Tesla, Inc., formerly Tesla Motors, is an American electric-automobile manufacturer. This company was founded in 2003 by Martin Eberhard and Marc Tarpenning and was named after Nikola Tesla, a Serbian-American inventor. Eberhard was the Chief Executive Officer (CEO) and Marc Tarpenning is the Chief Financial Officer (CFO). Funding to opened the company was acquired from different sources, most notably, Elon Musk, a PayPal cofounder, who contributed more than $30 million in Series A funding and served as a chairman of the board starting in 2004 (Gregersen & Schreiber, 2018). Elon Musk, Tesla’s longtime CEO had a mission for the company “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon possible” (Musk, 2018). This vision and mission have become the backbone of the corporation. They aim to provide an affordable, well-designed, fully electric vehicle for mass market consumption.
Tesla’s business model differentiates itself from its’ competitors by forgoing the traditional dealership model used by every other major automaker and instead engaging in direct sales to the end user. This is done for several reasons which include more control over their product and higher revenue per vehicle. Tesla’s organizational structure is both traditional, “considering the company’s managerial focus and control, along with limited operational expansion in the global market. Musk’s leadership effectiveness depends on the corporate structure’s ability to disseminate and support the implementation of new strategies for business growth and improvement.” (Meyer, 2018), and structures its organization in a vertical integration model, owning several steps in the supply chain of the components and use of the vehicles. One of their most ardent challenges is proliferation of charging stations, a crucial component of the infrastructure needed to ensure success of electric vehicles in general, especially considering Tesla’s early rise in a burgeoning industry. In addition to the automotive aspect of their company, Tesla has expanded to include energy storage systems for both homes and businesses.
Initially, because of a high per unit cost associated with production of an initial product coupled with a low economy of scale, Tesla knew its first car would be expensive and decided upon producing a sportscar, the Roadster. “Once Tesla established its brand and had produced and delivered its concept car to the marketplace, it reinforced its business model. Tesla’s business model is based on a three-pronged approach to selling, servicing, and charging its electric vehicles.” (Zucchi, 2021) They also offer the Tesla Rangers, a mobile service technician, and their nationwide range of Superchargers, to facilitate the distribution of electric charging stations across the country, a critical barrier to electric vehicle adoption.
In addition to their vehicles, Tesla also offers home and corporate energy storage products, such as their Powerwall & Megapack energy storage systems, and solar panel roof tiles. They also sell powertrain systems and components to other auto manufactures. They use a vertical integration model by trying to control several aspects of the supply chain, from producing the batteries used in their vehicles, to controlling all aspects of the technological features and having over the air updates through a pay per package service, and providing energy storage services for all kinds of users. This allows them to have more control over the entire user experience, employing an Apple like vision of influence over their markets.
Tesla operates mostly on a direct to consumer, B2C, business model. They have company-owned storerooms and rely on internet sales on their website which gives them more control over their sales. They circumvented the usual model where automakers sell to franchised dealerships and instead decided to sell directly to consumers through company owned showrooms and purchases directly from their website. “By owning the sales channel, Tesla believes it can gain an advantage in the speed of its product development. More importantly, it creates a better customer buying experience. Unlike car dealerships, Tesla showrooms have no potential conflicts of interest. Customers deal only with Tesla-employed sales and service staff. Including showrooms, Service Plus centers, and service factifies, Tesla has 429 locations around the world as of the end of 2019” (Zucchi,2021).
They were a relatively early entrant into the modern electric vehicle market, which at the time was dominated in the United States by Prius at the time, which was introduced in 1997. Tesla was focused on getting stylish, but affordable models of electric vehicles on the market. Tesla offers a mix of a few different types of products, most notably, their electric vehicle line which includes, by order of introduction, the Tesla Roadster, their first car introduced in 2008 and currently discontinued, Model S, introduced in 2012, essentially the electric car that really started it all for Tesla, followed by the Model X, their mid-size SUV, and the Model Y, their compact SUV, introduced in 2015 and 2016 respectively. This has been followed up by their highly successful Model 3, their 4-door sedan and most affordable offering. In the future they plan to add an electric truck and a new version of the discontinue Roadster.
