. Over the years Tesla, Inc. has redefined the ways of doing business in Consumer Goods. Tesla Motors Inc. (Tesla) is thriving and is not about to stop. Tesla, Inc. engages in the design, development, manufacture, and sale of fully electric vehicles, energy generation and storage systems. The most significant change in Tesla’s equity ratio was between 2011 to 2012 in which the equity ratio decreased from 0.31 to 0.11 as a result of a decrease in total equity and an increase in total assets. Powerful suppliers in Consumer Goods sector use their negotiating power to extract higher prices from the firms in Auto Manufacturers - Major field. Apart from increased sales of its leading car models, the company has registered several more achievements during the first two quarters of 2019. The progressive company officially incorporated in July of 2003, and in just 15 years they have revolutionized the future of the automotive industry. The first step is to determine companies that would be willing to partner or work with Tesla and negotiate contracts that would be beneficial for both Tesla and client companies. The first step is to determine the suppliers that provide only essential or one component of a Tesla vehicle and negotiate a manufacturing contract with these suppliers immediately. The “Secret Master Plan” implemented by Tesla helped develop and fund the necessary R&D to develop the Tesla vehicles but the inefficiencies in supply chain process resulted in the company to incur massive production costs that limited profits. Tesla Inc. is at the forefront of electric vehicles. The purpose of this report is to conduct a thorough market analysis for Tesla Motors. These companies include General Motors, Toyota, BMW, and Daimler AG. Tesla's second largest segment was the Large SUVs segment. If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Based on the DuPont Analysis (See Table 4), the company has exponentially decreased in return on equity from -8.48% in 2011 to -439.82% in 2014. Upon Tesla’s introduction to the automotive industry, factors were ideal and the company was positioned for success and growth. Before you dive into this post, take a look at our brand report on Tesla and its share of voice in the automotive industry. Tesla, Inc. (TSLA)'s research and analysis are contributed by Edmund and Harry. Tesla, Inc. is one of the leading firms in the Auto Manufacturers - Major. Tesla, Inc. operates in a very competitive Auto Manufacturers - Major industry. The growing rise of green energy allowed the technological advances made by Tesla to ultimately give rise to a competitive and technological market for consumers. Once there are slight ups and downs in the demand forelectrical cars or production delay occurs, Tesla will probably suffer a hugeloss. Upon analyzing the components, we see that there is an increase in profit margin in 2013 to 2014 from 10% to 28% resulting from an increase in net losses despite an increase in total revenue. With Tesla vehicles, the future of sustainable and renewable energy may come much sooner than later in the transportation field. The sales growth was above Tesla Inc 's competitors average revenue growth of 7.7 %, recorded in the same quarter. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry. One of the primary issues many consumers face is the charge-ability of Tesla’s electric battery. Companies such as Walmart would benefit from having a Tesla Supercharger station within their stores by driving consumer traffic. This was a result of an increase in total equity, and more specifically from the massive increase in stock price Tesla experienced in 2013. Additionally, this case analysis will review the development of electric vehicles as an industry and the expansion of renewable energy. Tesla Valuation Module provides a unique way to ballpark how much the company is worth today. — DigiLaw, Instead Of Ten-Figure Funding, This Robotaxi Startup Has Actual Customers, HPE Returns to Techie Roots Appointing Neri to Succeed Whitman. Even after investing $1.9 million of generated cash into the production of the Gigafactory to produced lithium-ion batteries on a larger scale, Tesla continued to experience net income losses despite expecting a net profit. With the production of the Tesla Model S, the second step of the action plan was implemented. The threat of substitute products is moderately low. Since Tesla continues to earn net income losses annually, some alternatives this company may consider pursing includes: transitioning towards the development of hybrid electric-gasoline cars, executing only step three of the master plan, or focusing only in the development lithium-ion batteries. Other major automobile companies have gain success with Plug-in hybrid electric vehicles (PHEV) such as the Toyota Prius, but no other companies have developed the same propriety lithium-ion battery with a comparable 200-mile range per charge or a comprehensive charging station network that is free to use. The location of Tesla in Silicon Valley allowed for the acquisition of excellently trained, ambitious, and highly committed individuals that help pave the success of Tesla. Without him, Tesla would not be where they are today. A scale curve analysis on quarterly cost and production data from 2012-2014[2] shows Tesla’s cost of production per Model S at the end of 2014 … Market analysis in the marketing strategy of Tesla : The global EV market is predicted to grow at a compound annual growth rate of 21.4% between 2018 & 2026 according to ReportBuyer. Font size Email Print. This competition does take toll on the overall long term profitability of the organization. We make beautiful, dynamic charts, heatmaps, co-relation plots, 3D plots & more. Tesla Motors, Inc. Market Analysis and Definition College University of applied sciences, Cologne Grade 1,3 Author Dominic Birk (Author) Year 2015 Pages 24 Catalog Number V309705 ISBN (eBook) 9783668087538 ISBN (Book) 9783668087545 File size 745 KB Language English Tags Marketing, market analysis, tesla, electric cars, tesla motors, steep analysis, pest analysis, SWOT, SWOT analysis, … This drop in gross margin was a result of a 