Executive Summary

Tesla is considered to be company that is mainly focused on the production of electric

vehicles and clean energy, with its location in California. Tesla's current products include electric

cars, battery energy storage from home to grid scale, solar panels and solar roof tiles, as well as

other related products and services (Tesla, Inc, 2021). Nikola Tesla was the founder of Tesla

Motors, established in 2003 of July, where, in addition to this, Elon Musk, also had a huge

contribution to the company in terms of CEO since 2008. From Musk’s perspective, transport

and energy sustainability are the primary aims of this company with the assistance of solar power

and electric vehicles. Moreover, Tesla is accepted to be one of the initiators in such electronic

industry, in terms of transportation, which can be built and developed without receiving any

assistance from other manufacturies. Tesla is  captivating organization to be  considered,

where, despite all its preferences, Tesla isn't without any challenges, especially, in terms of

its development in the amidst of production  issues both in California and Nevada, still  the

ongoing requests for Tesla cars are continuing, despite their failures in accomplishing all of

them, as Elon Musk underlined.

Company Description
 Building on this idea, it is essential to stress out the fact that, production of electric sport

cars in 2003, pushed the company of Tesla to be able to compete with other leaders of various

industries. One of the significant partners of Tesla at that period of time, was Lotus, due to their

inabilities to establish their own company production by themselves. With the assistance of this

cooperation, Tesla was not only able to make their own productions, but also develop another

branch of their company – Roadster. Despite the fact that, for the majority of the industries

around the world, to be able to build a car with high performance – is a doubtful and almost

impossible topic to be occurred, still Tesla, was the first company to realize its goal and create its

first model – Roadster.

Roadster is the quickest car in the world (+250MPH top speed), with record- setting acceleration,

range and performance, world-class handling, 100 mpg equivalent, zero tailpipe emissions, 300

miles range. After the production of this model of Tesla, this company was inspired to create

further developed sport cars in order to enhance company’s awareness and finance.

For the first time, when the car was produced, the primary aim of the company was

mainly focused on not on its deficits, but on its attractive appearance. Even though, innovations

are the main mass for Tesla, the success of this company is both restricted in California and
Nevada. In regard with this, consistent developments should be the prior purpose of the

company, in order for having the stability in the organizational stage with its new emerging

models. In order for Tesla’s company to overcome the revealing issues one by one, it is

recommended for them to increase the prices on produced cars for fulfilling all their existing

debts. Therefore, the gained capital would be forwarded to facilitating cost-leadership mission

and injecting stability. Based on their strategic projections, considering abilities and recognizing

possible restrictions, should be the main priority for Tesla, in order to predict their productions

successfully beforehand.

Product/Service Description

For the better future it is essential for Tesla and other industries to stop re-production of

fossil fuels in order to be able to maintain the future with zero-emissions. Building on the

previous idea, since Roadster was produced, Tesla’s company reviled the cutting-edge battery

innovation, as well as, its electric powertrain. Model S is the first premium electric sedan created

by Tesla is mainly focusing on the combination of safety, performance, and efficiency. Model S

has reset the world’s expectations for the car of the 21st century with the longest range of any

electric vehicle, over-the-air software updates that make it better over time, and a record 0-60

mph acceleration time of 2.28 seconds as measured by Motor Trend (Tesla, 2021). Furthermore,

Model X, which was produced 7 years later by Tesla company with its strengthened version

illustrated the safest, quickest and provides 5-star safety ratings. On one hand, completing CEO

Elon Musk’s “Secret Master Plan,” in 2016, Tesla introduced Model 3, a low-priced, high-

volume electric vehicle that began production in 2017, while on another hand, Tesla unveiled the

safest, most comfortable truck ever – Tesla Semi – which is designed to save owners at least

$200,000 over a million miles based on fuel costs alone (Tesla, 2021). Another version of Tesla,

which was produced in 2019 is called – Model Y, which has mid-size SUV, with place for seven

people to be able to sit, which enable for this car to have a comparative advantage in comparison

to Cybertruck.
 It is essential not only for Tesla, but for other companies as well, to be aware of servicing

and maintaining sport and electric car due to the increasing variety of electric vehicle’s

production. The main characteristics of Tesla consists of wheel alignment monitoring, tire

condition inspection, replacement of key fob batteries, windshield wipers and cabin air filter.

