0

Is Tesla, Inc. (TSLA) stock halal to invest in?

Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers electric... Read More

Report Summary

  • Only a non-material part of business's revenue comes from Haram.
  • Interest is not used while running the company.
  • The company has a substantial positive impact on the environment, society and governance.
What are Halal Investors' Comfort Levels?
Our Comfort Levels are based on our analysts’ latest review of a company's business, finances, and Environmental, Social and Governance (ESG) Impact. Our reports are not meant to be understood as a religious ruling (fatwa). Rather, they represent our best efforts in trying to identify whether a company is engaged in anything forbidden in Islam (haram) and to what extent. Based on our analysis, we determine our Comfort Level with investing in the company. We encourage readers to let us know if we missed anything in the comments and to voice their agreement/disagreement by leaving a thumbs up/down. Read more about our methodology.

Business Commentary


Tesla generates its revenue from four business segments which are:

  1. Automotive sales

  2. Automotive leasing

  3. Services & other revenues

  4. Energy generation & storage

As of Q1 2021, Tesla's business segments contributed to revenue in the following proportions:

Revenue Breakdown Q1 2020

Revenue Breakdown Q1 2020

Services & Other Revenues

The “Services and Other Revenues” business segment generates revenue from the following activities:

  1. Repair and maintenance services

  2. Extended service plans

  3. Sales of merchandise

  4. Sales of used Tesla vehicles

  5. Sales of electric vehicle components to other manufacturers

  6. Sales of non-Tesla vehicle trade-ins

Tesla Tequila:

Halal Investors is aware that Tesla, from time to time, sells limited quantities of Tequila as a gimmick. While the word "Tequila" is never mentioned in Tesla's quarterly report, we suspect revenue from its sale is being lumped in with the "Services and Other Revenues" business segment under "Sales of merchandise".

In light of the many other contributors to "Services and Other Revenues", Halal Investors estimates sale of Tesla Tequila to represent less than 1% of Tesla's overall revenue.

Tesla Leasing:

Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months.

Leasing (long-term rental contracts) are not forbidden in Islam and are not the same as interest-bearing debt.

Some lease-to-own contracts (with the obligation to buy at the end) may include components of interest.

However, Halal Investors estimates the bulk of revenue from Tesla's leasing contracts, itself only 2.9% of Tesla's total revenue, to be halal.

Conclusion:

Halal Investors finds only a non-material part of Tesla's revenue to come from haram.

Financial Commentary


According to the company’s Q1 2021 financial statements, the percentage that interest expense made up of total revenues was only 1%, at the same time, the company had an almost negligible interest income contribution to overall income.

Tesla Interest Income and Expense

Tesla Interest Income and Expense

Based on the aforementioned, Halal Investors finds Tesla's use of interest in its operations to be minimal.

ESG Commentary


Impact on the Environment

Tesla is leading the world's transition to sustainable transport and sustainable sources of energy.

The environmental impact of zero-emission transport and energy products, like the products that Tesla produces and sells, is undeniably more positive than the greenhouse gas-emitting alternatives.

Average Lifecycle Emissions in the U.S.

Average Lifecycle Emissions in the U.S.

Moreover, none of Tesla's scrapped lithium-ion batteries go to landfills, 100% are recycled. Electric vehicles are not only important due to reduction of CO2 in the atmosphere, but also due to reduction of poisonous gases around us. Pollutants cause about 4.2 million deaths every year globally. According to researchers, such pollutants cause more premature deaths than smoking or infectious disease. Electric Vehicles not only reduce the total carbon footprint, but also help to reduce city pollution.

Safety

In 2019, a Tesla vehicle with Autopilot engaged in the U.S. experienced just 0.3 accidents per million miles driven while the U.S. average was ~7x higher at 2.0 accidents per million miles driven. Even in cases where only active safety features were engaged, Tesla vehicles had a ~4.5x lower collision rate than the U.S. average in 2019.

Number of Accidents per million miles

Number of Accidents per million miles

Fire Safety

From 2012 to 2019, there has been approximately one Tesla vehicle fire for every 175 million miles traveled. By comparison, data from the National Fire Protection Association (NFPA) and U.S. Department of Transportation show that in the U.S. there is one ICE vehicle fire for every 19 million miles traveled.

Number of Vehicle Fires

Number of Vehicle Fires

Tesla also manufactures a unique set of energy products that enable homeowners, businesses and utilities to produce and manage renewable energy generation, storage and consumption.

On the other hand, the company doesn’t perform well, when compared to its peers, regarding water conservation and workplace health and safety (censible.com). Additionally, according to Grin.com, Tesla’s employees face significant safety risks during production; however, the company started taking various actions in order to prevent injuries in its factories. 

On the aggregate, from the aforementioned, Halal Investors finds Tesla to have a substantial positive impact on society and the environment.

Agree or disagree with our halal report cards? Share your feedback.

Loading...

Want our latest report cards?

Get the latest reports & insights from Halal Investors. Sign up for our newsletter.

Community Posts

Learn

HI

Halal Investors

Do good & do well. Learn and contribute to the halal investors community.