Introduction
Tesla, Inc. is a multinational American vehicle and clean energy company based in Austin, Texas. It produces solar panels, solar roof tiles, electric vehicles (cars and trucks), and battery energy storage systems. By 2023, Tesla will become the world’s most valuable automaker and one of the most valuable companies globally.
In 2022, Tesla held an 18% market share as the top seller of battery electric vehicles worldwide. Through its subsidiary Tesla Energy, the company installs a significant number of photovoltaic systems in the US and ranks among the largest global suppliers of battery energy storage systems, with 6.5 gigawatt-hours (GWh) installed in 2022.
In July 2003, Martin Eberhard and Marc Tarpenning founded Tesla Motors, named after inventor Nikola Tesla. Elon Musk became the company’s largest shareholder with a $6.5 million investment in February 2004 and took over as CEO in 2008. Musk aims to accelerate the shift to eco-friendly energy and transportation, leveraging solar power and electric vehicles.
In 2008, Tesla began manufacturing its first vehicle, the Roadster sports car. Over the years, they introduced additional models: the Model S sedan (2012), Model X SUV (2015), Model 3 sedan (2017), Model Y crossover (2020), and Tesla Semi truck (2022). The upcoming addition to their lineup is the Cybertruck light-duty pickup truck, set for manufacturing in 2023.
The Model 3 became the first electric vehicle to surpass 1 million units sold globally, becoming the best-selling plug-in electric vehicle by June 2021. In 2022, Tesla delivered nearly 1.31 million automobiles, a remarkable 40% increase from the previous year, and by August 2022, the company’s total vehicle sales exceeded 3 million units. Tesla achieved a market valuation of $1 trillion in October 2021, joining the ranks of six American corporations.
Business Overview
Tesla, Inc. creates, develops, produces, and sells energy generation and storage solutions in addition to completely electric vehicles. The following segments make up the company’s business: Automotive, and Energy Generation and Storage. Designing, creating, producing, selling, and leasing electric vehicles as well as selling automotive regulatory credits are all included in the Automotive category. The design, production, installation, sale, and leasing of stationary energy storage items, solar energy systems, and the selling of solar energy system incentives are all included in the Energy Generation and Storage category. Its headquarters are located in Austin, Texas, and Jeffrey B. Straubel, Elon Reeve Musk, Martin Eberhard, and Marc Tarpenning established it on July 1st, 2003.
According to CNN Business, out of all the shareholders of Tesla Inc. 26.5% are mutual fund holders, 16.52% are from other institutions, and the remaining 13.83% are individual stakeholders. As of the latest data of 2022, the corporation houses around 126.87k employees.
Business Strategy
When Elon Musk founded Tesla in 2003, electric cars were prohibitively expensive. To overcome this challenge, Musk devised a strategy of initially producing expensive, low-volume vehicles like sports cars to target less price-sensitive customers. Gradually, as Tesla could lower the price of batteries, they aimed to offer cheaper and more abundant cars.
Tesla manufactured less than 2,500 units of its first car, the Roadster, which had a price tag of over $100,000. Tesla’s Model S and Model X continued to be high-end models, but at more affordable prices. The latest versions, the Model 3 and Model Y, aim at a wider market with competitive pricing and achieve quarterly sales surpassing 100,000 units. Tesla distinguishes itself by regularly updating vehicle hardware, deviating from the traditional model year approach of other automakers.
Tesla sells its cars directly through its website and operates a network of outlets, rather than relying on franchised auto dealerships like other automakers. It has close to 400 shops and galleries in over 35 countries, located in malls and high-traffic areas. While direct vehicle sales are prohibited in some jurisdictions, Tesla’s galleries serve as educational spaces rather than sales locations.
In contrast to other automakers, Tesla is renowned for not investing in paid advertising campaigns.
In 2016, Tesla’s vertical integration was estimated at 80%. The company manufactures vehicle parts and develops charging stations. Vertical integration is uncommon in the automotive sector, where businesses usually outsource component production. Tesla’s low-cost strategy allows them to sell common technology items and expand their market presence..
Tesla licenses its technology to rivals to accelerate the global adoption of renewable energy. Licensing agreements include clauses that prevent patent infringement and direct copying of designs. Tesla maintains ownership of trademarks and trade secrets to safeguard its technology.
