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Tesla Overview
Neither Tesla nor Elon Musk needs any introduction to be fair. Tesla as we all know is a global leader in electric vehicles and clean energy company that started its journey in 2003. Since 2008, Elon Musk is the CEO of Tesla and the company has grown by leaps and bounds to acquire a market capitalization of USD 682.5 billion making it the 6th most valuable company worldwide. Moreover, Tesla holds the largest market share in the US electric automobile market with a market share of around 75 percent.
In this article, we delve deep into a meticulous SWOT analysis of Tesla to recognize its internal strengths and weaknesses. Besides, the SWOT analysis also looks into the opportunities and threats prevalent in the external business environment. In case you wish to learn more about SWOT Analysis, you should definitely go through our elaborate SWOT Analysis guide. As of now, let us get started with Tesla’s SWOT analysis.
Table of Contents
An intelligible and detailed SWOT analysis of Tesla
Tesla’s Strengths
Leader in EV segment: Tesla is a global leader in the EV segment with 21% market share (ET, 2022). The company delivered record 936,172 vehicles in 2021 which was an 87% increase compared to 499,550 vehicles sold in 2020 (ET, 2022).
Unique Leadership: Tesla is headed by Elon Musk who is considered a transformational leader and inspires the employees to innovate with the new products. Further, he is also a vision-oriented personality. His innovations include Tesla, which designed the world’s first-ever premium all-electric sedan named Model S (Tesla, 2022). Elon Musk has also founded various other innovative ventures like Space X, a space tourism company that enables people to travel to Mars. Additionally, Elon Musk also incorporated PayPal which is an online financial services company.
Strong financials: Tesla’s revenues are rising continuously on a year-on-year basis. The revenues for 2019 amounted to $24, 578 million which increased to $31, 546 million in 2020. At the end of 2021, the company’s revenues were $53,823 million. The net cash flow also tripled in the last two years, increasing from $6783 million in 2019 to $18,144 million in 2021 (Tesla, 2022). The increase in cash flow can be beneficial for the company while overcoming any external threat.
Rare R&D capabilities: Tesla has launched various technologies in its vehicles that include Tesla Autopilot wherein the car can steer itself and prevent the driver from crashing by automatically lowering the speed and maintaining adequate distance from the vehicles as well as pedestrians. Furthermore, Tesla is also known for its wireless chargers and supercharger that can charge the battery in 15 minutes. In addition, Tesla has developed a battery system named Power wall that can store solar energy and it automatically recharges when exposed to sunlight which can be used to power the vehicles (Naik, 2021).
Sustainability: Tesla contributes to environmental protection through several initiatives. 100% of the scrapped batteries are recycled which prevents the generation of e-waste. Tesla also minimizes the wastage of resources by consuming less water compared to its competitors. The company is planning to install a rooftop water harvesting system in its factory in Texas that would result in savings of 7.5 million gallons of potable water. Further, Tesla’s Model 3, X, and Y are rated 5 stars by the US, EU, and Australian car safety agencies
In addition, Tesla has a strict supplier’s code of conduct wherein the company sources products only from those suppliers that extract minerals in an environmentally friendly way (Tesla, 2020). The contribution of the company towards sustainability is a successful strategy for attracting customers who are increasingly preferring environmentally responsible brands. Hence, its sustainability quotient can be considered one of the core strengths of the company.
Tesla’s Weaknesses
Vehicle safety issues: Recently, Tesla had to recall half a million vehicles because of the defects in the latches of the front hood wherein the hood popped up automatically on several occasions (Gibson, 2021). Further, the cars have witnessed issues related to cruise control as well wherein the cruise would automatically get activated when drivers shifted the gears (Wang, 2021).
The exploitation of employees: There have been several instances when the female employees in the organization had to face sexual harassment and recently the company was sued by six employees in this matter (TOI, 2021). Further, the workers are forced to work overtime with no breaks due to which there have been many instances of severe injuries at the workplace (Wong, 2017). The company must ensure the satisfaction of its employees as it would lead to an increase in productivity.