50% reduction in gross profit due to a 270% increase in cost of goods sold, likely due to issues in supply chain process and limited suppliers. As a result of limited suppliers, Tesla became less selective with its choices of suppliers, often having to pay certain suppliers more than others due to minimal competition. Therefore, by having limited options in terms of suppliers, Tesla was forced to incur high production costs resulting in high prices of Tesla vehicles and significant profit losses. Now it is universally apparent on a global scale that Elon Musk is on a mission to monopolize not only the automotive industry, but the transportation industry as a whole, stretching as far as outer space. These analyses will include key aspects of the general environment specific to Tesla, an analysis of Porter’s five forces, and an overview of Tesla’s major competitors involved within the electric vehicle industry. Tesla should determine the automobile manufacturing companies that it would be interested in partnering or working with. 8. This company analysis was specifically tailored for Tesla, to asses key business aspects that are vital for its success. There is more competition, however, now entering the higher-end electric and self-driving car market. Tesla was able to capture a unique niche in the automobile manufacturing industry. Tesla attempted to reduce switching costs by becoming more flexible with suppliers, but typically only one supplier would emerge fulfill components needed for Tesla vehicles and the supplier would ultimately dictate the prices. It is essential for Tesla to recognize its current financial situation and make the necessary changes in order to make a profit in future years. Tesla employs digitized powertrain system whereby the torque to the front and rear wheels are instantaneously … This put pressure on Tesla, Inc. profitability in the long run. The threat of new entrants in the electric vehicle industry is moderately high. This four-step chronological action plan was the blueprint Tesla utilized to manufacture electric cars with the goal of charging with zero-emission electric power. Tesla’s most significant change on return on equity was from 2012 to 2013 in which return on equity substantially decreased from -12% to -288% (See Table 4). Tesla entered the market with the sporty Roadster. Between 2011 and 2014, the company continues to underperform with constant net income losses. This SWOT analysis of Tesla Inc. (formerly Tesla Motors, Inc.) emphasizes the importance of global expansion to ensure business growth in the global automotive and renewable energy industries. For instance, when Tesla worked with Toyota in 2010 to develop the powertrain for the RAV4. In fact, without Elon Musk, this company would totally be broke. Why? Tesla's market cap has increased by more than $500 billion in 2020, and is now worth as much as the combined market cap of the nine largest car companies globally. Tesla is a remarkable company. In this case analysis, three primary segments of the general environment will be used to assess the competitive advantage Tesla has gained within the electric vehicle industry. Tesla PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. In his revolutionary article - "Five Forces that Shape Strategy", Michael Porter observed five forces that have significant impact on a firm's profitability in its industry. However, the substantial annual increases in operating expenses from $313,083 in 2011 to $1.07 million in 2014 in addition to rising annual interest expenses have resulted in consistent annual net income losses averaging $197,576 between 2011 to 2014. Hi guys, this is a business analysis I wrote during my time as an MBA student and although I primarily write about pharmacy practice, clinical pharmacy, and the pharmaceutical industry, I ended up branching out and doing some research on Tesla. When Tesla entered the automobile industry, many suppliers were not capable or willing to change their production to allow the specialized production of Tesla vehicles. Since its founding in 2003, Tesla’s vision was to manufacture mass-market electric vehicles (EVs) that offered a compelling customer value proposition. It is important to fulfill contractual obligations to the client companies but to also limit their abilities to outcompete Tesla. At this time, no other companies have achieved the same success as Tesla with regards to a fully electric vehicle. The second step is to negotiate with the remaining suppliers for the parts that are deemed essential or a single component. Taking a poll would be an excellent baseline study. Political. 2) Tesla is competing globally in the automotive industry; it is more selective regarding the market not like other competitors since it is only producing full electronic cars. Rivalry among existing firms in electric vehicles industry has become highly intensive. The most likely cause of the increase in total assets between 2011 to 2012 is the 500% increase in inventories, although an increase accounts receivables and PP&E may also make some contributions to the equity ratio. The Porter Five (5) Forces are -. Despite the rapid growth and success of Tesla since 2003, the company has steadily been sustaining net income losses annually since 2011. Rivalry among existing firms in Tesla’s Porter’s Five Forces Analysis. In 2010, Tesla total assets were $386,082 and have increased to $5,849,251 in 2014. A similar relationship could be made with other companies that would be interested in the innovate battery technology Tesla has created. By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another. A short-term solution Tesla should consider is to develop cost-reducing contracts with suppliers that are willing to alter their supply chain production to fulfill parts required in the production of Tesla vehicles. Today, Tesla has continued to focus on this mission by continually making electric cars more affordable to reach a broader consumer base. The general environment for the electric vehicle industry is the external factors that may have either a positive or negative impact on a firm’s business strategy. If a supplier