In 2008, the Roadster was Tesla’s cutting-edge battery technology and electric powertrain. It was during this period that Tesla came up with one of its flagship features which are vehicles with high acceleration rates, ranging from 0 to 60 miles per hour 2 to 4 seconds. These speeds have never been produced in any electric vehicle previously. It is built with a very light car body because it is made of carbon fiber. This car has no internal-combustion engine so it does not produce tailpipe emissions. The efficiency ratings matched a gasoline mileage of 135 miles per gallon. This car is power by lithium-ion cells similar to the ones used in laptop-computers batteries. These batteries can be recharged from any standard electric-outlet. The Roadster’s cost is approximately $109,000 so is considered a luxury item and has a federal tax credit of $7,500 because you are purchasing an electric vehicle. In 2012 the Roadster production stopped and the new Model S which is the first electric sedan was introduced in the market. This car’s reputation is said to be the best electric car in the 21st century and the best Sedan in this category. They were able to create a Sedan that combine safety, performance and efficiency. Model S has the longest range of any electric vehicle. Motor Trend measures Model S. with an acceleration record of 2.28 seconds. This car came with three (3) battery options that could range from 235 to 300 miles. This car has an acceleration from 0 to 60 miles in 4 seconds and top speed of 130 miles per hour. The model S has more storage space because it carries the battery underneath vs the Roadster which holds the battery on the front. The model S, also has better handling because its low center of gravity.
It was during this time that Tesla introduce the Superchargers in the United States and Europe. These stations were built to charge batteries quickly and at no extra cost to any Tesla owner.
In 2015, Tesla came up with the Model X. This model is believed to be the safest, quickest and most capable sport utility vehicle. This model holds 5-star safety ratings from the National Highway Traffic Safety Administration. This vehicle has a maximum battery range of 295 miles and sitting for up to seven (7) passengers.
In 2016, Elon Musk the CEO came up with a Secret Master Plan and few major events happened through this period. Model 3, a low-priced, high-volume electric vehicle was I introduced. The actual production did not happen until 2017. This vehicle was nicely priced at $35,000. This is 4-door sedan with a range of 220 miles.
In 2015, the company came up with solar energy products. They started to produce a line of batteries to store electric power from solar energy for in homes and businesses. During this year, Tesla purchased the SolarCity company. This is when they decided to change the name to Tesla, Inc, to reflect that they had a number of products and not just cars. (Gregersen & Schreiber, 2018)
Position with-in the Industry
Tesla is presently the fastest growing company producing and leading in the electric vehicle industry. Tesla has produced and delivered over 500,000 units in 2020. The Model 3 is the bestselling plug-in-electric vehicle model in the industry. The company has been at the forefront of the industry for a decade and is consistently ranked amongst the top 100 companies. This is an excellent accomplishment in the vehicle industry. The company made over $31.5 billion in sales for 2020. This was a 28% increase over the previous year. Being a newer and less established company in the industry providing a currently niche product compared to gas powered vehicles, Tesla’s revenue lags in comparison to some of its more established competitors. Sales revenue at some of the other industry leaders are $280 billion for Toyota and $150 billion for Ford (Wagner, 2020). By profit, they perform better than their competitors when compared to revenues, showing that Tesla is competent in managing their expenses and debt. Hyundai showed profits of $25 billion, Ford had $36 billion, Tesla showed strong growth from previous years having profits of $39 billion, while industry leader Toyota had profits of $211 billion for the year 2019. When comparing market capitalization, Tesla leads the industry, in 2019 numbers, with over $650 billion while their next highest competitor, Toyota, falls at less than half that with around $250 billion, while Ford and GMC are at $60 and $85 billion respectively (Yahoo Finance, 2021).
United States is the largest geographical segment of Tesla accounting for around 69% of its revenue in 2018. China is another major geographic segment of Tesla. However, its contribution to the total revenue of the brand was less than 10% in 2018. Netherlands and Norway are other major markets of Tesla products. Other countries together ccounted for around 14% of the company’s net revenue in 2018. (Pretap, 2020)
Tesla believes that to produce exceptional vehicles, you must have vision, and accountable employees that believe in the company and the product. They put every effort in ensuring their employees are fully aware and trained on the products they sell. In order to keep the quality of the product and a safety approach, all production employees are required to participate in a multi-day training program even before they set foot on the factory floor. On-line training is mandatory and they have a daily track performance to ensure that all improvements can be made quickly. Tesla’s safety and production rates continue to improve, so they believe their program is solid.
