Tesla Motors as the Pioneers and Trailblazers of the Automotive Industry

Tesla Incorporation (Formerly known as Tesla Motors, Inc) is a leading American automotive and energy company founded by Martin Eberhard and Marc Tarpenning in July 2003 based in Palo Alto, California. Tesla focuses on creating a sustainable energy based in the ecosystem is the reason behind the companies focus on clean transport and clean energy. The company's name is a tribute to Nikola Tesla, an outstanding Serbian- American electrical and mechanical engineer who had a great contribution on the design of modern alternating current electricity supply system. Nikola Teslawas also known for his discovery for radar technology, X-ray Technology and Tesla coil.

Tesla Inc since October 2008 is led by one of the well renowned CEO of the generation- Elon Musk, a self made man with an outstanding entrepreneurial skill. Musk is also the designer and CEO of SpaceX, the aerospace manufacturer which introduced orbital launch system that can be reused many times just like aircraft. His vision and innovations have helped him to earn a reputation as “a real life Iron Man” with reference to the super hero movie of the Marvel Universe (Smith, 2014). Elon is also known for his bold point of views and proclamations. Tesla Inc’s future ability depend on the Musk’s shoulder. In 2015, the CEO declared that Tesla’s market capitalization would outperform Apple Inc’s $700 billion in the next ten years. This means Tesla will have market capitalization more than Honda Motor Company, BMW and General Motors Company. Other carmakers would rarely dream of achieving what Elon Musk has achieved till date. Tesla Board of Directors granted Elon Musk 52,74,901 stock options that he can exercise to lead the company towards specific performance or its desired goals.

Tesla believes in “high risk, high reward”. That’s why employee works long hours and the working environment of Tesla is very intense. The company is a prime example of advancement in energy alternatives, which is a reason why it wouldn’t initiate lawsuits who will use its technology on good faith (Tesla Motors, 2016). Tesla has become one of the leading companies in the world to sell luxurious vehicle. The company is not only involved in selling but also in philanthropist activities; it has donated $37.5 million to STEM education in Nevada and has distributed number of solar powers to disaster affected areas. The company is more concerned about the environment because of which they believe in using renewable energy sources, and eco-friendly products. In NASDAQ it is listed as TSLA. As of 28th Sept, 2019 the stock price of Tesla is $242.13 per unit.

The American company manufactures automobiles, battery and solar panel makes them unique. It manufactures vehicle at Tesla Factory situated in Fremont, California. In 2018, Tesla was ranked as the world's best manufacturer for selling plug-in passenger car. A plug-in passenger can be operated with an external source of electricity, such as wall sockets or through the energy stored such as battery packs that can be recharged. These cars are better than combustion energy vehicles in terms of cost, environment and operation. In 2008, Tesla launched the Roadster, which was the first luxurious electric car that had a positive response from the customers. After this, Tesla launched Model S, Model X and Model 3 cars which are less costly in order to target the market. Model 3, recently won an award for 2019 IIHS Top Safety Pick+ Award and it also won 5 star safety rating from EURO NCAP. Tesla has proved that how well an electric vehicles can perform in our day to day life. It changed the mentality of people or competitors to show the new approach of selling the cars. Starting Aug 28, 2019 Tesla launched their own insurance called Tesla insurance which is quite competitive insurance that will provide its users up to 20% lower rates, and in some cases as 30%. Right now it’s for customers in California but in the near future it will provide all over the states. A customer can cancel their insurance at any time they want and offer an affordable monthly payment without any hidden fees or additional charges.

Tesla instead of selling through some dealership franchises, they sell through their own networks and also accepts online orders. In order to attract the early adopters, Tesla offers “resale value guarantees” to customers. This program gives customers an option to bring back their vehicles between 36 to 39 months after delivery for a predetermined resale value. Because of the massive publicity and word-of-mouth, Tesla is getting a wide demand for vehicles and it is trying its best to fulfil those demands.

There are many different ways that Tesla generates revenue rather than selling only cars. It sells its components to other manufacturers, updates software on vehicles and through selling of regulatory credits from energy tax credits to generate revenue. The most significant way of Tesla generating revenue is through “Tesla Energy” which is a division of the company that offers battery based energy power solution for home, business and utilities. It sells solar panels, solar roof tiles, powerwall, powerpack and Megapack batteries that helps businesses, utilities and home owners to manage and consume the renewable energy generation. Along automotive and energy products there is a product called GigaFactory-1 which helps in significant reduction of energy cost. Tesla is creating thousand number of jobs because of its production of large number of batteries.

People who are really concerned about the environment and looking for an electric car with safety features, latest technology go for Tesla vehicles. Usually, the user of Tesla cars are older people with high income and the one who owns a house. Talking about the median people who are driving Model S and Model X is under 54 years old. Model X cars are owned by 29% of women and 71% of men, whereas 77% of men and 23% women own Model S.

