SWOT Analysis of Tesla Motors

SWOT analysis of Tesla Motors

The SWOT is also know as internal and external strategic analysis. The Tesla SWOT will elaborate the strength & weakness of, and opportunities & threats for Tesla Motors. It will provide a visual overview that will prompt discussion around the company’s strategy and situation. The analysis can be used to evaluate the position of their business. This can be used to guide overall business strategy session of Tesla Motors. It also can be used to go deep into a specific segment like production, marketing, and sales.

Company Overview of Tesla Motors

Tesla Motors is American energy storage and automotive that manufactures and designs, luxury electric vehicle powertrain components and electric cars. Elon Musk is the founder of Tesla Motors. The name comes from the physicist and electrical engineer Nikola Tesla. Roadster, of Tesla, uses AC motor that comes from Tesla’s original design of 1882. Roadster is Tesla’s first vehicle and is the first produced automobile to use lithium battery cells. It is the first production with a range greater than 200 miles (320 km) per charge.  From 2008 to March 2012, Tesla made sales of more than 2,250 Roadsters in more than 31 countries.

 


Competitors’ SWOT Analysis: 


SWOT Analysis of Tesla Motors

 

Strengths

  1. Energy Efficiency: the most energy efficient car as it uses renewable energy such as solar power. According to Fueleconomy, gasoline engines convert only about 17%–21% of the energy but, electric cars converts 59-62% of the energy. [3]
  2. Supplier to Other Manufacturers: Tesla is a major supplier of car parts for Toyota. It supplies components of powertrains to Toyota; these are used in RAV4 EV, the second-generation car of Toyota.
  3. Ability to Manufacture Environmental Friendly Cars: Tesla has pure and complete advantages over other companies in manufacturing environmental friendly cars. The cars use only electricity; the engines are powered by batteries. It means these cars are not driven by fuel engines and therefore, do not emit carbon dioxides or other air pollutants.
  4. Cost Reduction Advantages: they outsource secondary components to other companies which gave them acquiring cost reduction advantages.
  5. Existing Strong Investors and Partners: Tesla acquired strong investor’s partners in recent years such as Google, Daimler, Panasonic, and Toyota motors.
  6. Safest & Fastest Car – according to Valuewalk, Model X is the safest, fastest, and most capable sport utility vehicle. [1] it has bio-hazard air filtering system and falcon doors. It can accelerate speed from zero to sixty miles within 3.2 seconds.
  7. The Gigafactory – It has finished constructing a factory named Gigafactory. The purpose of this factory will be manufacturing lithium batteries for Tesla cars. The area of the giant factory is 3000 acres.[1] They have started producing lithium-ion batteries.
  8. Supply Agreement with Panasonic – Tesla is in a business agreement with Panasonic in which Tesla is taking Lithium-Ion batteries for its Model S vehicles. Panasonic is a leading manufacturer of batteries in the world. It supplies battery cells which has the highest energy density and industry-leading performance as well. It allowed Tesla to build more than 80,000 vehicles over the years. [8] For the agreement, Tesla can have best performing battery cells from a leading company at a reasonable price.

 

Weaknesses

  1. Bad impact from Model X: Tesla recently launched high-tech car Model-X. The price of Model-X is expensive if compared with that of other cars. When an electric car’s initial price becomes expensive, then how does it differ from a fuel car? It can be ignored by the people who compare prices.
  2. Time-consuming to make a delivery: Tesla says if you order a car, you will have it delivered after one year which cannot be a strong distribution process. The manufacturing capacity is so limited.
  3. Bigger Debt Portion: Tesla has a large portion of debt (and a negative $455 million cash flow) in its financial statement which makes it vulnerable.
  4. The Short Story of Experience: As Tesla has established in the year 2003, it does not have sufficient experience comparing to other car manufacturers like Toyota, Fords, or Mazda.
  1. Separation from Mercedes and Daimler – Tesla is not a strong supplier anymore as it was in the past. It was a major supplier to Mercedes and Daimler. [4] Mercedes-Benz used to take components for next-generation B-Class Electric Drives. But it will not take anymore, according to International Business Times. Mercedes-Benz made an investment over $550 million to build its own battery technology and powertrain. [6] Daimler also divested from Tesla Motors.