Evolution of Growth
Tesla plan for the future is to have the most affordable electrical car in the market. They want to be able to provide all customers with the best opportunities so everyone can be part of accelerating the advent of clean transport and clean energy production.
In 2019, Tesla came up with the Cybertruck, said to be the “most comfortable truck ever built”. Its futuristic design and streamlined look wowed spectators at the reveal. They have also produced a prototype of an electric semi-truck, which shows its vision in a future where the global transportation industry shifts towards automation of its logistics systems. It also opens up business and corporate markets to supplement the personal transportation market. On July 20, 2016, Musk detailed his new master plan for Tesla. It includes more affordable cars produced in higher volume, solar roofs, mid-size vehicles, SUVs and pickup trucks, as well as the refinement of autonomous vehicles and the creation of a sharing economy, in which cars can be active while the owner is not using them.(Ferris, 2016)
Strategic acquisitions have been the key steps for Tesla to grow. These acquisitions are Dowless & Associates, Inc. This acquisition took place in June 2016. This was a Cyber Security company providing services to the most sophisticated Intelligence Community (IC) customers. Another key acquisition that happened in May 2017 was the purchase of Compumatics Groups, which also provide services to the IC and Internal Revenue Service. Tesla is always looking for technology companies that can strengthen its’ portfolio.
Tesla’s goals are to produce the best energy saving/electrical cars every built. They want to be able to produce the most affordable cars in the market, with the goal to improve the quality of life and accelerating the clean transport and clean energy production.
Tesla’s growth model is to deliver an affordable, autonomous electric vehicle to every home. They want to see a world where sustainable technologies are developed to efficiently move people and goods around the world. They do this by integrating all aspects of the vehicle manufacturing process in order to control costs.
Macro-Environment (Pestle Analysis)
The political situation in the United States favors the production of Tesla products. At the same time, when the head of the company, Elon Musk, met with the country’s political elite, a bill on “Saving and multiplying energy” was being developed. It was introduced to the US Congress in June 2007 (Kim, 2020); this law determined the energy policy of America for decades to come, and it became fateful for Tesla. The law included a clause on preferential loans and subsidies for developing and implementing clean technologies for automakers.
The prevailing economic factor is the state program of preferential loans, which initially meant supporting new technologies that reduce gasoline consumption to reduce oil imports ultimately. In the work process, the program was supplemented with an item on targeted loans to developers of electric cars. In this form, it was adopted by Congress in September 2008; the US Department of Energy handled the distribution of loans. In 2009, Musk received a preferential loan of $ 465 million from the US government (Kim, 2020). With this money, the Tesla Model S was developed, presented in 2012, and a factory for producing electric batteries was built.
However, these are not all the benefits that Tesla has received from the law on “Conservation and Multiplication of energy.” According to the law, in the United States, each electric passenger car receives at least $7,500 in subsidies in the form of tax benefits; in some states, there are even more subsidies (Kim, 2020). According to the rules, the amount of donations is set for each specific manufacturer, and it decreases after the company sells 200 thousand electric vehicles. And in 2018, Tesla overcame this bar — therefore, from 2019, there are no more tax deductions for buyers of electric cars.
Electric cars are becoming more and more popular worldwide, and the United States is no exception. In 2016, 4 percent of all vehicles sold in the United States were electric vehicles. This means that every 25th car buyer has chosen in favor of electric cars (Kim, 2020). Electric cars are mostly popular among the younger generation; they are compact, economical, do not produce harmful emissions, and are also very fast and accelerate in a couple of seconds. Consumers choose electric cars for two main reasons: concern for the environment, and commitment to everything new and love for technology.
There are two types of consumers whose thinking is very different from each other; the first knows less about technologies. Most likely, they do not understand the principles of operation of an electric car and may not be interested in the technical side of the issue. For example, they do not know that it is better not to use an electric car in severe frosts; the environmental problems are very important for them. Many of them are vegetarians or vegans, some of them share left-wing political views, the other part is apolitical. Such people are open to the world; they like bright and comfortable clothes, probably permanently do yoga, are fond of Indian culture.