Inability to expand to emerging markets: Tesla surely holds the largest market share in the US EV market. However, Tesla has still not been able to penetrate crucial emerging markets like India which hints at the inability of the company to expand effectively and tap potential markets beyond the US. This is where Tesla needs to undertake an immediate management strategy.
Tesla’s Opportunities
Expansion into emerging markets: Tesla can expand its operations in emerging EV markets such as India, Brazil, and Thailand. The trend of EVs in India is on the rise which is evident from the fact that sales in 2021 increased by a huge margin of 168% compared to 2020. Further, the EV market in India is predicted to grow at a CAGR of 36% till 2026, thereby presenting a positive opportunity for the company to enhance its presence (Bhardwaj, 2022).
Likewise, the sales of EVs in Brazil also witnessed a rise of more than 50% in 2021 compared to 2020, and the EV market in Brazil is expected to rise by 68% till 2027 (Bnamericas, 2022). In addition, Thailand’s government’s plans of selling 1 million EVs by 2025 can be a comprehensive opportunity for Tesla to increase its footprints and profitability (Carter, 2021).
Introduction of affordable EVs: Tesla’s vehicles are a lot expensive with a starting range of more than $46,000 for the Model 3. Tesla should research and build an EV in a mid-range of $15,000-$20,000 to widen its customer base. Especially when it comes to markets like India, affordable EVs will be very crucial to the success of Tesla for tapping customers.
Scalable in-house battery production: Tesla manufactures just 4680 batteries on its own currently and sources most of the batteries from third-party vendors (Jin, 2022). The company should invest more in the battery infrastructure and produce more batteries on its own. This would ease the supply chain problems to some extent and the company would also have greater control over the production process and quality.
Increase in fuel prices: The continuous rise in crude prices in the last 1 year because of various factors such as shortage of supply due to corona and now the disruption in supply from Russia as a result of worsening relations with many nations because of the Russia-Ukraine war poses a significant opportunity for Tesla.
Tesla’s Threats
Shortage of chips: Tesla’s expansion plans have been hit because of the shortage of chips and now it won’t launch new models in 2022 (CBS, 2022). Further, the company has forecasted a 50% decline in growth because of the unavailability of chips.
Emerging competition: Tesla’s competitive rivalry is high with the brands such as SAIC Motor, Volkswagen, and BYD. SAIC Motors sold 2.86 million electric vehicles in 2021 and controls 13% of the global EV market. Tesla’s other close competitor, Volkswagen has a 10% market share in the EV segment and it sold more than 451,000 EVs in 2021 while BYD has a 7% market share with sales of 324,143 electric vehicles (Herh, 2022).
To encapsulate, Tesla is strongly placed in the market and is increasing its dominance on a large scale. Its sales figures doubled in 2021 as compared to 2020. The company has the potential to grow by expanding in the markets that are yet to be exploited such as India, Brazil, and Thailand. The barriers to its growth can be the shortage of chips in the international market and the possibility of a reduction in productivity due to dissatisfaction among the employees. Lastly, if you wish to analyze Tesla subject to influences in the external environment, you can read our well-crafted PESTLE analysis of Tesla.
Recommended Readings
References
CBS. (2022). Tesla won't roll out new models in 2022 because of chip shortages. www.cbsnews.com. Retrieved 29 March 2022, from https://www.cbsnews.com/news/chip-shortage-delays-tesla-cybertruck-new-models-2022/.
SAIC. (2022). SAIC Motor Continues to lead vehicle sales in China. www.saicmotor.com. Retrieved 29 March 2022, from https://www.saicmotor.com/english/latest_news/saic_motor/56955.shtml.
Tesla. (2021). ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2021. www.sec.gov. Retrieved 29 March 2022, from https://www.sec.gov/Archives/edgar/data/1318605/000095017022000796/tsla-20211231.htm#item_8_financial_statememts_supplementar.
Tesla. (2020). Impact Report 2020. www.tesla.com. Retrieved 29 March 2022, from https://www.tesla.com/ns_videos/2020-tesla-impact-report.pdf.
