Tesla Strengths – Internal Factors

 Innovation
Tesla is an innovator continues to invest heavily in research and development. In 2019,
Tesla invested $1,343 million into advancing its product and services.
It’s worth mentioning that Elon Musk will cross-fertilize ideas and innovations from his
other companies such as Space X. While there might not think there are any obvious cross
over, new materials and software could well benefit Tesla.
In terms of innovation, BCG ranked Tesla the 9th most innovative brand in 2019
 Leading Sales of Electic Cars
Over 2019, if you look at Tesla’s market share of the U.S. automotive market it might
seem disappointing at just over 1.3 per cent.
However, if you just look at the U.S. electric vehicle (EV) market, Tesla is the clear market
leader in battery-electric car sales for the United States. In 2019, it sold over 192,250 cars
while its nearest rival Chevrolet sold jus 16,418 units.
In fact, as of March 2020, Tesla has sold over 1 million vehicles.
 Brand and Marketing
Tesla has become synonymous with luxury sports cars. By starting off at the luxury end of
the car market, Tesla was able to craft the brand as a luxury car. Lower priced and more
mass cars like the Model 3 though benefit from the halo effect of the brand
For a company that spends zero dollars on advertising it has become a globally
recognized brand not least because of Elon Musk. Other car companies collectively spend
around $14 Billion on marketing every year – just in the US.
 Partners
Tesla has developed a network of global partnerships which help with the R&D costs,
distribution and of course charging points.
Tesla has a whole ecosystem of charging partners such as hotels, resorts, service centres
and shopping malls.
 Design
I would go so far as to say that Tesla is the Apple of the car world. I’m not comparing
Steve Jobs to Elon Musk, although that might be interesting. At the heart of both companies
is the attention to detail, the customer experience and the design of the products – end-to-
end design.
Design means listening to customers not necessarily taking on-board everything they
feedback but realising when you need to make improvements and then doing something
about it. Elon Musk is famous for replying to customers on their feedback and making
changes.
 Elon Musk
Elon Musk is loved by the media because he is unconventional and controversial. He
creates headlines which in turn generate publicity and lots of it. Sometimes wiping as much
as $15 billion off the value of Tesla but other times equally boosting it.
He has fans – lots of them – on Twitter alone he has 33M followers many of which are
devoted fans – reminiscent of the same adoration that Steve Jobs attracted.

Tesla Weaknesses – Internal Factors

 Manufacturing
Tesla has had problems and complaints about the standards of its manufacturing.
Elon Musk has been know to camp out near factories to try and thrash out factory issues.
As CEO, this must strain his attention from running Tesla, as well as Space X.
 Financial Performance
 Tesla has a high negative P/E ratio, reflecting investors’ faith in its future earnings despite
regular losses.
Tesla has also benefited from huge incentives at national and state level through to tax
credits for consumers. Some have criticized this and reflected on Tesla’s inability to still turn
a profit. In defence, Tesla has said it has succeeded despite these benefits, not because of
them.
Tesla’s market cap reflects investors belief in its long-term success, but many remain
sceptical – if you look at its market cap vs market share you could be forgiven for thinking
the stocks are overpriced. However, many view these stocks as similar to other more tech-
based startups that also have high valuations and high P/E ratios.
 Batteries
The two criticisms being levelled at Tesla over its batteries are not directly related. The
first is more about ownership of a Tesla car. Accepted that batteries capacity to recharge
diminishes over time which affects distances covered before a charge is needed.
The other weakness though is related to production – namely that Tesla depends on
batteries which in turn depend on elements like lithium and there are only limited supplies
of these.
Fun fact: Tesla became the world’s biggest battery consumer just a few years after
achieving volume production of its electric vehicles.
 One Man Show
Elon Musk takes centre stage – often that ‘s a good thing. However, as a large and
growing multinational company, it could do with more leaders who are less distracted. The
clear danger is that if you take Elon Musk out of the equation would investors feel as secure
– I doubt it!
 High Levels of Debt
The high levels of debt relative to sales and overall performance do not marry up with
other companies in the sector. Furthermore, Tesla is a relatively young company in the car
industry and has yet to secure its position across the main geographical territories.
Of particular worry is the other divisions of Tesla that are not performing least of which is
the troubled SolarCity project which Tesla purchased for $2.6 billion.
At some point, the debt will need to repayment and that looks unlikely in the
foreseeable future.
 Lack of Capacity
Car manufacturers depend on achieving economies of scale to make profits. Tesla needs
to secure and deliver car production across a broader set of geographical territories if it is to
achieve scale. That means it needs to secure more production not only in China but also
more in Europe.
 Market Focus
The Tesla Model 3 is more mass-market than the Model S but it is still priced above the
main volume in the car market. If Tesla is to achieve higher volumes and go head-to-head
with brands like Audi and Mercedes then it needs a mid-market product.

