Company: TESLA, Inc.
Subsidiary: SolarCity, Maxwell Technologies, Tesla Grohmann Automation
CEO:Elon Reeve Musk, since Oct 2008 – Present
Founders: Elon Musk, Marc Tarpenning, Martin Eberhard, Ian Wright, JB Straubel
Year founded: 2003
Headquarter:Palo Alto, California
Type: Public
Ticker Symbol: TSLA
Annual Revenue(FY 2021): $53.82 Billion
Profit | Net income (FY 2021): $5.6 Billion
Products & Services:Tesla Motor Vehicles | Auto service | Financial Services | Energy Storage (Power battery packs) | Solar panels | Lifestyle products | Retail merchandise
Competitors:2018 Kia Soul EV | 2018 BMW i3 | 2018 Nissan Leaf | 2018 Volkswagen e-Golf | 2018 Hyundai Ioniq EV | 2018 Chevrolet Volt EV.
Did you know ?
Tesla models together spell asS-E-X-Y (S3XY)
S = Model S
E = Model 3
X = Model X
Y = Model Y
Table of Contents
Introduction
Tesla Inc. was an American start-up powered by Silicon Valley. Tesla was named after Nikola Tesla, who was a very successful inventor and scientist of his time. He had remarkable achievements in Radio technology and electrical engineering of Serbian descent.
Tesla, Inc., which was Tesla Motors Inc. in the former days, has reached the heights of success as a dynamic automotive and energy solutions organization. It is famous for its innovative approach in the market because of its dominant position worldwide.
Tesla has emerged as one of the most discussed and analyzed companies among business enthusiasts. This SWOT analysis of the very organization will reveal all the significant insights regarding every factor of Tesla business model. Moreover, the overall results of this analysis also include strategic reforms in light of all the SWOT factors, i.e., strength, weakness, opportunities, and threats.
So let’s dig and find out what are the factors which affect this incredible organization’s competitiveness in the global automotive markets.
Tesla’s Strengths
Let’s start with the strengths of Tesla Inc. that will include the positive aspects of the company, which have reinforced the position of Tesla to become one of the most dominant companies in the world.
The following factors which are believed to be Tesla’s stronger points have ensured the company’s profitability, expansion, and popularity, especially in the long term.
1. A Top Employer Company
Any organization is as good as it employs. In the case of Tesla Inc., it is one of the key factors for the company’s remarkable success. Wall Street Journal reports that Tesla has emerged as an ideal company for employees due to its diversity and innovation-encouraging culture.
It has recently been listed as one of the ideal places to work, attracting young jobseekers with fresh talents and energy. The company has also been featured in Forbes’ ‘America’s Best Employer 2021’.
2. Most Valuable Automotive Company
Despite its issues, Tesla’s sales revenue was $53.8 Billion with 936,172 cars delivered to customers in fiscal year 2021. The increase in the number of deliveries and its profitability of $5.6 Billion pushed the company’s market capitalization to over $1 Trillion and surpassed the market cap of top 5 automaker (Toyota, Volkswagen, Daimler, Ford and General Motor) combined.
Tesla has now become the world’s most valuable automaker by market value. [1]
3. Best in-class Electric Cars
Tesla has left behind every other brand in the race of the finest electric cars. When compared by their range, Tesla’s electric cars have proven to be the best covering maximum distances. The recent comparison shows that Tesla occupies the top three places in terms of range. The Tesla Model S will get you the furthest – traveling up to 600 kilometers on a single battery charge. The nearest another brand has got is the Opel Ampera, with a range of 520 kilometers.
4. Tesla Doubles its Electric Vehicle Delivery
In 2021, Tesla delivered936,172 vehicles, an 87% increase in vehicle delivery compared to 2020.Despite the supply chain challenges and shortage of chips, Tesla demonstrated incredible performance in 2021.
5. Cross-sell and Diversification
Tesla has launched a comprehensive insurance program for its vehicles in association with Liberty Mutual insurance company called as InsureMyTesla.