Below, is described the Maintenance plan for Model S/X (over 4 years, 50.000 miles),

where all the revealed necessities of the service can be held by its replacement or inspection, as

well as, brake fluid and battery pack coolant replacement.

2. Situational Analysis

Macro Environment Analysis

In comparison to 2015, despite the fact that, in 2017 there was detected a huge increase of 191%
sales in Tesla company, still decrease of company’s total revenue by 12% from Automotives was
observed. Additionally, by 2017, in the sector of energy & storage revenues increased by 9% of total
revenue. Even though in 2016 the total revenue of the company decreased by 1%, if to compare and
contrast 2015 and 2017, it is obvious from the below table that augmentation of 2% occurs. Tesla should
have looked various avenues for reducing the cost of revenues such as buying raw materials with
negotiated prices or should have searched for alternative sources of procurement of raw
materials, might have used innovative technology for reducing production costs or adapt revised
re-engineering process and other measures to control the same which are not happening over the
years. Due to these reasons the cost has increased by 2% which (Table 1, i.e. it has increased
from 75% in 2015 & 16 to 77% in 2017) is really a bad sign and can quote as a significant reason
for the decrease of profits as well (Allied Business Academies, 2002-2021). Cutting advertising
expenses, increasing sales and reducing customer acquisition costs, were huge steps in terms of
development and improvement of margins in energy sector. Margin, that has been enhanced by
7%, in contrast to 2015, also pushed the company to triple their sales in energy and storage
sectors, where main target was based on the development of operational efficiency. Till the end
of 2017 the growth margin slightly decreased by 2% from 25% to 23%. However, if to consider
percentage changes in 2016, it is apparent that the total gross margin of automotive and services
diminished by 4%, meaning from 23% to 19%. Cost of the services and the possible features that
are impacting growth margin are the primary reasons which lead to the decrease of total revenue.
On one hand, Research & Development’ expenditures decreased by 6% in 2017 in comparison to
2015, while on another hand also, Research and development (“R&D”) expenditure are referred
to personnel costs in engineering and research, manufacturing engineering and organizations,
professional services and amortized equipment and technologies’ spending. R&D expenses
increased $116.5 million, or 16%, to $834.4 million during the year ended December 31, 2016
compared to the year ended December 31, 2015. The increase of $116.5 million was primarily
due to a $78.2 million increase in employee and labor related expenses due to a 15% headcount
increase (Allied Business Academies, 2002-2021).

Additionally, in end of 2017, on 31st of December, expenditures increased by

$1.04 billion, or 73 percent, compared to 2016. This increasement was largely attributed to an in
crease in employee and labor related costs of $524.0 million.
Headcount development from the expansion of automobile & energy generation and storage firm
 are considered to be the reasons for labor-related expenses.

Table 1
Comparative And Common Size Analysis Of Statement Of Operations Tesla Inc.
  USD 2017 USD 2016 USD 2015 Incr +/ Dec Incr + / Incr + / 22015
- Dec - Dec - as a % o
2015-2016 2016-2017 2015-2017
AUTOMOTIVE 8,534,752 5,589,007 3,431,587 63% 53% 149% 85%
AUTOMOTIVE 1,106,548 761,759 309,386 146% 45% 258% 8%
LEASING
TOTAL AUTOMOTIVE 9,641,300 6,350,766 3,740,973 70% 52% 158% 92%
ENERGY GEN AND 1,116,266 181,394 14,477 1153% 515% 7611% 0%
STORAGE
SERVICES AND 1,001,185 467,972 290,575 61% 114% 245% 7%
OTHER
TOTAL REVENUES 11,758,751 7,000,132 4,046,025 73% 68% 191%  
COST OF REVENUES
AUTOMOTIVE 6,724,480 4,268,087 2,639,926 62% 58% 155% 77%
AUTOMOTIVE 708,224 481,994 183,376 163% 47% 286% 59%
LEASING
TOTAL AUTOMOTIVE 7,432,704 4,750,081 2,823,302 68% 56% 163% 75%
ENERGY GEN AND 874,538 178,332 12,287 1351% 390% 7018% 85%
STORAGE
SERVICES AND 1,229,022 472,462 286,933 65% 160% 328% 99%
OTHER
TOTAL REVENUES 9,536,264 5,400,875 3,122,522 73% 77% 205% 77%
GROSS PROFIT 2,222,487 1,599,257 923,503 73% 39% 141% 23%
OPERATING EXPENSES
R&D 1,378,073 834,408 717,900 16% 65% 92% 18%
Selling General and 2,476,500 1,432,189 922,232 55% 73% 169% 23%
Administrative Expenses