Tesla Opportunities – External Factors

 International Expansion
Tesla has factories in Freemont, US; Tilburg, Netherlands, Berlin, Germany and Shanghai,
China.
The factory in Germany is set to open in 2021 and will produce the Model 3 range of cars
Despite these it is perhaps the Asia market that holds the greatest potential. Competitors
like Audi are realizing the benefit of expanding in China reaching much higher volumes than
Tesla.
  Mid-Market Car Range
The mid-market car sector is critical for volume and also the fleet car sales.
Tesla can exploit its base to produce lower priced mid-market cars that drive higher
volume and adoption rates.
 Battery Production In-house
Tesla can change from using Panasonic to make its batteries to making its own.
This could open up new revenue opportunities by suppliers other car makes.
This would alleviate problems with supply and help the company to increase its
production rates.
 Expand Ecosystem
Tesla could expand its charge point infrastructure either through further partnerships or
even acquisitions.
this could provide useful protection against competitors and provide further data as well
as revenue from the infrastructure e.g. offer Tesla car owners beneficial charge rates but
charge competitors a percentage commission for using the infrastructure.
 Corporate Fleets
Corporates are increasingly having to account for their global carbon footprint as well as
develop more sustainable solutions.
Although many corporates have a corporate statement, they have yet to translate these
into action when it comes to var fleets. However, there is growing demand from
shareholders for greater transparency and more action.
Tesla is well placed to become a suitable car choice for fleet cars if it can produce a
broader range that will fit to the budgets for mid-management.
 Government Incentives
The growing urgency of various governments to accelerate their policies towards a
cleaner environment has increased the demand for zero-emission vehicles. Developed
nations such as the US, Germany, and the UK are promoting the use of electric vehicles to
reduce emissions, which has resulted in the growth of electric vehicle sales.
This trend though could accelerate as other nations also adopt policies and offer
incentives to customers.

Tesla Threats – External Factors

 Competition
The giants in the automotive industry might have underestimated Tesla, but they have
now woken up and are investing heavily in electric and digital technologies
It’s important to recognise their size and presence, particularly in the US market which is
probably the most competitive market for Tesla
The big players still have a considerable amount of market share, the capital to invest
heavily in electric and digital technologies
As an example, General Motors is investing $20 billion into autonomous vehicles – that’s
roughly 15x Tesla’s R&D budget
 Product Liability Claims
Despite Tesla’s premium quality assurance, it is facing significant product liability claims
which could lead to a big financial penalty.
Tesla has launched many autopilot vehicles, and not all of them have been successful.
The company has faced lawsuits and claims related to the failure of technology including
cars set on fire. If these liability claims continue, then Tesla may be subjected to greater
financial setbacks.
 China Market
 Even in China Tesla has a long way to to go to catch to the same volumes as to its
competitors.
The coming years will be a test of how well Tesla performs in this crucial market.
 Substitutes
As cities get more congested new regulations and policies could change and lead to more
dramatic shifts in how we tackle pollution and congestion problems. More cities may ban
cars and force the use of public transport systems.
The sharing economy has grown and become a growing trend, particularly among
younger generations. With the high cost of living in cities and the trend towards city living,
sharing vehicles might be the new normal.
Luxury cars might not fit into this model though.
 Lack of Critical Materials
Tesla uses lithium-ion cells in their battery packs but global demands increasing as other
car manufacturers ramp up their electric vehicle production.
Tesla could face disruptions in the supply of these vital raw materials due to the
increased prices as well as in other vital elements needed for batteries e.g. nickel, copper,
and cobalt. All these materials could affect the company’s production line severely in the
future.
 Regulatory Changes
Currently, there are no regulations for self-driving vehicles in the majority of countries,
including the US. Tesla’s though is continually pursuing this as part of its overall strategy, in
other words as a competitive edge. However, by the time regulations come into play to
allow autonomous vehicles others car producers could have the same or similar technology.

=> The Tesla SWOT analysis shows that the biggest threat comes from competitors. Tesla’s
competitors ready have strong infrastructure, distribution and models that they can
transform to electric. This would secure sales and limit Tesla’s growth.