is not willing or cannot accommodate the requirements Tesla needs to produce its vehicles, then alternative parts or suppliers must be pursued immediately. When a new product or service meets a similar customer needs in different ways, industry profitability suffers. Did you find this post helpful? This will be helpful in two ways. The issue with purely electric cars is the fact that they are limited with the ability to be charged. Tesla was named after Nikola Tesla, who was a very successful inventor and scientist of his time. This positive outlook holds despite challenges in expanding the business. The purpose of this analysis is to assess the financial health and stability of Tesla. Tesla Inc. was an American start-up powered by Silicon Valley. The Tesla Roadster became the catalyst which allowed the production of more affordable electric vehicles such as the Tesla Model S in 2013, the Tesla Model X in 2014, and the Tesla Model 3 in 2017. The cost of building proprietary batteries along with solar powered Supercharger stations will take into account for pricing despite the free use of the charging stations to Tesla owners. If the cost of implementing becomes too expensive for Tesla, they should consider acquiring previously owned gasoline stations that are no longer in business or partnering with a major grocery store such as Walmart to install their Supercharger stations alongside gasoline pumps. Tesla was incredibly successful in producing their proprietary lithium-ion batteries with a range of over 200 miles per charge. The unique futuristic design of the cars along with the excellent performance that could rival even the most powerful gasoline powered cars also created a strong desire for driving and obtaining a purely electric car. Three years after going public, its stock price rapidly increased up $291.42 in 2014. High product differentiation electric power train technology: Tesla Inc. has positioned itself as a unique brand in the market with core focus on developing automobiles on electric energy a shift from fossil fuels. The Model S quickly won several awards including 2013 Car of the Year. The company manufactures electric vehicles since 2003 (Tesla.com 2016). The intensity of rivalry among other competitors has steadily increased and is moderately high. By innovating new products and services. Rivalry among existing firms in Tesla’s Porter’s Five Forces Analysis. On onehand, compared with traditional cars, Tesla’s ability to undertake the risk isrelatively lower. The expansion of the global network of Superchargers and the rapid success Tesla has made with their functional electric vehicles allowed the expansion of their firm throughout North America, Europe, Asia, and Australia. Tesla became the first automobile company to successfully create and design a fully electric and rechargeable vehicle that was both beautiful and capable of competing with gasoline powered cars from even the most established automobile manufacturers in the United States. Ever since, Tesla has been on top of the trend towards alternative powertrains in the passenger vehicle industry. Tesla’s current business model has relied heavily on the its “Secret Master Plan”, which was unveiled in 2006. By transitioning into developing hybrid gasoline-electric cars, Tesla will be able to reach a broader consumer base. Unlike other automotive companies, Tesla isn’t just focused on selling cars.The vision is much grander than that: Tesla wants to revolutionize the driving experience. Or perhaps expand hybrid capabilities? These five forces analysis today in business world is also known as -Porter Five Forces Analysis. The unique aspect Tesla has gained, is the fact that the company produces its very own proprietary lithium-ion batteries with a range of more than 200 miles per charge. Tesla, Inc. Porter Five Forces & Industry Analysis, Ken Private Limited: Digitization Project case study solution, Microsoft Goes Online: MSN--1998 case study solution, IPremier Co. (C): Denial of Service Attack case study solution, British Motorcycle Industry at a Crossroads, Chinese Version case study solution, Tootsie Roll Industries, Inc. Porter Five Forces Analysis, Tempur Sealy International, Inc. Porter Five Forces Analysis, Turning Point Brands, Inc. Porter Five Forces Analysis, Tower International, Inc. Porter Five Forces Analysis, Tyson Foods, Inc. Porter Five Forces Analysis, Tata Motors Limited Porter Five Forces Analysis, Tupperware Brands Corporation Porter Five Forces Analysis, Travelport Worldwide Limited Porter Five Forces Analysis, Hostess Brands, Inc. Porter Five Forces Analysis. The ratio analysis will include each of the following ratios: liquidity ratios, profitability ratios, and leverage ratios. Fern Fort University. This includes a long range vehicle that possesses recharging flexibility, one that is energy efficient, low cost, and high performing without compromising design or functionality. The solutions provided for Tesla will be based on the assumption that the company will want to continue to manufacture and develop electric cars. The strength of Tesla’s increasing stock price was the expected future returns. The batteries have been the backbone of the company and being able to sell these batteries to larger and more established automobile manufacturers would significantly increase revenue for Tesla. When one considers an electric vehicle, they simply think of Tesla. The rise of the electric vehicle market was spearheaded by Tesla and its innovative lithium-ion batteries with a range of more than 200 miles per charge. Would they like to expand their powertrain electrical components? However, Tesla continued to experience constant net income losses annually since 2011. Multiple companies have attempted to create an electric smart car to compete with Tesla, but the bottom-line for many of these companies is the fact that their vehicles will never be a Tesla. In other words, Moore’s Law guarantees exponential growth in the tech sphere, promising limitless expansion and an infinite resource of new innovations. By building a large base of customers. 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