TOTAL OPERATING 3,854,573 2,266,597 1,640,132 38% 70% 135% 41%

EXP

Tesla Inc. (formerly Tesla Motors, Inc.) needs to overcome challenges linked to the
external factors identified in this PESTEL/PESTLE analysis – which is a strategic management
tool that determines the effects of the industry’s remote or macro-environment on the company
(D. Kissinger, 2019). Tesla’s company is mainly focusing on the remote or macro-environment
of industry related to the automotive, the energy and storage sector, as it was mentioned before.
These companies, in terms of external factors, have an impact on the customers and community
 base-organizations. There are several incentives, which have significant impact on the
businesses and industries, such as: ecological, sociocultural and technological ones.

Ecological/Environmental factors

The remote or macro-environment of the global business is subject to the effects of ecological

conditions covered in this part of the PESTEL/PESTLE Analysis of Tesla, Inc. For example,

ecological trends determine the availability of materials used in the company’s production

processes. In this case, the following ecological external factors affect Tesla’s market:

1. Climate change (opportunity)

2. Expanding environmental programs (opportunity)

3. Rising standards on waste disposal (opportunity)

This PESTEL/PESTLE analysis considers ecological factors as significant forces on Tesla, Inc.’s

industry environment. For example, the company has opportunities to promote its electric

vehicles based on concerns on climate change, expanding environmental programs, and rising

standards on waste disposal. The company’s electric vehicles, batteries and solar panels are

considered suitable in directly addressing these external factors linked to business sustainability

and environmentally friendly products. This part of the PESTEL/PESTLE analysis shows that

Tesla has significant growth opportunities based on the nature of its products.

Social/Sociocultural Factors

Social conditions and trends affect a firm’s remote or macro-environment through employees,

customers, and investors. This part of the PESTEL/PESTLE Analysis of Tesla Inc. considers

how the business aligns with the social trends in its target markets. The company’s managers

must ensure that strategies are applied to maximize the business benefits of such external factors.

The sociocultural external factors important in Tesla’s business are as follows:

1. Increasingly popularity of low-carbon lifestyles (opportunity)

2. Increasing preference for renewable energy (opportunity)

3. Improving wealth distribution in developing markets (opportunity)

This company analysis shows opportunities to grow the multinational automotive business. For

example, Tesla Inc. has growth opportunities based on the rising popularity of low-carbon

lifestyles and increasing preference for renewable energy. In the PESTEL/PESTLE analysis

framework, these external factors improve market demand for the company’s electric vehicles

and related products. In addition, Tesla has an opportunity to boost its financial performance

based on the increasing wealth distribution in developing markets. This wealth distribution trend

increases the population of potential buyers of the company’s relatively expensive cars. In this

part of the PESTEL/PESTLE analysis, Tesla Inc. can grow its business internationally, based on

sociocultural opportunities in its remote or macro-environment.

Technological Factors

This part of the PESTEL/PESTLE Analysis determines how technologies influence the

company’s remote or macro-environment. The advancement of Tesla’s automotive and energy

solutions business depends on available technologies. For example, materials engineering

technology determines the efficiency and cost-effectiveness of the company’s batteries. The

following technological external factors are significant in Tesla, Inc.’s automotive business:

1. High rate of technological change (opportunity & threat)

2. Increasing automation in business (opportunity)

3. Increasing popularity of online mobile systems (opportunity)

The high rate of technological change is an opportunity and threat in this business analysis. The

high rate presents opportunity for Tesla to enhance its products’ technologies. However, the

same external factor threatens the company in terms of the potential rapid obsolescence of
technologies used in its products. Nonetheless, increasing business automation is a trend that

creates opportunities in this PESTEL/PESTLE analysis case. For example, Tesla has growth

opportunities through further automation of its business processes. In addition, the increasing

popularity of online mobile systems should prompt the company to increasingly integrate these

systems in its automobiles. The technological condition of the remote or macro-environment, as

shown in this part of the PESTEL/PESTLE analysis of Tesla, Inc. emphasizes opportunities for

growth based on technological enhancement

Competitive environment analysis

Tesla’s Strengths

Let’s start with the strengths of Tesla Inc. that will include the positive aspects of the company,

which have reinforced the position of Tesla to become one of the most dominant companies in

the world. The following factors which are believed to be

Tesla’s stronger points have ensured

the company’s profitability, expansion, and popularity,

especially in the long term.

