Tesla, known around the globe for its iconic electric vehicles, is back among the ten largest companies in the world, measured by market capitalisation. While the automotive segment accounts for 85% of the company’s revenue, its energy generation and storage business grew 74% in the latest quarter, reaching a contribution of 6% in total sales.
In this article, we’ll share tips for choosing a stock broker to buy Tesla stock from South Africa, provide a step-by-step guide to help you make your first purchase, highlight exchange-traded funds (ETFs) with high exposure to Tesla stock, delve deeper into the reporting structure of Tesla, and more!
How to buy Tesla stock (Step-by-step guide)
1. Choose a good stock broker
Since Tesla is one of the ten largest companies in the world, you can choose from a myriad of brokers to help you make the purchase. That said, consider the terms each broker offers and ensure the broker you pick works with South African residents. Below we highlight four low-cost brokers who work with South Africans and are suitable for beginner investors:
|Broker||Stock commission, US||Minimum Deposit||Regulators||ZAR available as base currency||FX conversion fees|
|Interactive Brokers||$0.005 per share with a minimum of $1.00||$0||FINRA, SIPC, SEC, CFTC, IIROC, FCA, CBI, AFSL, SFC, SEBI, MAS, and MNB||No||0.002% with a minimum of $2.00|
|XTB||$0 per US CFD share||$0||FCA, KNF, CySEC and FSC||No||0.5%|
|IG||$0.02 per US CFD share with a minimum of $15.00||$0||ASIC, FCA, NFA, MAS, FSCA, FINMA, FMA||Yes||0.5%|
|Pepperstone||$0.02 per US CFD share||$0||ASIC, SCB, CySEC, FCA, BaFin, and DFSA||No||Markup on liquidity provider (not specified)|
As you can see from the table above, IG is the only broker that offers the South African rand (ZAR) as a base currency, while the other brokers need to fund your account in USD or another base currency. Whatever base currency you choose, your Tesla trades will be executed in USD, meaning you will incur foreign conversion fees from the ZAR/USD exchange rate (either when you exchange ZAR/USD to fund your account with USD or upon executing the trade with another currency such as ZAR).
You can learn more about the individual broker specifics in our dedicated article here.
2. Open and fund your account
Once you have weighed the pros and cons of each broker, you are all set to open an account. The process usually takes a few days as the broker verifies your identity. When the process is finalised, you must deposit money into your account.
3. Place a “Buy Order”
If you have found an online broker that suits your needs, managed to open an investment account, and made the initial deposit, you are all set to buy your stock. All you have to do is find the share within your chosen broker and place a buy order. For this example, we will use the mobile version of Interactive Brokers GlobalTrader:
a) Search for Tesla stock ( or the ticker “TSLA”) and select it from the list:
b) Click “Buy”:
c) Choose the order details. Now, it’s time to choose how to invest:
The three most important order parameters to set are:
- Type of order: By default, Interactive Brokers sets your order type as Limit, short for Limit order. This is good since it allows you to set a maximum price at which you are willing to buy the shares. The alternatives are a Market order, which will purchase your shares at the best available price immediately, and a Stop order, which is a more sophisticated order – it will enter a market order once a specific stop price is reached (in our example above, you may set the stop price anywhere below $258.08, for instance at $245).
- Limit price: Assuming you kept the “Limit” as the type of order, you need to set the maximum price you are willing to pay per share. If you use Market order, you do not need to fill this and will buy at the best available Ask price. If you use a Stop order, you need to set a Stop price.
- Shares: Here, you define the number of shares you want to purchase; alternatively, you may set a dollar amount instead.
Additionally, Interactive Brokers Global Trader allows you to set two more parameters that are not as important:
- TIF: Short for time in force. This option shows how long your order will remain active. It is set to Day by default, meaning it will get cancelled unless executed by the end of the day. The alternative is Good ‘Til Cancel, which means the order will be active for up to 90 days or until you cancel it manually.
- Market Hours: This option shows in which time interval your order will be valid. The default option is Extended, meaning your order participates in trading during regular trading hours, as well as before and after the regular opening hours of the exchange. However, while Tesla is one of the most liquid shares, trading in extended hours is often associated with larger bid-ask spreads and illiquidity, especially for smaller companies. Hence, you may want to change the default option to Regular, meaning your order participates in trading only during the regular opening hours of the exchange, when trading is most liquid. The last option is Overnight, which means your order only participates in trading after regular hours but before the exchange opens on the next day.
d) Preview the order: Finally, it is a good idea to click Preview and double-check everything is in order. A new window will appear:
e) Place the order: Once you have double-checked the order parameters, you may close the preview window (tap anywhere outside it, or click Cancel) and drag Slide to Buy to the right to finish the process.