SWOT Analysis of Tesla Inc.
Let’s examine some of the elements that contribute to Tesla, Inc.’s status as one of the most valuable businesses in the world.
STRENGTHS
Impressive Hiring Strategy
As a CEO, Musk has always given more weight to skill and experience than to academic degrees, and this is evident in the way Tesla selects its staff. Having this vision, however, is one thing; being able to use it as a successful hiring strategy is quite another. The business has created a two-step, fairly novel hiring process to do this. The first stage is similar to the conventional interview method employed by the majority of recruiters, but it places more value on relevant work experience than academic credentials. Candidates that succeed in the first step go to the second round of hiring, which entails practical sessions that gauge each applicant’s practical skills.
This tactic has a number of benefits. Organizations prioritize experience over conceptual knowledge, especially in highly technical professions like engineering. This preference leads to more productive individuals in these fields. Moreover, selecting personnel with practical experience in these fields significantly reduces training costs and time. Tesla can now afford to hire the greatest employees possible thanks to this.
Strong Brand Value and High Market Capitalization
As of right now, Tesla has been the seventh most valuable corporation in the world with a total market valuation of $547 billion. The corporation is still a secure investment, and although this is about half of projected peak valuation of $1.06 trillion in 2021, most investors still see great long-term growth potential. The value of the Tesla brand is also high; it was estimated to be worth $76 billion in 2023, about double what it was in 2022.
Both of these values are influenced by a number of important factors.
- For investors who can tolerate some risk, the corporation is regarded as a solid investment.
- The brand reflects the future of fully self-driving vehicles.
- Tesla has consistently been at the forefront of many technological advancements.
- Even when compared to its nearest competitors in the market, it has a significant competitive edge.
- A Phenomenal Organization Structure
Elon Musk has come under fire for some of his unconventional leadership styles, yet there is no denying the good impact he has had on the organizational structure of Tesla. Although the corporation has gained renown for its internal flexibility, it officially employs a combination of functional and divisional organizational structures. The success of Tesla’s unusual hierarchical structure can be attributed to several elements, including Musk’s hands-on philosophy and the unconventional norms he upholds. These include;
- Avoiding frequent and pointless meetings is one of them.
- Leaving a meeting when you are no longer able to contribute to or benefit from it.
- Avoiding restrictive and time-consuming methods of communication.
Unique Brand Positioning and Good Marketing Strategy
In addition to being one of the most expensive brands in the world, Tesla is also among the most distinctive. There is an ongoing debate revolves around whether the company is primarily an automaker or a tech company. Its expansion into areas like solar energy and electric batteries suggests a leaning towards the latter.
Additionally, the business has positioned itself as the global and American spokesperson for sustainable technologies and the car sector. This is actually remarkable considering that the business allocated minimal resources to branding and marketing, opting instead to let its reputation speak for itself.
Strong Innovative Capacity
Tesla has established a reputation for being a force for innovation and an early user of ground-breaking new technologies, particularly in the fields of green energy. Key instances include:
- Their selection of top-of-the-line electric automobiles, which is among the best in the business.
- Supercharging stations make quick and practical long-distance travel in electric vehicles possible.
- The Tesla Solar Roof, which enables consumers to increase solar energy production while lowering their carbon footprint.
- Users can install the Tesla Powerwall in their homes to store energy from solar panels or off-grid sources.
- The groundbreaking Tesla advanced driver-assistance technology, also referred to as Tesla autopilot, may be the first step toward fully autonomous automobiles.
Market Domination
Tesla does not build nearly as many automobiles as well-known automakers like General Motors, Toyota, Ford, Volkswagen, and so on, while having a bigger market value. Tesla, however, easily outperforms all of its rivals in the field of electric vehicles, solidifying its position as the world’s leading producer of these vehicles. In 2021, the business sold more than 900,000 electric automobiles, with the Tesla Model 3 being its best-selling model.
Charismatic CEO
It is impossible to ignore Elon Musk’s revolutionary vision and transformational leadership style, which have enabled him to create one of the most successful businesses in history and become the richest man in the world, despite the fact that he has become such a divisive figure in recent years.
Numerous observers believe that Musk is one of the factors contributing to the success of the Tesla brand and the belief held by both investors and customers in what the firm stands for. Despite the obstacles put in his way (both technologically and commercially), he has been able to overcome many of them thanks to a combination of creative leadership, exemplary work ethic, and an almost obsessive will to succeed.
