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Tesla in Ev Market

Autor:   •  November 14, 2018  •  Essay  •  874 Words (4 Pages)  •  79 Views

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As we move closer to Tesla’s 20th anniversary, propose specific actions/recommendations for Tesla to continue surviving/thriving – or even continuing being a preferred stock in investors' mind – regardless of their lacking financial performance.

In order to remain competitive in the EV market and ensure profitability in the future, Tesla needs to address various issues. For one, Tesla should emphasize efforts on their manufacturing efficiency. As stated in their Annual report, Tesla is looking to further expand into foreign markets, incorporate trucks and public means of transportation to its product offering (Tesla, 2017). However, these plans to generate revenue will be rendered ineffective if the current supply chain system cannot be maintained and increase in the future. For instance, moving away from single-source suppliers, in doing so diversifying the supply chain, would reduce supplier power and tackle the problem of severe delays as seen with all previous Tesla models. Moreover, Tesla should consider to even further vertically integrate through acquiring mining companies. For example, buying Pure Energy Minerals located directly at the Gigafactory, would allow to streamline and enhance their supply chain. Moreover, and relating to question 5, we see many developing countries such as Norway, Germany and UK banning combustion engines and solely betting on electric vehicles within the next 20 years. Since Lithium is the only component of batteries which cannot be substituted, it is highly likely that prices will increase in the future. Inevitably resulting in higher costs for the main competitive advantage tesla has, their batteries.  Owning sources for Lithium would enable Tesla to continue thriving, foster their competitive advantage and be less vulnerable towards exogenous shocks. However, they do need to consider the environmental impacts of Lithium extraction.

Tesla has also the opportunity to leverage their Gigafactory giving the competitive pricing for their batteries which are much under industry standards (Tesla case). Licensing their battery technology and other core electronic components to different car manufactures such as Volvo which aims to go fully electric by 2019 or BMW by 2020, would generate immediate revenue and cash-flow without massive upfront investment. Taking into account Tesla´s current state, they will not be able to permanently penetrate the mass markets. Instead concentrating on R&D to continuously innovate would enable Tesla to lead the electric automotive industry but also the domestic and commercial home-use market leveraging both the Gigafactory and the acquisition of SolarCity. Concluding, Tesla can continue being a preferred stock for investors through diversification. By focusing on diminishing their weak spots within their supply chain, acquiring new business and building upon their existing product lines.

 

Bibliography

Tesla. (2017). Tesla Fourth Quarter & Full Year 2017 Update. Retrieved on 26 09 2018 from http://ir.tesla.com/static-files/ae336f83-b5ea-4bd0-966d-ee0dd327f44c

As we move closer to Tesla's 20th anniversary, propose specific actions/recommendations for Tesla to continue surviving/thriving – or even continuing being a preferred stock in investors' mind – regardless of their lacking financial performance.

In order to remain competitive in the EV market and ensure profitability in the future, Tesla needs to address various issues. For one, Tesla should emphasize efforts on their manufacturing efficiency. As stated in their Annual report, Tesla is looking to further expand into foreign markets, incorporate trucks and public means of transportation to its product offering (Tesla, 2017). However, these plans to generate revenue will be rendered ineffective if the current supply chain system cannot be maintained and increase in the future. For instance, moving away from single-source suppliers, in doing so diversifying the supply chain, would reduce supplier power and tackle the problem of severe delays as seen in all previous Tesla models. Moreover, Tesla should consider to even further vertically integrate through acquiring mining companies. For example, buying Pure Energy Minerals located directly at the Gigafactory would allow to streamline and enhance their supply chain. Moreover, and relating to question 5, we see many developing countries such as Norway, Germany, and the UK banning combustion engines and solely betting on electric vehicles within the next 20 years. Lithium is the only component of batteries which cannot be substituted, it is highly likely that prices will increase in the future. Inevitably resulting in higher costs for one of the main competitive advantage Tesla has their batteries.  Owning sources for Lithium would enable Tesla to continue thriving, foster their competitive advantage and be less vulnerable towards exogenous shocks. However, they do need to consider the environmental impacts of Lithium extraction.

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