The second type of consumer is people whose work is connected with modern technologies. They can be IT specialists, marketers, designers, top managers, or own their own business. They also care about the environment, but they chose an electric car because of their love of technology. They are keenly interested in gadgets, speak different languages well, and often visit abroad. Their interests include artificial intelligence, virtual reality technologies, everything Elon Musk does, and his company SpaceX in particular. Most electric car owners belong to the age category of 30 and older; about 40 percent of them are women, the remaining 60 percent are men (Kim, 2020). Facebook, Instagram, and Twitter are the social networks which the vast majority of them prefer; most of them uses Apple technology.
In mechanical engineering today, there is a tendency of a gradual reduction in the interest of leading automakers and consumers in cars with traditional gasoline and diesel engines. The public’s attention is shifting to vehicles that use engines powered by alternative energy sources, particularly electric vehicles, as part of a power plant. The autonomy or mileage range of modern hybrid vehicles reaches 750 km or more; shortly, it may reach one thousand kilometers. Fully electric cars, as a rule, have an autonomy of 250-300 km. The claimed autonomy of the top-end modification of the Tesla Model 3 is approaching 500 km. The maximum autonomy of the Tesla Model S, according to the EPA (US Environmental Protection Agency), exceeds 600 km (Kim, 2020).
Such high independence of Tesla electric vehicles is achieved primarily through the use of high-capacity batteries and the optimization of the battery management system. It can be concluded that the main drawback of electric vehicles associated with their low autonomy has not yet been eliminated. Thus, insufficient capacity, long charge time, and low specific energy of batteries have been limiting the efforts of electric car designers for many years. In addition, the growing popularity of electric vehicles requires the use of an increasing number of rechargeable batteries. They are components of complex systems that must work optimally to ensure safe and efficient use of energy. Therefore, it can be argued that the appearance of electric vehicles on the market that has solved these problems with the help of new technologies can be severe competition for Tesla.
In addition to climate goals, many countries, when developing electric vehicle technologies, are trying to solve specific economic problems. The solution of problems implies the formation and conquest of new markets for high-tech products, the development of national innovation systems, giving a new impetus to stagnant sectors of the economy. Almost all countries with an electric vehicle penetration rate above 0.5% (including the United States) provide direct financial support or indirect tax incentives (Kim, 2020). This is done to install private charging points at the national level. Such countries can include the countries that produce electric vehicles, primarily the United States. At the operational stage, the promotion of electric transport is carried out at the state level through exemption from the transport tax.
Support measures that do not provide direct or indirect monetary subsidies consist of granting certain rights to owners of electric vehicles. In several US cities, electric cars already have the privilege of passage on a dedicated lane for public transport. They also are allowed to move along the road allocated for the movement of vehicles with a full load, which significantly increases the attractiveness of their use in urban conditions. A change in in the legations for the industry may consist in granting an even greater range of rights. As a result, the level of probability of changes in legislative regulation is relatively high. This is because, at an early stage of the formation of electric vehicle markets, any legislation largely determines the nature of the industry’s future development. These initiatives also influence the configuration of the supporting infrastructure in a significant way.
Electric cars are becoming increasingly popular because it is evident that the electric car market is moving forward with giant steps. It can be assumed that they will soon displace cars with internal combustion engines. Such an environmental fact causes this as low environmental pollution from the electric cars. Currently, the United States is taking several actions aimed at the use of electric vehicles by residents of its country. These measures are taken to preserve the environment and health, which undoubtedly benefits the products of the Tesla company. The American authorities hold tenders for manufacturers of electric vehicles to use this transport for work purposes by civil servants. In this way, they attract attention and set the tone for the popularization of electric vehicles.
Scientists have found that motor transport creates extensive zones in large cities with a 70-90% share of air pollution (Kim, 2020). Due to the increase in the number of personal vehicles, smog over large cities has become a sign of the times. Cars with internal combustion engines produce a lot of noise, and a lot of smoke. Car exhaust contains many harmful substances, but most of them affect the environment locally — at the place of release, poisoning the driver and the people around him. Also, when burning fuel, many greenhouse gases are released, which are one of the causes of global warming. One of the ways to solve intra-city transport is to introduce electric vehicles, which the Tesla company produces.
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