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Strategic Management

Introduction to Tesla Motors Inc. Analysis

Tesla motors is a 4-wheeler motor company that excels in giving high performance electric cars headquartered in Palo Alto, California. In 2017 the company goes by the name of Tesla Inc. The CEO Elon Musk envisioned this company with Martin Eberhard and Marc Tarpenning in 20 to provide people with environment friendly cars with high performance and great design language. Tesla has become one of the largest 4-wheeler cars sellers in the United States of America (Teece 2018). From 2019 to 2020 Tesla acquired market capitalization of worth 207 US billion dollars surpassing the Toyota which has been the most valuable car companies for years. In 2019 it has been awarded with most plug-in battery-operated cars with model offering Model 3, Model Y, Model X. In this assessment their will be brief analyses on the decision made by Tesla to manufacture motor vehicles in China and also analyze the rise of Tesla and issues the company has faced (Perkins and Murmann 2018).

Overview of Tesla Motors Inc. Analysis

Tesla is been becoming a giant 4-wheeler motor company of the world. The company has been making its move to expand in the market of China. Although, beside the reputation of Tesla it is still been difficult for the company in the market of China as local brand have already have dominance over the market. The company has built its new factory in the city of Shanghai, China to produce cars locally and distribute it across the country. The risk analyses have shown that the company is playing huge gamble with its investment in this country. The approach of making the plant in Shanghai was to lower down the production cost and dominate in the electric car business as medium of transportation of the future. Also, Tesla is making tactical approaches to get its shares in one of the largest car markets of the world (Välikangas 2018). Unlike other foreign car makers Tesla has established in market of China with full ownership rather than with partnership. The company is set up to build models for world wide supply with Shanghai factory as its main base of operation. Tesla is approaching to build cost effective cars in China and sell to other parts of the world with huge profit maximization. Also, the Tesla is only having its significance in the market of USA and some of the market in Europe. Through its China manufacturing facility, the company will be able to deliver its products in most car-oriented market globally. The China manufacturing facility is producing Model 3 the company’s cheapest product to establish it brand in the Chinese market. This plant will be able to avoid higher import duties on their respective products (Zhang et al. 2016).

PESTLE Analysis in China

Political

The government of China has made easy policies for the automakers that are manufacturing electric powered vehicles as a gesture for accepting cleaner and greener technologies for the future sustainability. The government of China has approved Tesla Inc to maintain the full ownership of the Shanghai plant with quicker building of the factory.

Economical

The electric powered cars are demand in market and they are adding in the global economy. The projects related to electric energy are funded by the government of the states. The sales of electric cars are rising with surprisingly 82 per cent in the past years. The cost of production of battery cells have also been dipped which has led to make electric cars with more affordable prices.

Social

The society have started to accept electric powertrain vehicles for better performance and increasing concern towards environment. It has been a priority of the communities to dissipate less carbon footprint to the environment and increase the usage of the renewable energy (Jiang and Lu 2018). The people of China are preferring for better energy alternatives for maintain their carbon footprints.

Technological

The policies of China are always accepting to adapting the cutting edge of technologies and this is the reason for their global manufacturing. The country has been starting to develop embedded technology in automobiles. The technological advancements are quite high in China and Tesla has been getting rid of the excessive import duties.

Legal

The government of China has stricter laws for automobile industry. The government has aimed to reduce carbon footprint by automobiles by applying stricter emission norms. Also, Tesla has been permitted to keep full ownership of their market in China rather than other foreign car companies that had to split their revenue with partnership.

Environmental

The people of China are aware of the fact that climate change is happening and it is deteriorating global health at very quick pace (Teece 2019). The acceptance for products and technology that could increase of renewable energy resources.

Porter’s Five Force Analyses

Competition in The Industry

The competition in the automotive market in China is one of the highest globally. Tesla has to compete with already established local companies. Expanding in the market like China is quite challenging and also when it is a foreign brand in China. The numbers of companies are high in China and they all have enough slice of the market.

Threat of Substitutes

The substitute of electric power train vehicles is very less in the market. Also, Tesla enjoys its success as first movers in this electric technology. However, the established market possesses potential threat of substitute in automotive market. The performance of substitutes is moderate in the market of China and offers lot of opportunities to Tesla (Kendall et al. 2017).

Bargaining Power of Buyers

Tesla products provide good products to their customers. The company has excelled in gaining the markets trust in the past years by introducing products like Model 3, Model Y, Model X and upcoming Tesla Roadster. Although, the product lineup suit people requirement the cars come with a premium price. The low cost of switching is still prevalent and is threat to the company.

Bargaining Power of Suppliers

Tesla have always had low level of incorporation. The control over distribution of the product is low in the company. The size of the suppliers is limited and have very few influences on the automobile sector. The supply level is moderate which empowers the supply but to a certain degree.

Potential of New Entrants

The company is suffering from high production costs and it is a threat for company in long run. The electric power train vehicles business is not widely spread and it make difficult for company to expand with time (Qian et al. 2019).

Conclusion on Tesla Motors Inc. Analysis

Tesla has become one of the largest 4-wheeler cars sellers in the United States of America. The company has built its new factory in the city of Shanghai, China to produce cars locally and distribute it across the country. The risk analyses have shown that the company is playing huge gamble with its investment in this country. The political aspects have been in favor of the company in China. Tesla has produced revenue from its Model 3 with its cheapest model offering. The company is striving to expand in China with its brand recognition. The company has to lower its production cost and make its product available to mass market. The threat is evident in company and has to rectify it immediately as other companies are building electric power vehicles at much approachable price.

Reference for Tesla Motors Inc. Analysis

Perkins, G. and Murmann, J. P. 2018. What does the success of Tesla mean for the future dynamics in the global automobile sector?. Management and Organization Review14(3), pp. 471-480.

Välikangas, L. 2018. Forum on Tesla and the global automotive industry. Management and Organization Review14(3), pp.467-470.

Zhang, N. Fan, Z. Luo, N. Bi, X. Zhao, Y. An, J. Liu, J. Chen, Z. Fan, Z. and Li, D. 2016. Noncontrast MR angiography (MRA) of infragenual arteries using flow‐sensitive dephasing (FSD)‐prepared steady‐state free precession (SSFP) at 3.0 Tesla: Comparison with contrast‐enhanced MRA. Journal of Magnetic Resonance Imaging43(2), pp. 364-372.

Jiang, H. and Lu, F. 2018. To be friends, not competitors: A story different from Tesla driving the Chinese automobile industry. Management and Organization Review14(3), pp. 491-499.

Teece, D. J. 2019. China and the reshaping of the auto industry: A dynamic capabilities perspective. Management and Organization Review15(1), pp. 177-199.

Kendall, K. Kendall, M. Liang, B. and Liu, Z. 2017. Hydrogen vehicles in China: replacing the Western Model. International Journal of Hydrogen Energy42(51), pp. 30179-30185.

Qian, J. Y. Chen, M. R. Liu, X. L. and Jin, Z. J. 2019. A numerical investigation of the flow of nanofluids through a micro Tesla valve. Journal of Zhejiang University-SCIENCE A20(1), pp.50-60.

Teece, D. J. 2018. Tesla and the reshaping of the auto industry. Management and Organization Review14(3), pp. 501-512.

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