ETFs – an alternative way to gain exposure
ETFs allow you to gain exposure to a dozen or even hundreds of companies with a single investment. ETFs can be a good option if you:
- Want to complement your Tesla position with similar companies;
- Want to limit your portfolio volatility (ETFs invest in many companies operating in different lines of business, limiting your exposure to idiosyncratic risks);
- Are interested in following a specific theme in your investments (technology stocks, consumer discretionary stocks, etc.);
Some ETFs you may want to consider are:
- Consumer Discretionary Select Sector SPDR Fund (ticker XLY) tracks 52 stocks in the Consumer Discretionary sector, although it is heavily skewed to large capitalisation companies. The ETF distributes dividends, and the expense ratio stands at 0.10%. The ETF’s largest holding is Amazon at 24.23%, followed by Tesla at 19.07% and Home Depot at 4.71%.
- Invesco QQQ (ticker QQQ) is a broad technology ETF following the Nasdaq-100 index. The ETF distributes dividends, and the expense ratio stands at 0.20%. The weight of Tesla in the ETF is 2.98%, ranking it at 9th position, with Apple at 11.42% and Microsoft at 9.36%, the largest ETF components.
- Global X Autonomous & Electric Vehicles ETF (ticker DRIV) tracks 75 companies that are likely to benefit from the wide adoption of electric and autonomous vehicles. The ETF distributes dividends, and the expense ratio stands at 0.68%. The weight of Tesla in the ETF is 2.87%, ranking it at 6th position, with Alphabet at 3.54% and Nvidia at 3.43%, the largest ETF components.
Tesla’s Financials and Performance
Once you have purchased Tesla shares, keeping track of how the company and its competitors are doing is a good idea. Doing so, you will get greater insight into whether to add to your position, hold it, or sell it to pursue better opportunities elsewhere.
Apart from the investor relation section (available here), there are specialised platforms to help you understand how Tesla is doing from a financial perspective. One platform you can use is Koyfin – you can access Company overviews, Key statistics, Financials, Transcripts, and more! Get a 20% discount on Koyfin.
For example, Koyfin allows you to get a quick handle on how the company’s revenues and margins (as measured by gross profit) are doing:
While such platforms cannot substitute your own research 100% of the time, they can be a very useful tool in the research process, saving you time and providing new investment ideas.
The go-to place to find up-to-date information on the company is its investor relations section, available here. Below, we will provide a quick overview of the company’s operations.
In 2017, the company changed its name from “Tesla Motors” to simply ”Tesla” to highlight its other businesses. Case in point, Tesla now reports results in three main revenue lines:
- Automotive (85% of revenues)
- Services and other (9% of revenues)
- Energy generation and storage (6% of revenues)
Automotive sales primarily consist of vehicle revenue, but also include regulatory credits (credits which are sold to other automakers to help them meet fuel efficiency standards) and vehicle leasing. Automotive is Tesla’s highest gross margin segment, at ~20% most recently, although competition in the electric vehicle market is only set to increase, putting pressure on profits.
Services and others incorporate revenue from used vehicle sales, as well as fees paid when utilising Tesla’s network of Supercharging stations. The latter is set to increase its relative contribution in terms of revenue, given Tesla is opening up its network to non-Tesla vehicles. Tesla does not yet disclose the individual gross margin of “Services and other” since the revenue line is part of the greater “Automotive & Services and Other” segment, with a gross margin of 18.2% in Q2 2023.
Energy generation and storage includes the Powerwall (for residential customers) and Megapack (for businesses) energy storage systems and solar energy solutions. The division has delivered substantial margin improvement, with its gross margin of 18.4%, up markedly from the prior-year period (11.2%).
Tesla is also developing technologies such as the Optimus robot, which Elon Musk predicted would be worth more than the car business one day. The company also started production of its Dojo supercomputer in July 2023, which will help it to achieve full self-driving.
Automotive companies traditionally try to run a conservative balance sheet with a net cash position, given the cyclical demand for cars. Tesla is no exception, with its net cash position at around $21.5 billion at the end of Q2 2023.
Despite its low financial leverage, Tesla stock has experienced wild price swings in recent months, changing the value of the business by hundreds of percent in both directions. Thus, you should keep in mind that Tesla shares are more volatile than other automakers, such as General Motors or Toyota.