Shift in Consumer Sentiment Towards Green Technologies
Electric vehicles, solar roofs, and electric batteries are just a few examples of the greener technologies that Tesla has been able to benefit on as the market has generally shifted its mindset in that direction. This has made it possible for the business to incorporate this into what their brand stands for—a code for the present and the future.
WEAKNESSES
Frequent Manufacturing Delays
Tesla frequently experiences manufacturing and distribution delays despite having a huge number of highly qualified employees, cutting-edge technology, and a ground-breaking manufacturing procedure. This is probably because the business is involved in producing highly complicated technologies, which have a varied supply chain network and intricate logistics.
Due to several supply chain delays, the company is frequently required to halt accepting orders for fresh deliveries when it comes to its range of electric vehicles. This problem affects the Tesla Solar Roof as well, delaying installations for months.
Setting Overly Optimistic Goals
Although the Tesla brand has gained a reputation for consistently developing ground-breaking technology, critics have accused them of occasional overconfidence and even deliberate misleading by promoting technologies that are either not yet available or that do not exist. For example, Musk has faced exposure for making claims about battery capabilities that physics has proven to be incompatible with.
Other times, the business has had to retract statements it made about fully autonomous vehicles, faced an unsuccessful attempt to fully automate its manufacturing process, encountered numerous delays with the eagerly anticipated Tesla semi-truck, and, of course, dealt with the contentious Tesla bot. These controversies have not only damaged the company’s reputation but also eroded investor trust.
High Employee Turnover Rate
Despite the success of Elon Musk’s leadership style and his aptitude for identifying talent, his propensity to put his company’s success and profits before the happiness of his employees, as well as his occasionally abrasive demeanor, have resulted in an unnaturally high employee turnover rate, particularly among executive staff. Given that the typical employee stays with the company for just 3.7 years, some workers have even gone so far as to call the Tesla workshops ‘sweatshops’ and ‘abusive’.
MarketWatch anticipated that in 2019, the company’s executive turnover rate will be around 27%. This determination found it to be higher than the cohort average of 15%, but when compared to data from several other top tech businesses, it was not unreasonably high. However, it was discovered that the executive turnover rate of employees directly under Musk was 44%, significantly higher than the 9% industry average. This demonstrates that Musk has a tendency to fire workers who irritate or disappoint him, even at the expense of the business.
The Cost of their Products
Tesla has established itself as one of the leading innovators in technology. The costs the corporation charges for its goods demonstrate that the future won’t be inexpensive. Musk has stated that the company aims to make sustainable technology, including electric vehicles, accessible to a wider variety of customers. However, the base versions of their automobiles carry a price tag ranging from $43,990 to $129,990, which presents a substantial financial commitment for any customer.
The high pricing the corporation charges for its products are caused by a number of important considerations. For instance, the cost of the car’s electric batteries accounts for more than 50% of its price. The issue of high costs is further exacerbated by the fact that the firm, despite being one of the world’s top sellers of electric vehicles, has struggled to meet demand for its goods.
Inability to Meet Demand due to Restricted Output
As we previously discussed, Tesla struggles to meet the demand for its goods. This results in both excruciatingly long waiting times for customers and costs that seem to have been artificially increased. While some see this as a deliberate move to instill a sense of exclusivity around their products, it may backfire as other businesses ramp up production of electric vehicles and related technology, providing customers with a less expensive and more readily available alternative to Tesla products.
The firm has also battled with a small selection of products, particularly when it comes to its electric cars, which serve as its showpiece technology. The firm only sells a semi-truck and four basic electric vehicle variants. In a sector where the majority of businesses take great satisfaction in being able to cater to almost any buyer’s needs, this is extremely rare.
Open Source Patents
Tesla has a reputation for adopting open-source patents on a variety of its technology, in contrast to the majority of IT corporations. The method may have a number of benefits, such as the ability to profit from any advancements made to Tesla technology by other parties, but there are also disadvantages, such as Tesla losing exclusive property rights to technologies it has substantially spent in developing.