6. Innovative Company
Tesla has a very high rate of innovation, (not to forget the recent developments of world’s first fully electric semi truck and new sports car). Therefore, the market trust and expects the company to develop competitive and profitable products which of course leads to substantial financial gains.
7. Better Positioned
According to experts, Tesla is in a better position to survive economic uncertainty compared to other US automakers. For one, Tesla’s revenue increased to $53 Billion in 2021 and delivered more than 900,000 cars by the end of 2021, which is about double compared to 2020. [3]
8. Unconventional but Effective Strategies
Tesla’s unique but highly effective management strategy was recently exposed to the public after its employee handbook was leaked. It revealed the unconventional secrets behind its success. Just like its founder, Tesla’s handbook is no-nonsense, direct, and to the point. The company hires the smartest and most innovative employees and holds them accountable by setting clear and concise targets. [4]
Tesla’s Weaknesses
All the internal factors in a company which causes any damage or bounds performance evaluation are identified weaknesses in the SWOT Analysis. So, these are some of the shortcomings of Tesla’s organizational structure, which reduce its competitiveness and business growth.
1. Manufacturing Complications
The higher standard of innovation, the greater will be mechanical complications and production risk factor. Tesla faces continuous launch, manufacturing and production ramp delays while launching their new vehicles and other products.
For example, Tesla faced endless manufacturing challenges when they were about to launch Model X, which lead to constant delays for distribution. Similarly, the company went through extreme troubles while manufacturing Model X’s battery module assembly line at Gigafactory 1.
2. Unable to meet demand might affect brand value
Due to highly experimenting and complicated procedures, Tesla’ might face an unbalanced supply and demand, unable to meet the production ramp in the future.
3. Lack of High Volume Production
There is no doubt that Tesla is the pioneer of actual energy-saving cars. But it has failed to produce high volumes of automobiles for any of its models. Even now, as the company plans to manufacture Model 3 vehicles at high volume, it faces issues in terms of production cost and management resources and space expansion in Gigafactory 1.
4. Shortage of Batteries
In the annual shareholder meetings, CEO Elon Musk accepted that their production rate has decreased due to the limited supply of batteries. The shortage directly affected the sales of electric vehicles and energy storage systems.
5. Elon Musk as Tesla’s Sole Representative
Tesla accepts that the company is a ‘one-man show.’ Sadly, that man, Elon Musk has a lot on his shoulders to give his hundred percent to the company. Musk is also deeply involved in other projects like space launch vehicles at Space Exploration Technologies Corporation and The Boring Company.
6. FinancialUncertainty
Immense financial capabilities allow companies to compete for market share more effectively. Tesla has outstanding debt of $5.38 Billion.If the company is unable to generate enough cash flow to repay its debt, then there is a risk of delaying expansion, reducing investments, selling assets, etc.
7. Employee Safety Concerns
Tesla was recently fined for creating a tent production line without a permit or safety inspection. Also, the company did not train workers about the risks of working in the tent for long periods under the scorching California’s heat. The soaring temperatures in the tent could have caused breathing issues for some employees. [6]
8. Leadership Wrangles
Friction and conflict between management and the board of directors can undermine productivity and long-term success. Tesla’s management and board have been engaged in several power tussles. [7]
9. Tesla Faces Lawsuit over Sexual Misconduct
Earlier, six Tesla workers filed a lawsuit alleging sexual misconduct and harassment at the workplace. The women have complained that the company fosters a dark culture of sexual misconduct. They also alleged that they were cat-called and were frequently subjected to shameful remarks, groping, and misogynistic behavior.
Tesla’s Opportunities
The opportunity section of this SWOT Analysis emphasizes the emerging chances of growth for the company. It is an external factor which, when identified, can help Tesla to improve its business performance, management structure, and strategic growth and other aspects.
