SWOT Analysis of Tesla – 2022
Tesla Inc. is an American company that manufactures motor vehicles, solar panels, lifestyle products, energy storage, and much more. It was named after Nikola Tesla, who was a great scientist and inventor. Tesla Motors Inc. was the former name of Tesla Inc. The company has got a whopping success in energy solutions and the automotive sector. Its innovation and dominant worldwide position make it a highly valuable brand in the world. Let’s read the SWOT Analysis of Tesla.
Tesla is very famous among business devotees. In this SWOT analysis of Tesla, we will focus on all the essential factors of its business model. The basic purpose of conducting a SWOT analysis is to reveal a company like Tesla’s strengths, weaknesses, opportunities, and threats. These factors can heavily influence the company’s market competitiveness in the global automotive sector. So, let’s find out!
Company Name: Tesla Inc.
Founders: Elon Musk, JB Straubel, Ian Wright, Marc Tarpenning, Martin Eberhard
Founded: July 01, 2003, San Carlos, California
Headquarters: Palo Alto, California
CEO: Elon Musk (2008- )
Type: Public
Sector: Automobiles
Tagline: Burn Rubber not Gasoline
Unique Selling Proposition: An ability to create fully electrically engineered vehicles.
Customers: People looking for electric and luxury cars.
Target Consumers: Rich and affluent people who love spending on premium, innovative vehicles.
Revenue: 53.82 billion US dollars (2021)
Net Income: 5.6 billion US dollars (2021)
Strengths of Tesla | SWOT Analysis of Tesla
A Great Employer Company
The success of a company is based on its employing power. In this case, Tesla is a great employer company, and this thing has contributed a big part to its immense success. According to Wall Street Journal, Tesla Inc. is the perfect organization for employees or workers due to its innovation and diversification promoting activities. The company also managed to secure a prominent position in the list of ideal employer companies. They continuously look for fresh and talented workers that can take the company’s vision one step ahead. According to Forbes, Tesla is the “America’s Best Employer Company of 2022”.
Most Sought-After Automotive Company
In 2021, the company’s annual revenue was 53.8 billion US dollars. They delivered 936,172 in the same year, which is almost double its previous year’s sales. As a result, Tesla managed to generate 5.6 billion US dollars of net profit. Today, the company’s market capitalization is around 1 trillion US dollars. The company surpassed different top automakers such as General Motors, Toyota, Ford, Volkswagen, and Daimler. In terms of market value, Tesla Inc. is the most valuable automaker in the world right now.
The Best Electric Cars
When it comes to the manufacturing of the finest electric vehicles, Tesla has outdone every automotive brand. Its cars are really great in terms of efficiency, innovation, and range. Its new Model S is the best distance-covering vehicle. It can go more than 600 kilometers on a single battery charge. The second best figure in this regard is secured by the Opel Ampera, traveling up to 520 kilometers on a single battery charge.
An Increase in Electric Vehicle Delivery
Tesla delivered over 936170 electric vehicles in 2021. This figure represents an 87 percent increase in its vehicle delivery compared to last year. Despite having a shortage of materials and supply chain issues, the company showed unbelievable performance.
Diversification
With the association of Liberty Mutual Insurance, the company has initiated a solid insurance program for its cars. “InsureMyTesla” is the name of the program. It is a good move by the company to gain the trust of customers.
Innovative Organization
There is no doubt about it that Tesla is one of the most innovative companies in the world. The recent developments such as a new sports car and fully electric semi-truck are proof. Therefore, the company has got the trust of the market. It allows Tesla to produce more innovative and profitable products. In this way, they can grow their overall financial assets.
Better Market Position
According to economists and financial experts, Tesla’s market position is very strong and can survive in uncertain economic conditions. Its annual revenue and net profit have been growing with every passing year. They sold record-breaking electric vehicles in 2021.
Unusual but Beneficial Policies
Tesla’s highly effective and unusual management strategies are one of its biggest strengths. Its strategy is very clear, to the point, and direct, just like its CEO Elon Musk. Tesla hires the most talented and smartest workers. They help the company to achieve its short and long-term targets.
