Tesla was founded in 2003 by a group of engineers in Silicon Valley who wanted to prove that electric cars could be better than gasoline-powered cars. With instant torque, incredible power, and zero emissions, Tesla’s products would be cars without compromise. Each new generation would be increasingly affordable, helping the company work towards its mission: to accelerate the world’s transition to sustainable energy.
Tesla’s engineers first designed a powertrain for a sports car built around an AC induction motor, patented in 1888 by Nikola Tesla, the inventor who inspired the company’s name. The resulting Tesla Roadster was launched in 2008. Accelerating from 0 to 60 mph in 3.7 seconds and achieving a range of 245 miles per charge of its lithium-ion battery, the Roadster set a new standard for electric mobility. Tesla would sell more than 2,400 Roadsters, now on the road in more than 30 countries.
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Consumer Reports surveyed car owners and ranked Tesla among the top auto brands based on the cars: quality, design, value, safety, and technology. US News ranked the company’s flagship car, the Model S, as the #1 ranked car not only among luxury hybrid and electric cars but also large luxury cars.
Tesla has a unique positioning in the automobile market. It is not just about selling cars but completely revolutionizing the way we look at the entire driving experience. Whether it is about bringing the best luxury automobiles, long-range electric cars or the most innovative low-ion cost models, the company has reported quite a robust sales growth. Over the past few years, their sales have grown at a phenomenal pace. It jumped nearly 30% in 2015 alone after clocking a 50% plus growth in the previous year. This increase has been mainly driven by their Model S. Even if you see the 2016 demand from their Model X, the quarter on quarter is particularly encouraging. So that said, given the huge sales numbers logically the growth drivers are there, but what exactly is the reason that the company is not being able to clock in profit.
Over the years, the company has overcome many hurdles to revolutionizing the auto industry. The employees of Tesla are among the brightest and most resourceful. The company is led by a management team with extensive experience in start-up companies. CEO Elon Musk founded 2 multi-billion dollar companies: SpaceX, an aerospace manufacturer and space transport service, and PayPal, a leading multi-billion dollar online payment service. Chief Technical Officer, JB Straubel, successfully co-founded Volacom, a major supplier of bird collision avoidance systems for airports worldwide.
First in the market – Tesla Motors have the opportunity to strengthen their position as the ‘pioneer’ of electric cars as they are one of the first firms to cater for the premium electrified vehicles market. Foothold in China – Tesla and China Unicom has teamed up to build over 400 charging stations in 120 cities. China Unicom’s interest depicted through the corporation’s willingness to pay for all maintenance and electricity costs may be just the start of the partnership. Product – The electric car concept has not been able to reach its full potential as the technology and production costs have kept it from being fully commercial. As technologies improve, the performance of the vehicles (I.e. the range) will share a similar experience.
One of the biggest opportunities for Tesla lies in its innovation. Given the kind of response that its latest models have generated, the question is why the sales are not able to help profitability? One key reason could be even at $35,000, one of its cheapest models – The Model 3 is still out of reach for a majority of consumers. For most, the price is significantly higher than the highest range of budget.
The other factor is the kind of cost that the company puts in every year. It is rather worrying that given the expenses the company incurs on an annual basis could be a reason for the severe dent in its overall profitability. The company would need to work towards bringing down costs to experience profitability.
Price and Time. The Model X is loaded with impressive new technology. But - and when it comes to mass-market vehicles, this will be really important - it's also two years late and priced higher than a lot of people expected. Tesla first announced the Model X early in 2012. At that time, the plan was to have it in production by the end of 2013. It's now nearly the end of 2015, and although Tesla has delivered a token number of Model Xs, it's not expected to hit full-speed production for several months. If you order a Model X today, Tesla says you'll have to wait about a year to get it. Production is ramping up so slowly in part because those impressive doors are apparently really hard to get just right. It's said that those doors are a big part of why it took so long to get the Model X into production. But Musk insisted on doing the falcon-wing doors and doing them right - in part because they're really cool.
The infrastructure around electric cars doesn't exist. Tesla Motors are doing their best to change this by building Superchargers, which are like gas stations but for electric vehicles only. It will be free to charge your Tesla Motors car at these stations. They are also developing stations where you can replace the battery with a recharged battery since it takes maybe 30 minutes to charge the battery at the Supercharger.
As large automakers increase their focus on electric vehicles (EVs), competition in this space, considered to be Tesla Motors‘ home ground, is intensifying. Ford Motors announced earlier in December that it will invest an additional $4.5 billion in electric vehicles by 2020. General Motors' battery-powered Chevrolet Bolt, which will have a range of 200 miles between charges, is expected to be launched in 2016. Given the focus on clean vehicles and long-term targets of zero emission, an increasing number of automakers are now investing heavily in electric vehicles.
Tesla has a competitive edge in this market given its supercharger network and direct selling model. Further, most new players are planning to enter the non-luxury segment, where Tesla’s Model 3 is yet to be launched. Even though Chevrolet Bolt of General Motors appears to be a direct competitor for Model 3, we believe given the low penetration of EVs in the auto market, as more players introduce these cars it should lead to a greater acceptance of this category, creating a larger market for all players and competition should not be a concern in the near future.
- Should Tesla Be Worried About Competition? [forbes/sites/greatspeculations/2016/01/04/should-tesla-be-worried-of-competition/#677ee5c4ebe8]
- About Tesla [https://www.tesla.com/about]
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