1. Sales expansion in untapped Market
The most significant opportunity for the company right now is the Asian market, which is still unsaturated in the field of automotive and renewable energy markets. Especially in the situation where Tesla needs to expand its global market to increase its financial stability and stronger market presences.
2. Less Expensive Car
Tesla is expensive due to its unconventional reliance on innovation, which requires maximum financial support to entertain new technology.
Recently, Tesla has launched Model 3, which is a more affordable version of Model S with less range, power, and fewer features. However, it is an excellent opportunity for Tesla to expand the size of their audience market.
3. Bringing battery production technology in-house
Tesla intends to make its own battery cells. The move can be a big game-changer as it will help the company to increase its manufacturing rate while reducing its production cost. Currently, Panasonic is their primary supplier of batteries.
4. Introduction of pick up truck
According to National Automobile Dealer Association market share data, Pick up truck accounts for 17.6 percent of the US automotive market, which has huge opportunity of growth in Electric Vehicle. Cyber Truck can bring a lot of growth opportunities for Tesla in this segment.
5. Market Confidence in Tesla
The stock market has shown confidence in Tesla after beating the projected car deliveries. As a result, Tesla has reached a Trillion Dollar market cap.
6. Exploit Air-Taxi Market
Demand for innovative urban air-taxi services to supplant conventional taxis and reduce traffic congestion and pollution is projected to increase drastically by 2025. Tesla has the expertise and technology to deliver electric vertical takeoff and landing (eVTOL) vehicles and a second-largest shareholder has already invested millions in air taxi startup Lilium.[9]
7. Hertz Books Order for 100,000 Tesla Cars
In a bid to meet the rising demand for electric vehicles, Hertz plans to buy 100,000 Tesla cars. However, a deeper reason for such a large purchase is staying two steps ahead of their rivals that are having trouble fulfilling the demand for gasoline-powered vehicles due to a chip shortage. This is great for Tesla as it hasn’t been able to successfully sell a large fleet of its popular electric vehicles.
Tesla’s Threats
The threat factor is combined with the phenomenon which stops the company from taking full advantages of the benefits that can be derived from the available strengths. Therefore, these are the few threats which Tesla faces to maintain the business despite the unpredictable conditions of the market.
1. Product Liability Claims
Despite Tesla’s premium quality assurance and high standards of manufacturing, the automobile industry, in particular, is accustomed to facing significant product liability claims which the company’s fears to be one of the biggest financial blows.
Tesla has launched many autopilot vehicles, and not all of them have been successful in case of an accident. The company has faced lawsuits and claims related to the failure of technology in their products. If these liability claims continued, then Tesla may be subjected to greater financial setbacks.
2. Extensive Competition
Tesla, Inc. faces aggressive competition from both alternative fuel vehicles (Hybrid, Plug-in hybrid, fully electric car) and self-driving technology. Many automotive brands in the luxury segment like Mercedes, BMW, Audi, Lexus and in the economy segment like Toyota, Ford, General Motors, Volvo are getting ready for a fierce competition.
Many brands are not only launching or planning to launch their environment-friendly-Self-driving technology but also, they are offering them at a comparably lower price. It is a definite threat for a company like Tesla, which thrives on its unique value for innovative cars which are extremely expensive and unaffordable for many.
3. Product Defects
Due to highly complex engineering for innovative vehicles, Tesla’s cars and other energy products have exhibited major flaws in many cases. The defective products often have weaknesses in design, manufacturing, and other features which can harm the company’s image permanently.
4. Long term confidence
For any company, the assurance of long term sustainability is essential to maintain the public image and the company’s morale. Tesla, due to its unstable manufacturing conditions, suffers from disbelief among the public about its long-term existence, which can result in a deficiency in further business development.
5. Custumer Adaptation
Any business run along the lines of customer’s acceptance. If the public is ready to adapt change, companies benefit from the innovative range of products. However, it can be a slow, unforgiving process, producing new challenges for companies like Tesla. The organization highly depends upon customers willingness to adopt electric vehicles.