Weaknesses of Tesla | SWOT Analysis of Tesla
Production Risk
In order to maintain quality and achieve innovation, the company sometimes faces production risks and mechanical errors. Due to this, most of its new products and vehicles are delayed. The company experienced numerous manufacturing risks and complications when planning to launch Model X. Such complications and delays can destroy the trust of marketers and even customers. Tesla should focus on improving its innovation strategies.
The Incapability of Meeting Demand
The company is also incapable of meeting the demands of the customers due to the complicated and experimenting processes. This supply and demand issue can create trouble for the company in the long run. This will ultimately decrease its net profit and annual revenue.
Scarcity of Large-Scale Production
In terms of innovation and production, there is no competitor to Tesla. But, it lacks high volume production. They don’t have high-volume production plants and resources. However, they are trying to manufacture Model 3 vehicles at a large scale but facing problems in managing resources and cost.
Lack of Batteries
The CEO of Tesla has accepted in a recent meeting with shareholders that the company’s production rate is decreasing day by day due to the lack of batteries. It will ultimately impact the sales of energy storage systems and electric vehicles in the future. The company needs to address these issues on an urgent basis.
One-man Show
Tesla’s prominent popularity is just because of one man, Elon Musk. The whole company depends on him. It creates various issues in management. In short, Elon Musk is the only face of Tesla. Moreover, he is also focusing on other projects like the Boring Company, Space Exploration Technologies Corporation, and space launch vehicles.
Financial Uncertainty
Despite being the most robust company in terms of finances, the company’s performance is highly at risk of economic uncertainty. The company has a debt of 5.38 billion US dollars. If it fails to generate mo9re cash flow, then it can face problems like selling assets, delaying growth, and reducing investments.
Safety Concerns of Employees
The company was fined for developing a tent production line for remote workers without safety inspections or a permit. Moreover, they didn’t mention safety guidelines for sitting in a tent in extreme heat. According to experts, working for a more extended period of time in this tent in humid conditions can cause breathing problems.
The Conflict between Management and Stakeholders
The overall productivity of Tesla relies on the coordination of the board of directors and management. Any conflict between these can destabilize its long-term growth. In recent years, the board of directors of Tesla and its management has been engaged in various wrangles.
Lawsuit
Till date, more than 6 Tesla workers filed a sexual harassment lawsuit. According to dissidents, they were subjected to misogynistic behavior, vulgar remarks, and groping. Such incidents can destroy the company’s image or reputation at the global level.
Opportunities for Tesla | SWOT Analysis of Tesla
Sales Opportunities in Asian Markets
Tesla has a huge scope in the Asian markets and other untapped markets. Even though these markets are already saturated with renewable energy sources and automotive companies, Tesla can create a big difference with its quality products and innovation. In certain economic conditions, it is imperative for Tesla to expand its operation globally to gain maximum financial stability. This thing will also make its market preference even stronger.
Cost-Effective Vehicles
Due to its state-of-the-art technology and unconventional dependence on innovation, the company needs ultimate financial resources to provide new technologies. That’s why it is considered a luxury brand. Tesla’s buyers are currently very small due to the expensive cars. Tesla can grow its audience by manufacturing affordable or less expensive vehicles. The company has launched Model 3, which is quite affordable than other models like S, X, or Y.
Bringing Battery Production Technology
The lack of batteries is a significant problem for the company. That’s why they decided to manufacture their own battery cells. This move can make a massive difference for the company by reducing its production cost and increasing its manufacturing rate. Right now, they are heavily dependent on Panasonic for the supply of batteries.
Production of Pickup Trucks
The demand for pickup trucks in the United States is very huge. They account for approximately 17.6 % of the United States automotive market. It is a considerable number, and Tesla is planning to introduce pickup trucks. It will create a significant difference in the electric vehicle segment. By introducing other electric vehicles, the company can quickly grow its business in the automotive sector.
Market Trust
Nowadays, Tesla has crossed a trillion dollar market cap mark due to the confidence in the stock market. This is a big achievement for the company, and its stakeholders trust it completely.
