TESLA SWOT ANALYSIS
Tesla is best known for sustainable innovation. The brand is famous for the environment friendly vehicle and energy products it makes. You know it as the maker of high performance fully electric vehicles and energy systems. It installs and maintains solar and energy storage products. While the brand has become famous for its innovative model, it is also growing its global network of vehicle stores and service centers. There are challenges in its way including making its products more affordable and accessible. Its cars are costly and another major challenge is the availability of charging points and service centers.
While Tesla is working in this direction, it has also planned to release a new model that is less costly and can be sold to the masses. Tesla’s focus is on transition towards a sustainable transport system. Its vehicles and engineering expertise are something most notable about the brand. The popularity of sustainable vehicles has risen in the recent years and that has been profitable for Tesla. Still, to make widespread adoption possible, it would have to invest more dollars. Research and development is one of the major operational costs before Tesla. It does not have a very large product mix but it has complemented its vehicle mix with energy storage products. This is a SWOT analysis that sheds light on the strengths, weaknesses, opportunities and threats before Tesla Motors.
- Brand recognition – Tesla is a well recognized brand. Apart from its vehicles, it is also known for a large range of other kind of sustainability products. The brand has gained reputation and global recognition through its products and services. It has attracted heavy publicity and recognition based on its differentiated business model. Brand recognition is an important factor that aids at generating sales and in case of Tesla, it is a major leverage. From Quora to several business news sites and media, the internet is constantly abuzz with discussions over the brand and its products.
- Sustainable innovation – The sustainable innovation model adopted by Tesla is one of its most critical strengths. From its vehicle to solar energy and energy storage systems, all of its products are related to sustainability. The focus is on helping the world transition towards a better and energy efficient world. Both its Model X and model S are fully electric, high performance vehicles with exceptional functionality. Apart from its range of vehicles, Tesla makes energy storage and solar energy systems. Its vehicles and energy storage systems are highly innovative and equipped with best in class technologies and several exceptional functionalities.
- Growing vehicle sales – Tesla’s vehicle sales have kept growing globally. It markets and sells its vehicles over the world through the company owned stores. From 2015 to 2016, it has seen some major growth in its revenue. This happened due to a sharp growth in vehicle sales of around 55%. From 2015 to 16, Tesla’s automotive revenue increased $2.16 billion, or 63% to $5.59 billion. This is some major growth backed by a sound marketing strategy.
- Engineering and technological expertise – Tesla is also famous for its engineering and technological expertise. It has created significant in house capabilities in the design and engineering of electric vehicles and their components and systems. It designs and engineers bodies, chassis, interiors, heating and cooling and low voltage electrical systems in house and to some extent in cooperation with the suppliers. Apart from that the Tesla engineering team has expertise in light weight material which is important for making electrical vehicles. Its in-house engineering team designs its energy storage products and solar energy systems.
- Fast growing super charger network – Tesla’s super charger networks play a very important role in the widespread adoption of the Tesla products. Customers can charge their vehicles on the roads and through its super charger network or at other destinations where these super chargers have been deployed. Tesla has continued to build its fast charger network throughout North America, Europe, Asia and other markets to enable convenient long distance travel. These super chargers are industrial grade high speed chargers that are designed to charge any Tesla vehicle at a significantly faster pace than any other charger. Since the demand for super chargers has kept growing with growing sales of the Tesla vehicles, these super charger stations are equipped with four or fourteen super chargers. These super chargers have been placed strategically along the routes that are well travelled allowing Tesla owners to enjoy long distance travels without taking many stops. Its supercharger network had more than 4000 superchargers in mid-2015 and Tesla plans to grow it to more than 7000 by 2018.
- High costs of vehicles – Tesla vehicles are costlier than the ordinary vehicles and in this regard they rank among the premium category vehicles. Apart from its Model 3, Model S and Model X are costly and therefore not affordable for the middle class consumers. Even the Model 3 is somewhat high priced for the middle class consumers in the developing countries. The high cost of Tesla vehicles is an important weakness that has kept Tesla’s sales from growing fast.
