchy
As hinted at earlier, Tesla does employ functional centers that cover all
business activities. These include finance, sales, marketing, technology,
engineering, design, and the offices of the CEO and chairperson. Functional
team heads form the core of Tesla’s centralized control at its headquarters in
Austin, Texas, with international operations given little autonomy.

Each center, in turn, supports two key corporate divisions:

1. Automotive – which incorporates the design, production, sales, and

leasing of electric vehicles and environmental offset credits.
 2. Energy Generation and Storage – a much smaller segment that
deals with the design, production, installation, sales, and leasing of
solar energy generation products. This also includes relevant
environmental incentives and credits.
In terms of financial reporting, Tesla is also comprised of four geographical
divisions:

1. United States.
2. China. 
3. Norway, and
4. Other.
Key takeaways:
Tesla is characterized by a functional organizational structure with
aspects of a hierarchical structure. Musk’s preference to avoid
delegation means the company embodies characteristics of a flat
structure with a higher ratio of subordinates to managers. In certain
scenarios, Tesla may exhibit flexible or very little structure
whatsoever.
 With that said, Tesla’s dominant organizational structure is
functional. One group of employees, for example, may be structured
around sales with another structured around engineering.
 Functional heads are based in Austin, Texas, and control most
aspects of the company’s domestic and international operations.
Each functional group supports two key corporate divisions with
financial reporting also occurring in four additional geographic
divisions.
Read Next: Organizational Structure.

Read Also: Tesla Business Model, Tesla Competitors, Tesla Mission

Statement and Vision Statement, Who Owns Tesla, How Does PayPal
Make Money?, Elon Musk Companies, Who Is Elon Musk.

Read Also: Tesla Business Model

Related to Tesla
Tesla Business Model

Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where
cars are manufactured and the Gigafactory which produces the battery packs and stationary
storage systems for its electric vehicles, which are sold via direct channels like the Tesla online
store and the Tesla physical stores.
How Does Tesla Make Money?
In 2022, Tesla generated $81.46 billion in revenues. Tesla’s business model primarily relies on
automotive sales, $71.46 billion (almost 88% of the total revenues); services/others followed
with over $6 billion; energy generation and storage generated over $3 billion in revenues.
Tesla Cost Structure
Automotive sales are the most critical segment for Tesla, with over $71.4 billion in revenue from
automotive parts; most of the gross profits come from automotive sales, with over $20 billion in
gross profits, or a 28.5% gross margin.
Tesla Marketing Strategy
Tesla doesn’t have an official advertising budget to spend on budget, as it has almost been null
over the years. Indeed, Tesla leveraged a combination of Elon musk’s ability to generate
significant media coverage and build a product that sold via word of mouth and directly to
consumers.
Tesla Revenue Per Employee
According to a FourWeekMBA analysis, in 2022, Tesla’s revenues per employee were $637,144,
growing from $542,079 in 2021.
Is Tesla Profitable?
Tesla was profitable in 2022, and it generated $12.55 billion in net profits. Tesla has been
profitable since 2020. Indeed, Tesla generated $862 million in net profits in 2020. And it further
generated $5.6 billion in net profits in 2021.
Tesla Profit Margin
Telsa’s profit margins moved from negative 3.15% in 2019 to over 15% in 2022. As Tesla scaled
up manufacturing and improved its economies of scale (with new facilities) and scope, the
company became extremely profitable by 2022.
Tesla Profit Margin Per Car
Tesla’s profit margin per car in 2022 was $9580, compared to over $6000 in 2021 and over
$1700 in 2020. As Tesla was working toward mass manufacturing in 2020, the company’s
profitability per car has increased slightly.
Tesla R&D Strategy
Tesla R&D’s costs have doubled in absolute number, from almost $1.5 billion in 2020 to over $3
billion in 2022. Yet they have decreased as a percentage of revenue, from 5% in 2020 to 4% in
2022. These R&D expenses primarily comprise costs associated with personnel for teams in
engineering and research, manufacturing engineering and manufacturing test organizations,
prototyping expense, contract, and professional services.
Tesla Market Cap vs. Revenue
In the peak of 2020 and 2021, Tesla reached a market cap revenue multiple of 21x and 18x,
respectively-. This means that Tesla was valued at 21X over its revenues in 2020 and 18X over
its revenue in 2021. By the end of 2022, this multiple decreased to 4.7X.
Tesla Production
Tesla Production vs. Delivery
Who Is Elon Musk
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene,
started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in
1999, he made $22 million, which he used to found X.com, which would later become PayPal,
and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other
companies like Tesla (he didn’t start it but became a major investor in the early years) and
SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass
manufacturing electric car maker.
Who Owns Tesla
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the
stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%),
FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and
Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder
and CEO of Oracle), with a 1.7% stake.
History of Tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the
company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as
CEO of the company. Tesla would go through many near-death experiences until 2018. And yet,
by 2021, Tesla will become a trillion-dollar company.
Tesla Business Model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where
cars are manufactured and the Gigafactory, which produces the battery packs and stationary
storage systems for its electric vehicles, which are sold via direct channels like the Tesla online
store and the Tesla physical stores.
Tesla Competitors
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise
companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors,
Toyota, and more. At the same time, Tesla is an electric energy production and storage company
(SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous
driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving
software.
Real-Time Insurance
A real-time insurance business model enables Tesla to build its insurance arm by dynamically
adjusting the premiums based on real-time driving behavior. Reduced insurance premiums
hooked with the leasing arm enable Tesla to scale its demand side of the business.