Issue Statement

Although Tesla has become an established well known brand, it’s facing a number of problems. The company is facing difficulties in meeting high customer’s demand which has resulted in lengthy waiting time for customers. Tesla’s customers have to wait for a longer period of time for customer service because of numerous delivery of vehicles. Tesla’s competitors like BMW and General Motors are also indulged in manufacturing electric vehicles with higher production and they’ve high distribution capabilities than Tesla.

Also, with a decrease in gas prices and difficulties in finding supercharger stations, it has become difficulties to Tesla in selling their cars. Tesla’s 2017 Model S was having a problem with suspension and Model X faced a hardware issues. Also, Model S car is 50% more expensive to repair than other cars, and crashes 46% more often. Talking about the Model X cars, it crashes 41% more often and has an accident chances of 89%. It shows that Tesla cars are more prone to crashes and are very expensive to repair.

The challenge for Tesla is also public’s opinion and their comments about Musk and his tweets. They’ve also resulted in the decrease of the share prices of the company. Although Tesla claims of their safest cars, Tesla's safety regarding new technology has been questioned. In March, 2018 a model X car crashed in the mountain near the highway barrier which resulted in the death of the driver whose name was Walter Huang. Although, semi- autonomous system was active during the accident, Huang’s wife complained about the vehicle not being working properly around the area where the crash happened. But Tesla blamed Huang saying the reason for the accident was his carelessness in driving. On May 8, a Model S driving customer and one of the passengers died in a fatal car accident in Florida. The vehicle collided in the wall and was caught by fire. The National Transportation Safety Board investigated the accident and focused on the battery fire that resulted in the crash. Most of the Tesla’s car accidents have occured when autopilot was on. Well, most of the people believe that Tesla has exaggerated Autopilot’s safety and driving techniques to sell their cars. Tesla has claimed Autopilot to be more safer than what it is. Tesla has also been criticized for using too many robots for Model 3’s production. Because of the automation, the production process of Model 3 was slowed down. Later on, Musk tweeted about the automation and took full responsibility.

Also, Tesla failed to report injured employees while working, avoided some safety measures and trained employees for dangerous work without any sufficient training. Since 2013, California Safety Agency found 40 violations from Tesla (Business Insider, 2019). Their former employees have claimed that Tesla uses puncture holes for batteries and they gave false data regarding the production of Model 3 Sedan by upto 44% (The Washington Post, 2019). The other employee claimed that Tesla was involved in unauthorized hacking of employee’s devices and surveillance.

Tesla also faced difficulties in producing solar roof tiles because of assembly line issues. Even until April 18, the installation for solar panel wasn’t begun for the customers who weren’t Tesla employees. Not only employees, Tesla’s shareholders filed a lawsuit against Elon Musk when he gave a statement about making the company private which resulted in manipulating stock prices and misleading investors. According to the Wall Street Journal, Tesla promised of making 20,000 Model 3 vehicles but ended up making only 2,685 vehicles. Well, it shows that Tesla comes first on promising a lot to customers, but when it comes to delivering of the demands, they are always late.

There are numerous challenges for Tesla in the near future. With the increase in demand for Tesla vehicles, they’ve started in expanding their business. The company plans to assemble in Netherlands and specialized production plant in California. It has invested multi billion dollar investment in ‘GigaFactory’ situated in Nevada that will enhance the production of electric vehicles and electric alternatives that are battery powered. Tesla also entered into a strategic partnership with Panasonic Corporations in order to reduce the cost for producing lithium ion battery packs. The company’s 2015 annual report suggests that Tesla will invest $1.5 billion in capital expenditures for the installation of Model 3 machineries, opening of 80 retail and service centres and start of 300 new supercharger locations (Tesla Motors, 2015). These bold plans will either create a history in the market for energy revolution or take a company to a high debt.

On April 20, 2017, Tesla recalled 53,000 vehicles worldwide out of 76,000 vehicles that were sold in 2016 because of faulty braking system that could stuck and prevent vehicles from moving (Vox, 2017). On March 29, 2018, Tesla recalled 123,000 Model X cars that were built before April 2016 due to vulnerable power steering bolts that had a chance to fail and customers had to drive in increased force in order to control the vehicles (CNBC, 2018).

Strategic Direction

Company’s vision, mission, business and marketing strategy:

Vision: At first, Tesla’s vision was to accelerate or focus on world’s transition to sustainable transport. Later on, in mid 2016 Elon Musk changed the corporate mission to accelerate or focus on world’s transition to sustainable energy. This changed in a statement reflects the company aims towards capturing market opportunities for sustainable energy. The new mission explains the use of energy storage products in addition to electric vehicles. The component “to accelerate” refers to the way of pushing Tesla towards advancement in technology and standardized products with the use of renewable energies. “World transition” refers to the company’s aim to capture global markets in terms of electric vehicles and related products. The other component “sustainable energy” refers to the mission statement that Tesla carries in order to achieve its objectives by producing electric vehicles and other related products.

