Tesla Case

EXECUTIVE SUMMARY

Tesla Motors is one of the leading producers of electric cars and electric powertrains in the world. Founded in 2003 and based out of Palo Alto, California, Tesla is currently in 37 countries worldwide. Tesla currently produces 3 models, the Roadster, Model S, and the Model X. A primary issue Tesla faces is the steep prices of all three models. The least expensive model is the Tesla model S. It’s cheapest option begins at $57,400. Many experts believe that for Tesla to be successful, they will need to produce a model closer to the $30,000 range. Other critics focus on the issue of a possible takeover, or the company’s lack of liquidity options. Lastly there is the issue of global expansions. Tesla hopes to increase their number of stores worldwide by 50 throughout the next several years creating an annual cost of roughly 5-10 million dollars. Although Tesla faces ever increasing pressure to develop a more inexpensive model, I personally believe this is not the correct option. Tesla Motors offers top end, luxury vehicles that provide the distinct advantage of electric power over Tesla competitors in an industry that is moving more and more in that direction. Tesla competes against top end, automakers such as Maserati, Jaguar, Aston Martin, and Porsche. All of these competitors are internationally renowned, high end, high brand recognition companies. To be successful I suggest, Tesla focuses on their continued international expansions and marketing to created a world-renowned, top class product that incorporates their primary strength of electrically powered vehicles.

ANALYSIS

When looking at Tesla and analyzing them as a company in the long term, there is a great deal of upside, with minimal downside. According to New York Times writer Bradley Berman, The Tesla Model S, with the biggest available battery pack (85 kilowatt-hours), has an E.P.A.’s rating for equivalent gasoline miles per gallon of 88 miles per gallon equivalent in town and 90 on the highway, with a 265-mile range. This is a pretty impressive statistic and one that consumers are excited about. Through a S.W.A.T. analysis, it is easy to see the tremendous upside that Tesla has in
the long run.

Strengths – To differentiate itself from its competitors and pro- vide superior customer experience; Tesla has opted not to create franchised dealers, but instead maintains all sales and service operations in-house. As well, the forecast for electric cars calls for electric vehicles to account for 7 percent of the U.S. car sales and 5.5 percent of global car sales by 2020, and 15 percent of global sales by 2025. Furthermore, experts predict Tesla shares to increase to as much as $70 dollars a share in the next year. In line with this, Tesla is at the front most edge of electric technology and has partnered with German powerhouse Daimler and Toyota.

Weaknesses – In the short-term Tesla has had some financial issues, along with some negative press focused on CEO Elon Musk’s divorce issues and the Tesla Roadster performances in comparison to the competing Lotus Elise. As well Tesla in new to the game, being founded in 2003, this means Tesla is perhaps not as well known, trusted, or established as well as its competitors. Tesla’s financial issues are the real problem, recording net losses in each of the last 4 years. Yet with great expenses coming in the research and development of this new technology that is expected. Coupled with forecasts looking up, Tesla will soon have positive numbers again, with total assets more than doubling from 2009 to 2010.

Opportunities – Tesla’s greatest opportunity comes with their knowledge of “smart technology” and their opportunity for continued international expansion. This is without mention of their superior automotive products, that have car enthusiasts in a mad state of excitement. Through pairing with technology giant Panasonic, Tesla has the greatest resources and minds at their disposal when it comes to the electric car sector of the automotive industry.

Threats – Tesla’s has two main threats. The threat of “smart car” substitutes such as the Nissan Leaf, which sells at roughly $26,000, well below the price of Tesla vehicles. Tesla faces the challenge of advertising an electric, high end, luxury vehicle. The second threat Tesla faces is the threat of a takeover; many cite the partnership with Daimler as evidence of a potential takeover even though CEO Musk has insists otherwise.

CONCLUSION and RECOMMENDATION

Although critics believe Tesla will never be successful until they can create a model that has an initial price of 30,000 I disagree. My recommendation for Tesla Motors is to continue the production of high end, luxury automobiles. As well many may overestimate the long-term cost of owning a Tesla, when comparing the 5-year ownership of a 34,500 BMW 128i to a 57,000 Tesla Roadster, the BMW cost roughly 5% more, and the 45,000 BMW 528i cost nearly 12,000 more. (www.teslarumors.com) I further recommend Tesla focus on the continued international expansion of their company. Both the Tesla Roadster and the Roadster Sport are available now for lease in Europe’s most populace countries (www.evcarco.com) by continuing to expand across the globe Tesla is becoming more of a household name. When combining brand recognition, and a positive alternative to gas powered vehicles, without sacrificing horsepower, Tesla has a recipe for success if they continue to expand and publicize their brand.

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