Tesla Inc. as a Revolutionary Company

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Introduction

Tesla Inc. is a revolutionary company that focuses on clean energy and electric vehicle production. Stemming from humble beginnings, with the leadership of its CEO Elon Musk, Tesla has projected itself as one of the most valuable companies of all time. Tesla holds a 66.3% market share in electric vehicles, and sells both luxury and mid-entry level cars. Although 2021 saw the EV market only have a 2.4% share among automobiles, it is growing from a niche community to a massive industry (Edelstein, 2021). This paper will examine the electric vehicle industry and Tesla as a company.

Challenges and Opportunities

The electric vehicle industry and markets are rapidly growing, with more than 10 million electric cars on the roads in 2020 and each year seeing renewed records for vehicles produced, bought, and registered. The positive aspect is that more markets outside the United States, such as Europe and China (and broader Asia) are adopting the electric vehicle with appropriate policies and infrastructure (IEA, 2021).

Competition in the Industry

Tesla operates in a highly competitive market of automobiles, as well as a more niche market of electric vehicles, making competition a strong force. Given the low switching costs for consumers, the competition is fierce. Even among a much smaller subniche of electric vehicles, the few firms that have produced or are in the process of producing EVs, there is high aggressiveness in terms of marketing. Tesla is currently leading the EV industry, and as that market share grows, other traditional automakers are attempting to dethrone the company aggressively (Riley, 2019).

Potential of New Entrants

The potential for new entrants is strong, as most major automotive vehicle producers have announced the development of all-electric vehicles, but very few have come to market so far. Once those cars begin to be massively produced and sold, the market may shift significantly. Furthermore, as the technology becomes more available, smaller players in the car industry may choose to produce electric vehicles, potentially at a lower quality and cost to undercut the major competitors.

Power of Suppliers

Suppliers have a tremendously strong hold on the vehicle industry in general, but for electric vehicles that is even more dependent. Car production, especially as technologically complex as electric vehicles, needs a wide variety of parts and materials shipped from all over the world to produce the larger components, that are, in turn, shipped for final production. Furthermore, a major component of electric vehicles is the battery which requires a mixture of rare or expensive metals to produce, the majority of which are difficult to source at an industrial level, giving these suppliers significant bargaining power (Rapoza, 2021).

Power of Customers

The bargaining power of consumers in the electric vehicle industry is moderate. The primary factor is that the switching costs are low, so a consumer can easily switch between automakers based on preference without much compromise as virtually all offer similar features. However, vehicle purchases for most people are a major commitment, and people commonly dedicate themselves to the brand and idea, particularly with socially active brands Tesla.

Threat of Substitutes

The threat of substitutes remains weak for the industry because there are no other viable technologies for vehicle propulsion outside of electric utilized by Tesla and others. There have been some prototypes with hydrogen engines or algae driven fuel as green replacements for petroleum, but none of the technologies have reached maturity or mass production.

Strengths

As a company Tesla has many strengths, with its brand name being widely recognized and synonymous with EVs and innovation. It has a significant lead over competition in various technologies for EVs as well as technologies such as autonomous driving. The company has been able to overcome multiple production issues and establish profitable manufacturing facilities in various countries, including producing its own batteries which is critical for EVs. The brand and the companys results allow to attract new funding and investment making it the most valuable automotive company. It is by far the best in-class of EVs, getting greater mileage on charge and faster charging than other producers.

Weaknesses

Tesla does have a range of weaknesses, including the brands dependence on Elon Musk as the leader. Tesla lacks high volume production and periodically experiences manufacturing complications and delays with shipping. The company also faces some financial uncertainty, as despite being highly valued, it has only recently achieved profitability and remains deeply in debt. The firms dependence on batteries and semiconductors, as with most EVs, make the dependence on rare earth metals highly concerning. Furthermore, there is a limit as too how much the lithium battery can be developed, giving the opportunity for other EV makers to equalize any advantages Tesla may have eventually.

Conclusion

Tesla is operating in a challenging industry, where it is being contested by other automakers while also facing a range of other issues such as supple bottlenecks and customer demand. However, the company has benefits of being ahead in the industry, having resolved many of the technical and logistical challenges of production in years prior. Its brand name is also synonymous with electric vehicles. While Tesla does have an overreliance on its CEO Musk as well as facing some regulatory issues, it is a company known for its adaptability in the industry and market, pushing for more options for consumers.

References

IEA. (2021). Trends and developments in electric vehicle markets. Web.

Edelstein, S. (2021). Tesla is losing US EV market share but gaining luxury share, now outselling Mercedes-Benz. Web.

Rapoza, K. (2021). Chinas rare earths slump a sign of domestic hoarding For EV batteries, and more.Forbes. Web.

Riley, C. (2019). The great electric car race is just beginning. CNN. Web.

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