In the internal strategic analysis of Tesla Motors [Strengths & Weakness], we found more strengths than weaknesses.

  

Opportunities

  1. The Demand of the kind: The demand of this kind of cars is increasing day by day. But why the demand is increasing? There are some reasons. First of all, it does not cost much to maintain an electric car. Second, when you compare it with fuel driven car, you don’t need to spend a lot of money on fuel if you drive an electric car.
  2. People are becoming more concerned: Fuel driven cars are more harmful to environment. As mass people are becoming more concerned about the environmental pollution of using carbon producing car, they will soon be converting to environmental friendly cars.
  3. Subsidy programs: These cars are environment friendly. Government of a country along with the general people wants to have a green environment which is not harmful to the people. As a result, government offers different types of facilities to these types of car manufactures. Many countries including USA offer subsidies to these types of green energy companies. This makes the company conserve much better potentials.
  4. Cost Reduction: QC processes can enormously reduce these costs drastically if utilized wisely.
  5. Self-Driving Features – Tesla has been working for the invention of new technology for its cars. It has been developing full self-driving upgrade options. It may come in between three to six months, Musk tweeted recently. Though it is not fully self-driven but still it is expected that the new upgrades will be welcome by the public. [2]

 

Threat

  1. Expensive Cars: Recently released model S can cost near to $100,000. Even though, the price may seem reasonable considering the quality; it remains unattainable for most middle class Americans. And when the middle class people are not considered, you may face a huge threat for your business for most of the time.
  2. Strong Opposition: Well-capitalized giant companies expose threats to Tesla. The companies like Volkswagen, Toyota, or Ford have strong capabilities to be competent in the manufacturing field and in the distribution as well. Moreover, electric cars have not reached to every corner in the world. So, the market is still pretty small.
  3. Decreasing Oil Price: The price of the oil and the sales of the car [Fuel driven cars] are negatively correlated. That means, when price of oil falls, people find it more reasonable to buy a fuel driven car. We all know that the price of fuel is declining. If it keeps declining, people will be more interested to buy fuel dependent cars.
  4. Increasing Competitors: The number of companies in producing electronic cars is increasing day by day, that results increasing number of new competitors for example, Volkswagen. There are also competitions from the corporations which produce fuel dependent cars as these are close alternatives.
  5. Less Attractive to Young Generation: When it is about attraction and image, fuel driven sports cars are the most demanded cars in the world because of its unique features. Electric cars are less attractive to young generation.
  6. Simultaneous Production of Cars: Tesla and Panasonic have constructed a mega factory which is capable to producing huge number of lithium-ion batteries. Tesla’s target to produce 500,000 cars by 2018. But building cars is not so easy. It is complicated and requires time to manufacture an electric car.  [10]

In the external strategic analysis of Tesla Motors [opportunities & threats], we found more threats than opportunities.

In Conclusion, Outcomes of the SWOT Tesla

The analysis shows that it has great strength and opportunities as well as weakness and threats. But if we consider the future, it has a great chance to enormous expansion. Also, there are strong threats for this companies. But if Tesla can utilize its strengths and increase it, it may be able to avoid the threats in future and utilize the opportunities.

 

[the Tesla SWOT or Strategic Analysis (SWOT Analysis of Tesla Motors 2017) is conducted in the year 2016 & 2017, and will be kept updated time to time.]


References used in the SWOT Analysis of Tesla Motors

  1. Ten Facts about Tesla
  2. Tesla motors Self Driving Features
  3. Fuel Economy
  4. Tesla Agreement with Toyota and Daimler
  5. Toyota’s Suppliers
  6. Tesla is no longer Supplier to Mercedes 
  7. Tesla & Daimler
  8. Tesla’s Agreement with Panasonic
  9. Tesla Business Agreement with Panasonic
  10. Tesla Gigafactory Problems
  11. Wikipedia Link
  12. Official Site: Tesla Motors

 

Author: faizul

Sheikh Faizul Haque, the founder of GotAbout, graduated from North South University, Bangladesh. His major was Finance and Accounting. Faizul has been writing in business blogs since 2013, also has a strong interest in Behavioral Finance, Risk Management, and Portfolio Management.

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