6. Self-Driving Cars Are Still a Concern for Pedestrians
In a survey from YouGov, US adults still feel unsafe to walk around self driving cars. Especially, people above the age of 55 are the most afraid to be around self-driving vehicles.
7. Disruption of Supply Due to Shortage of Materials
Tesla can face major suspensions in the supply of manufacturing materials due to the increased prices. The company uses aluminum, steel, lithium, nickel, copper, and cobalt, as well as lithium-ion cells from suppliers. All these materials have volatile prices, which can affect the company’s production line severely in the future.
8. High-Risk Factor Due to Usage of Lithium-ion
Tesla uses lithium-ion cells in their battery packs. Lithium is a highly reactive and explosive element, which increases the risk factor of our products. Tesla has faced a a few caseswhere their cars have caught fire and vented smoke, which has defamed the company on a major level.
9. Lack of Regulations for Self Driving
As there are no proper regulations for self-driving in many countries, including the US, Tesla’s sale is effected by the self-driving restrictions in many areas. This confusing situation of legal complexity increases uncertainty about Tesla’s self-driving project’s future.
10. Elon Musk’s Erratic Behavior Affecting Tesla’s Reputation
Tesla’s entire reputation is built upon the revolutionary personality of Elon Musk. But recently, his strange behavior and impulsive reactions are affecting Tesla’s worth as an iconic, innovative brand.
Recently his marijuana smoking incident on Joe Rogan’s podcast created controversy for being inappropriate. Subsequently, Tesla’s stock value dropped close to 9 percent by this unexplainable behavior from a man who is a visionary genius.
Elon Musk appeared to smoke weed during a live podcast interview, and Tesla shares dropped sharply: https://t.co/UsftcPJd5a pic.twitter.com/hZzYUB3ST6
— CBS News (@CBSNews) September 7, 2018
10. Economic Uncertainty
Even though Tesla is better positioned to survive economic uncertainty than competitors, the looming recession is still a major threat to the company. [10]
11. Toyota Increases Production for its EV Vehicles
It seems that Toyota is going to give Tesla a solid run for its money. The Japanese automaker announced it’s going to ramp up its electric vehicle production, aiming to sell up to 40% of its EV vehicles by 2030. In a relatively short time, Toyota has managed to get a bigger slice of the EV market share.
Conclusion
In this SWOT analysis for the company, we highlighted each of the strength, weakness, opportunity, and threat which Tesla faces in the market. To grow its market share and financial stability, Tesla needs to take vigorous actions.
Yet there is no doubt that despite the negative factors, the company is an ultimate symbol of progress and innovation.
References & more information
- Korosec, K. (2020, July 1). Tesla Blows Past Toyota to become Most Valuable Automaker in the World. Tech Crunch
- Wagner, I. (2020, July 15). Tesla’s vehicle deliveries by quarter – YTD Q2 2020. Statista
- Pettitt, J. (2020, May 9). These experts think Tesla’s in a better position than other US automakers to survive the recession. CNBC
- Kelly, J. (2020, February 14). Tesla’s Leaked Employee Handbook Is As Unconventional As Founder Elon Musk. Forbes
- Kolodny, L. (2020, July 2). Tesla shares soar after reporting a big beat on second-quarter deliveries. CNBC
- Chokshi, N. (2020, May 13). Tesla Posts $105 Profit for Quarter, Extending Rebound. The New York Times
- Atkins, B. (2019, February 25). Tesla’s Leadership Challenge. Forbes
- Shelton, R. (2019, September 13). Elon Musk is not the problem at Tesla — blame the people around him. CNBC
- Korosec, K. (2020, July 2). Tesla delivered 90,650 vehicles in the second quarter, a smaller-than-expected decline. Tech Crunch
- Hawkins, A. J. (2020, June 8). Tesla’s second-largest shareholder invests $35 million in air taxi startup Lilium. The Verge