- Limited presence – Tesla’s sales network depends on its super charger network. As its super charger network grows, the brand’s sales will also grow. Elon Musk is working on growing this network faster but till now it has a limited presence and will take both time and a large investment to grow.
- High competition – The level of competition is high. The need for super chargers to charge Tesla vehicles is an important factor affecting its competitive strength. Other brands like Nissan and Ford are also making environment friendly and electric vehicles. Their vehicles due to being priced lower pose a competitive threat to Tesla’s sales. So, both affordability and accessibility or availability are important questions before Tesla. By managing the two factors, it will be able to manage the competitive threat before the brand.
- High production and operation costs – The production and operation costs at Tesla are high. Tesla has managed to reduce manufacturing costs by ramping up productions of Model S and Model X. Still, R&D and laws and regulations can be a costly affair and complying with them leads to an increase in costs.
- Growing demand of sustainable products- Sustainability is not a passing fad and the demand for sustainable products has grown fast in the 21st century. This is a major factor churning demand in the favor of Tesla. People are looking for environment friendly options for transportation. Tesla’s opportunities are growing as people want products that are less polluting and more environment friendly. Think if trillions of dollars being spent on fuel could be saved every year and thousands of megawatts of solar energy stored. Apart from reducing the consumption of fossil fuel, this can help save dollars. If your car saves you millions in your life time by running on electricity and your home appliances run on solar energy, you know Tesla vehicles and products are not costly. They will save you more than you have invested in purchasing them.
- Supply chain, sales and maintenance network in Asia – Asian markets are heating up and for brands like Tesla there are major opportunities hidden in both the Chinese and Indian markets. Tesla can focus on strengthening, its sales, supply and maintenance network in Asia. This can help the brand grow its sales faster. Moreover, the Asian consumer is eager for sustainable products and only if the prices of Tesla product were lower, the large middle class Asian consumer segment could become a large source of revenue for it.
- More low priced models to tap into the rising middle class – The rise of the middle class in the 21st century is an important factor that has brought major opportunities of growth for the international brands. Tesla’s products are not so affordable for the middle class consumer in the developing nations. However the company is working in this direction and as it continues to reduce its manufacturing and operations cost, it could mass produce lower priced vehicles. This will help it make affordable products and bring them within the reach of the middle class consumers.
- Autonomous driving technology – Autonomous driving technology has become the talk of the town and many top vehicle brands are working to bring their Autonomous vehicles on the road by or before 2020. Tesla also has plans to release fully autonomous vehicles. Its current vehicles come equipped with self driving hardware required for full self driving capability at a safety level that is substantially greater than human driving.
- Mobility service – Tesla is also planning to release a ride sharing service. If it does, that could provide people with another cheaper option for transportation.
- Competition – Tesla is facing intense competition from both luxury brands and environment friendly brands. Apart from the luxury brands like Audi and Porsche, the brands making environment friendly vehicles are also a competitive threat. Tesla has a premium image and it will take time to break this image and bring more affordable vehicles to the market. However, that is a good way to reduce the competitive threat.
- Legal and regulatory troubles – Legal and regulatory troubles can be costly affairs and they can lead to an increase in costs. Tesla has operations in several countries and thus its business is subject to legal and political regulation in those markets.
Tesla’s business network is growing faster. Last year, the company saw some major growth in its vehicle sales. Its manufacturing and marketing have also grown more cost efficient. However, the growth of its supercharger network is important for the brand to grow its sales globally. Tesla has plans to release fully autonomous vehicles and ride sharing services. Its Model 3 will help it penetrate the market deeper, especially the Asian markets. Now, Tesla is a well known brand producing sustainability products. The demand for these products has kept rising and in future if Tesla’s network grows faster, then you know it is going to save the world billions by saving on fossil fuel consumption.