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Reputational Risk: Definition, Dangers,
Causes, and Example
By 
WILL KENTON
 

Updated December 05, 2022

Reviewed by 
THOMAS J. CATALANO
Fact checked by 
PETE RATHBURN

What Is Reputational Risk?

Reputational risk is a threat or danger to the good name or standing of a business or entity.
Reputational risk can occur in the following ways:

 Directly, as the result of the actions of the company

 Indirectly, due to the actions of an employee or employees
 Tangentially, through other peripheral parties, such as joint venture partners or suppliers

In addition to having good governance practices and transparency, companies need to be socially
responsible and environmentally conscious to avoid or minimize reputational risk.

KEY TAKEAWAYS

 Reputational risk is a hidden threat or danger to the good name or standing of a business
or entity and can occur through a variety of ways.
 The biggest problem with reputational risk is that it can erupt out of nowhere and without
warning.
 Reputational risk can pose a threat to the survival of the biggest and best-run companies
and has the potential to wipe out millions or billions of dollars in market capitalization or
potential revenues.

Understanding Reputational Risk

Reputational risk is a hidden danger that can pose a threat to the survival of the biggest and best-
run companies. Often the risk results in outcomes not easily measured; however, it can adversely
affect a company's profitability and valuation. It can wipe out millions or billions of dollars in
market capitalization or potential revenues and can occasionally result in a change at the
uppermost levels of management.
Reputational risk can also arise from the actions of errant employees, such as egregious fraud or
massive trading losses disclosed by some of the world's biggest financial institutions. In an
increasingly globalized environment, reputational risk can arise even in a peripheral region far
away from home base.

In some instances, reputational risk can be mitigated through prompt damage control measures,
which is essential in this age of instant communication and social media networks. In other
instances, this risk can be more insidious and last for years. For example, gas and oil companies
have been increasingly targeted by activists because of the perceived damage to the environment
caused by their extraction activities.

It can be a time-intensive process to monitor for online activity such as negative reviews that can
jeopardize a company's reputation. Online reputation management (ORM) software can help
companies track what consumers say about a brand on review sites, social media, and search
engines. Many of these solutions allow you to use one dashboard to look at and respond to
reviews.

Example of Reputational Risk

Reputational risk exploded into full view in 2016 when the scandal involving the opening of
millions of unauthorized accounts by retail bankers (and encouraged or coerced by certain
supervisors) was exposed at Wells Fargo.1

The CEO, John Stumpf, and others were forced out or fired. Regulators subjected the bank to
fines and penalties, and a number of large customers reduced, suspended, or discontinued
altogether doing business with the bank.2 Wells Fargo's reputation was tarnished, and the
company has had to rebuild its reputation and its brand.3