OPPORTUNITIES
Introduction of Products to New Markets
Even though the sales of electric cars have skyrocketed in recent years, traditional cars powered by fossil fuels still dominate them in many areas of the world. This voyage has been primarily driven by consumers in Europe and China, with a fairly little portion of new electric car purchases occurring in the United States. Therefore, by making major investments to promote the sale of electric vehicles in countries like the United States as well as other countries like Asia and Africa, the corporation may dramatically increase its client base.
Improved Affordability of their Vehicles
While the high cost of its goods cannot entirely be attributed on Tesla, the firm may take substantial steps to lower this cost for customers. One method to do this is to change the company’s perception from one of a brand that sells high-end electric luxury automobiles to one that serves a wider variety of consumer demographics.
In-house Battery Production
Contrary to popular belief, many things, including Tesla automobiles, undergo production not entirely from scratch in a warehouse. Outside tech firms manufacture many essential parts before incorporating them into Tesla vehicles. One of the most important parts of each Tesla product, the battery, is one of them. Naturally, the corporation is exposing itself to a higher risk of supply chain interruptions and delays by outsourcing numerous essential parts of its supply chain, something for which they already have a bad reputation. Therefore, Tesla will be able to exert more control over the crucial elements of their manufacturing process by bringing batter manufacture in-house.
Maintain its Reputation as Champions of Innovation
In terms of innovation and the creation of new technologies, Tesla has always been in the forefront. Its status as the innovation champion is used to leverage a sizable chunk of its brand image. This means that the business must keep working to maintain its current standing through the combined efforts of its leadership, solid financial support, and a big pool of competent employees.
Supporting the Shift towards Renewable Energy
A lot of well-known businesses are working hard to change their production procedures and operational procedures to fit a more sustainable model. The radio firm Tesla is widely recognized for promoting this movement. However, it is still capable of doing more if it positions itself at the very top of the movement toward a greener future by using its strong brand equity and distinctive selling strategy.
THREATS
Increased Competition from Other Automakers
Tesla is undoubtedly not the first business to invest in the market for electric vehicles. However, it was the first to get the public’s notice. For years, Tesla has sold more automobiles than its nearest rivals thanks to its distinctive brand positioning and technological advantages over other electric vehicle producers. Tesla has begun to lose some of its market supremacy, though, as rival car industry juggernauts like Ford, Chevrolet, Hyundai, and Kia have entered the market. In terms of pure sales, the firm continues to lead other producers of electric vehicles. However, the question of how long it can hold onto this edge in the face of escalating competition, increased consumer unhappiness, and less expensive alternatives to its products has begun to surface.
The Distraction Put Forward by its very Notable CEO
Elon Musk is without a doubt a vital component of the success of Tesla and one of the main foundations of its brand image. Recent occurrences, however, would imply that having a CEO who is so vocal and has celebrity-like status could ultimately be bad for the company. More and more investors, and even consumers, are calling for Musk to stand down. The business also has a more conventional CEO on staff who will operate in the background to keep things on course. As a result, Musk appears to have stepped away from the spotlight, but history suggests that it won’t be long before he becomes involved in yet another public dispute.
Uncertainty Surrounding Rare Earth Metals
Every sector needs to cope with supply shortages and limitations since each one’s production process is different. Rare earth metals like cobalt, nickel, and neodymium are some of the most essential components of electric vehicles and solar panels, two of Tesla’s main products. The capacity of tech businesses to get these resources might be seriously jeopardized by supply shocks, trade conflicts, and extreme price swings. Tesla is not immune to supply shocks and current trade battles between the United States and China, which pose a serious danger to the ongoing supply of these unprocessed earth metals. China is the supplier of a sizable portion of these raw materials.
Legal Intricacies of Self-Driving Vehicles
Although the idea of autonomous vehicles may be thrilling, they are still a relatively new and unproven technology. Rigorous testing, vetting, control, and, most crucially, a proper understanding of the legal repercussions will be necessary for it, similar to almost all new types of technology.
Changing Government Policies and Public Opinion on Green Energy
While there is widespread agreement that the world needs to transition to more environmentally friendly energy sources, such as renewable energy and the adoption of electric vehicles, certain global shocks have compelled governments, citizens, and even corporations to reassess the precise means of achieving these goals.
Numerous government initiatives aimed at promoting green technology extensively subsidize and support a number of the technologies created and sold by Tesla. A large decrease in financing and support for these initiatives might result from changes in public opinion, which would be detrimental to the firm.
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