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Tesla Research and Development Spending

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Editor’s Remarks:
It is widely known that Tesla is a loss-making company; in fact, its losses correlate almost perfectly with its R&D expenses. In 2016, the California-based automaker reported an annual loss of $889m, which was more or less equal to how much it spent on innovation that year. This is in line with Tesla CEO Elon Musk’s master plan; in 2006, he announced a 10-year timeframe to build a sports car, then use the proceeds to build an affordable car, before using that money to build a yet cheaper automobile. With Tesla’s much-awaited Model 3 due to start production on July 1st, Musk is on the verge of realising his decade-old vision. Tesla’s R&D expenditure has undoubtedly contributed to its wildly fluctuating share price as the company has raised equity time and time again over the past few years. However, times are changing: the latest equity raise barely dented its share price, which has risen astronomically – and perhaps somewhat paradoxically – since Trump’s election in November from $180 to a 52-week high of $327. Alongside the jump in share price, Tesla has released more information about its autonomous driving software, including a video late last year that showed a driverless car seamlessly navigating Californian roads. Musk recently announced that the company would conduct its first fully autonomous drive from Los Angeles to New York by the end of the year. Evidently, with rocketing shares and unparalleled technology, Tesla’s risky R&D strategy seems to be paying off.

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