Exploit Air-Taxi Project
These days, immense pollution, traffic congestion, and rowdiness of conventional taxis have increased the demand of the air-taxi market. Tesla has a unique technology called eVTOL (electric vertical takeoff and landing) to deliver. The company has invested millions of dollars in this startup Lilium.
Hertz Books Order for 100,000 Vehicles
The growing popularity of electric vehicles has urged companies and people to buy electric cars. In this scenario, Herts plans to purchase 100,000 Tesla cars. It is a big success for the company and its long-term success.
Threats to Tesla | SWOT Analysis of Tesla
Liability Claims
Over the years, Tesla has faced many lawsuits due to technology failure in most of its products. The product liability claims can also create a big dent in its financial assets. The company has tested many technologies, including autopilot vehicles, but they didn’t get encouraging results. If it continues, then it will be a significant setback for Tesla.
Immense Competition
The automotive sector is really saturated in the US, China, and Europe. So, Tesla faces intense competition from the autonomous as well as alternative fuel vehicles segment. Companies like Toyota, Ford, BMW, Audi, Mercedes, General Motors, and Lexus are continuously eating Tesla’s market share. So many brands are also launching eco-friendly or self-driving cars. They are a severe threat to the growth of Tesla. It is imperative for Tesla to offer innovative and less expensive products and vehicles to retain its market share and audience.
Defects in Products
Many Tesla cars and products have shown flaws in various cases due to complex engineering and mechanical complications. These defective products are also less desirable in design, quality, and overall image. Such factors can tarnish the company’s image and customers’ confidence.
Long-term Confidence
In order to maintain the public image, the company’s long-term sustainability really matters. Due to unconventional manufacturing techniques and processes, people are still dubious about the long-term sustainability of Tesla. It can stop the company’s expansion and overall growth.
Changing Customer Preferences
These days, there are two types of customers, one who likes change and the second who doesn’t like change. It is necessary for Tesla to identify before launching a new product whether the customers are ready to adapt or not. It is a drawback of being a highly innovative company. Moreover, customers’ changing preferences are also bringing new challenges for Tesla.
Autonomous Vehicles are a Big Fear for Pedestrians
According to a survey, adults in the US still feel treacherous to walk around autonomous vehicles due to the system or technology failure. This ratio is very high among the aged 55 or above. It means people are not ready for self-driving cars.
Shortage of Materials
The increasing prices of materials can cause serious delays in manufacturing vehicles and products. Tesla uses lithium-ion, copper, cobalt, aluminum, nickel, steel, and lithium from different companies. The fluctuating prices of these materials can harm the company’s manufacturing time.
Risk Factor due to Lithium-ion
The company uses lithium-ion cells, which are highly explosive and reactive elements. Most of its vehicles have caught fire due to this reactive material. Such incidents can harm the overall reputation of the company on a huge level.
No Clear Regulations for Self-Driving
Many countries, including the US, have no clear rules and regulations for self-driving. This can reduce the sale of the company. It is a serious threat to the company and its long-term profitability.
Elon Musk’s Erratic Behavior
The company’s entire image is based on Elon Musk. His erratic behavior can affect the company’s reputation globally. The recent controversy about marijuana smoking is one of his impulsive behaviors. This kind of behavior from a visionary genius is inappropriate.
Economic Fluctuation
Although the company has positioned itself in a better way to survive any economic uncertainty, the mounting recession is still a huge threat to the company.
Stiff Competition from Toyota
The biggest competitor of Tesla is Toyota right now. Toyota has increased its production of electric vehicles. They are planning to sell more than 40 percent of its electric vehicles by the end of 2030. Toyota has managed to secure a huge portion of the electric vehicle market in such a short period of time. It can harm the market share of Tesla in the future.
Final Thoughts
We have comprehensively discussed the business model of Tesla in this SWOT analysis. We also highlighted the company’s strengths, weaknesses, opportunities, and threats. Tesla has a competitive edge in the market right now. They should make aggressive business decisions to improve their financial position in the market. There are countless opportunities ahead for Tesla that can effortlessly increase its market share and brand value. Despite the lawsuits and Elon Musk’s erratic behavior, Tesla is the symbol of innovation and progress.
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