1. A Top Employer Company

Any organization is as good as it employs. In the case of

Tesla Inc., it is one of the key factors for the company’s

remarkable success. Wall Street Journal reports that Tesla has emerged as an ideal company for

employees due to its diversity and innovation-encouraging culture.

It has recently been listed as one of the ideal places to work, attracting young jobseekers with

fresh talents and energy. The company has also been featured in Forbes’ ‘America’s Best

Employer 2019’.

2. The Leading Automotive Company

Despite its issues, Tesla’s sales have only increased. It has become a leading automotive brand

for 2019, delivering 367,500 vehicles.

Thanks to its unparalleled advancement in innovation and luxury simultaneously, the company

has left behind some very exclusive automobile brands like Mercedes and BMW.

3. Best in-class Electric Cars

Tesla has left behind every other brand in the race of the finest electric cars. When compared by

their range, Tesla’s electric cars have proven to be the best covering maximum distances. The

recent comparison shows that Tesla occupies the top three places in terms of range. The Tesla

Model S will get you the furthest – traveling up to 600 kilometers on a single battery charge.

The nearest another brand has got is the Opel Ampera, with a range of 520 kilometers.
4. Tesla Dominates the U.S Electric Vehicle Sales

According to Statista, Tesla model 3 is the most sold electric vehicle of 2019 with a sales

number of 187,971. On the second position, Chevrolet Volt stands, with 155,477 cars sold.

Where Tesla model S is again on the third position with a close call, having 134,392 cars sold. In

short, Tesla is top electric car sales charting the electric car sales chart.

5. Cross-sell and Diversification

Tesla has launched a comprehensive insurance program for its vehicles in association with

Liberty Mutual insurance company called as InsureMyTesla.

6. Innovative Company

Tesla has a very high rate of innovation, (not to forget the recent developments of world’s first

fully electric semi truck and new sports car). Therefore, the market trust and expects the

company to develop competitive and profitable products which of course leads to substantial

financial gains.

Tesla’s Weaknesses
All the internal factors in a company which causes any damage or bounds performance

evaluation are identified weaknesses in the SWOT Analysis. So, these are some of the

shortcomings of Tesla’s organizational structure, which reduce its competitiveness and business

growth.

1. Manufacturing Complications

The higher standard of innovation, the greater will be mechanical complications and production

risk factor. Tesla faces continuous launch, manufacturing and production ramp delays while

launching their new vehicles and other products.

For example, Tesla faced endless manufacturing challenges when they were about to launch

Model X, which lead to constant delays for distribution. Similarly, the company went through

extreme troubles while manufacturing Model X’s battery module assembly line at Gigafactory 1.

2. Unable to meet demand might affect brand value

Due to highly experimenting and complicated procedures, Tesla’ might face an unbalanced

supply and demand, unable to meet the production requirement. In fact, their delivery rate in the

first quarter of 2019 is quite alarming. The company has delivered 63,000 cars in the first

quarter of 2019, which is a 31% drop from last quarter of 2018.

3. Lack of High Volume Production

There is no doubt that Tesla is the pioneer of actual energy-saving cars. But it has failed to

produce high volumes of automobiles for any of its models. Even now, as the company plans to

manufacture Model 3 vehicles at high volume, it faces issues in terms of production cost and

management resources and space expansion in Gigafactory 1. 

4. Shortage of Batteries

In the annual shareholder meetings, CEO Elon Musk accepted that their production rate has

decreased due to the limited supply of batteries. The shortage directly affected the sales of

electric vehicles and energy storage systems.

5. Elon Musk as Tesla’s Sole Representative

Tesla accepts that the company is a ‘one-man show.’ Sadly, that man, Elon Musk has a lot on

his shoulders to give his hundred percent to the company. Musk is also deeply involved in other

projects like space launch vehicles at Space Exploration Technologies Corporation and The

Boring Company.