Mission: Tesla’s vision is to create the most appealing vehicles to establish themselves as the compelling company of the 21st century by moving people choice to electric vehicles. Tesla wants to establish themselves as the compelling company by the use and introduction of new technology through manufacturing and designing the world's best electric vehicle cars. Tesla satisfies the “21st century component” which means it focuses on producing vehicles that are more safe to the environment. Tesla wants to be a dominant car company in the market by establishing its new factories in different countries.

Core competencies: Tesla’s core competencies comes from focusing on improved batteries and inverters, powertrain technology and vehicle engineering. Tesla is a leading technology company that uses a renewable source of energy to manufacture its products. Instead of using fuels, Tesla’s car uses a battery pack where energy can be stored by charging. Tesla with 20kw charger can travel 60 miles per hour unlike other company’s cars. Tesla’s cars have been designed very well with every function controlled by the software. This enables company to timely check the technical function and software of the cars just like ok google or siri. It provides autonomous driving facilities unlike other cars in. In the future, there might be a shortage of gasoline and the cost of cars that use gasoline will touch high prices that people could hardly afford. During this time period, people will look for electric cars because electricity is a renewable source of energy. As mentioned earlier, Tesla sells car directly instead of franchised dealership. Unlike other car companies that put charger, electric controls in electric bay, Tesla putsat left room under the hood called frunk. Elon Musk can also be considered as the core competency of Tesla because there can hardly be another CEO like Musk who has outstanding skills and knowledge with an exceptional brain. The exceptional thing about Tesla is that they focus on providing quality products thinking about the environment and keeping profit as their second choice. The way Tesla invests in Research and Development, hardly any company invests.

Business Strategy: Tesla at first, instead of focusing on producing number of cars with affordable cost, it focused on creating a luxurious expensive electric cars to compete directly with the competitors. Tesla focuses on value driven factors rather than cost driven factors. Tesla uses generic strategy to capture and compete in the market. Under this strategy, Tesla introduces new technology and aims at manufacturing cars and other products with appealing design with advancement in technology. Because of which Tesla can compete with its direct competitors like BMW, General Motors and Toyota.Tesla uses this strategy to attract early adopters, to enhance company’s performance and increase sales. Beside generic strategy, Tesla uses intensive strategies in order to compete in the market and ensure growth. Well, we can see how Tesla has gradually evolved in the market. This is mainly because of the company's profitability, use of advance technology and the popularity of its brand.

Tesla uses broad differentiation strategy which helps to establish competitive advantage that helps to differentiate one company from others. The company attracts all the potential customers who are interested in environmental products. Their products are also different in a sense, they use electricity instead of gasoline and has a unique design of cars. Tesla aims at using environment friendly technology which other companies lack. During the starting time, Tesla used differentiation focus as its generic strategy to attract early adopters in the high end market to sell their products. Early adopters are more inclined towards buying new products. It attracted early adopters at first, then moved to larger market. Since Tesla is already successful in establishing itself as one of the renowned company, it uses broad differentiation strategy which is also the reason that it doesn’t limit itself only in selling electric cars, it sells a number of products like batteries, solar panel also. Talking about the co-operative level strategy, it uses strategic alliance that’s it has a partnership with Panasonic in terms of research and development for batteries. In terms of international level, it uses transnational strategy which means it has expanded outside US like Asia, Canada and Europe to target the set audiences and sell products internationally.

Market Strategy: Unlike other car manufacturing companies who sell cars through franchised dealership, Tesla uses direct sales to sell their car which also makes them unique. Tesla has its own showrooms around the world to provide for its product development and customer services. Though the strategy of selling the products by closing its showroom was marked risk by many- it gave a high success in 2018, also the sign for the upcoming years are promising. It also has online facilities, where customers can customize their products and order online. Tesla’s primary strategy is market penetration strategy where it sells huge number of electric vehicles in order to capture market with an objective to increase market share and revenue. Tesla uses product development as the secondary strategy where it focuses on the growth of the company by producing new related products using advanced technology. The best example is Tesla selling solar panels, Roadster which is Tesla’s first electric sports car. Tesla invests lots of money in Research and Development in order to meet customer’s demands. Talking about the tertiary intensive growth strategy, Tesla uses market development which means entering new markets in order to gain global business. For an example, the company seeks for continuous approach of establishing new offices. This strategy gives a glimpse of Tesla’s mission and vision statement of gaining global leadership and establishing itself as the number one company with the use of advanced automated technology that are focused on environment protection. The differentiation strategy favors differentiation strategy by introducing new products in the market.