Tesla Case Study

...

problems is the lack of liquidity. Even though they had high sales of the new Model S in 2013, the company continues to have lost over 70 million because of the large sum of debt, the slow rate at which clients are buying Tesla motors and failure to achieve planned cost reductions and controlling operational cost. Another weakness is that Tesla motors founded in 2003, they are an extremely young company with low brand equity and expertise in auto-manufacturing industry compared with well-established company such as Ford or General Motors. Finally there isn’t enough infrastructure to support all electric vehicles, and with batteries mileage range going up to 300 miles then their needs to be more charging stations around for people to use.

Opportunities

One of the main opportunities is the customer awareness about benefits of having electrical car, especially due to the rise in the cost of oil because the quantity is decreasing and increasing concerns about pollution and global warming create a good opportunity for the company to generate demand. Also, US governmental subsidy programs and loans for green-energy companies help to find additional investments for growth, as well as government incentives across many countries in support of green-car adoption will encourage customers to purchase. Finally, the company is in the market segment which is relatively new, largely untouched and rapidly growing in terms of demand. This gives Tesla a great opportunity to expand and produce more vehicles, if they can do this and market efficiently they can acquiring more market share and earn more profit.

Threats

Due to the attractiveness of the market, Tesla could see other established manufacturers entering the market with greater economies of scale capabilities and higher expertise in automobile market. This would ultimately lead to the other company’s position their car within lower prices, taking away potential customers. This could also lead to other competitors investing in alternative energy technologies and potential major breakthrough such as a hydrogen powered vehicles. This would cause a damper on Tesla‘s current technology advantages. Another threat is that if another economic recession was to happen, or a significant drop in oil prices can affect the sales of Tesla. Lastly electric vehicle related accidents, for example a fire could the effect the way people perceive the products, and Tesla could lose reputation as well as customers.

Conclusion

All in all I think that the company is in good shape to grow and become better if they implement certain aspects and are ready to compete with competition. From an investing point of view I think that Tesla is an intriguing investment opportunity, although one with a good amount of risk. Competition in the auto industry is fierce, with companies entering the electric vehicle market with lower priced cars it will be a tough challenge for Tesla. There are also risks involved as to whether the company can ramp up production quickly enough to meet demand.

However, I believe the sales of the Model 3 with be a good standpoint as to whether Tesla with become the major force for electric vehicle. Strong sales of the car could drive significant top-line gains when it comes to market. Looking at the short term, costs will likely remain high, and I expect more debt and equity offerings to pay to boost the production of cars. Long-term, I think the company will be a huge success, if the company can adapt and strengthen to allow the ability of lower costs, (which can be made possible through its Gigafactory), and boost production capacity in a timely fashion. We live in a world where oil is running out, we live in times were humanity is thinking of the future and how we can sustain out world. Oil, is fading out and long term I believe we will see electric cars taking over, as well as other technology such as self-driving cars. Tesla has the advantage of being one of the major electric car companies, and the popularity of electric cars is going massively grow in the future. I think tesla is in a great position right now, but like any company in a growing market, they need to continue to research and develop and change with the market to gain that market share. I’m excited to see what the future holds for Tesla.

...