Tesla Motors

“Tesla is not just an automaker, but also a technology and design company with a focus on energy innovation”

Monday 12 June 2017, by Jessica Ramos-Villasenor

Written by: Jordi Font, Cristian Ausina and Jessica Ramos-Villasenor

A. The main facts about the activities of the company:

Tesla Motors is an American company that designs, manufactures, and sells electric cars. Tesla Motors was started by a group of Silicon Valley entrepreneurs and strives to create a revolution and accelerate the world’s transition to electric mobility with a full range of increasingly distinct electric cars. Tesla vehicles are electric which are transforming the way people drive and move. Tesla has gone public as of June 29, 2010 and has a market cap of $34.32 billion. Tesla Motors’ goal is to increase the number and variety of electric cars in society by pushing through an environmental perspective. The lack of patents in their innovations have served as a platform where motor vehicle competitors may be inspired by similar achievements in technology. In essence, technology leadership is not defined by patents but rather an ability to attract and motivated talented engineers. The open source philosophy serves as an inspiring element in Tesla’s business model.

Following its mission and vision, based in accelerating the transition to a sustainable way of transportation, Tesla Motors impulsed a strategy called “technological sharing”. The strategy is not only congruent with their vision, but may also be interpreted as a strategic move. In recent years, Tesla Motors has been a leading market in electric cars, but it still has difficulties to compete against conventional car manufacturers. In order to effectively compete, Tesla decided to grow the potential of competence by increasing the interest of investing, which ultimately, will increase the size of the market, and promote the creation of new charging points.This is essential, as we could consider this as a network effect where more charging points increase the value perceived of electric cars by customers. We really consider this as inspiring, given their technologies advantages they could retain their position with small risk of new successful incumbents, instead, they decided to change the rules of the game and free lots of their patents.

B. The ethical challenges this company is addressing:

While the electric sports car has astonished the motoring world, it is only the beginning Tesla Motors hopes to aspire. Just a few months back, Elon Musk launched a new branch in his business by releasing an innovative understanding of solar panels by storing energy. The solar panels are run by adaptable solar roof panels installed at homes by professionals. The clean look of the solar panels classifies them as luxurious goods but also provides the option for homeowners to opt for power-walls where the energy is stored and utilized at peak times throughout the day. Basically, the power-wall is a polished plug and play battery system that takes energy from the sun during the day stores it and uses it during peak times in the evening. As the name suggests, it’s small enough to hang up on the wall. It is designed to look more like an odd feature rather than a piece of technology that powers your home. The obvious problem with solar problem today is that it is very primitive in the sense of its direct usage where once the sun is gone, it’s game over. Realistically, this kind of technology will change the world, but not just yet. The places that will benefit the most are remote areas where power is limited or unreliable, where energy is expensive and places with lots of sunlight. In conclusion, although this technology and this approach is innovative this is just a first generation product. Elon Musk is creating an infrastructure that will reduce our reliance on oil, thus helping solar panels to become more persuasive and reduce our use of carbon fuels.

The car market is small and heavily competitive, only a selected few dominate the whole market. The high needs of capital and resources to invest in R&D, marketing and the main production of vehicles is a huge barrier for any other innovative firm to consider being a new player in the game. However, Tesla has shown that a new perspective is possible by shifting development in a narrow market, thus establishing a new and sustainable business model.

Currently, the alternative of electric cars falls under a norm that is not far from reality, but this was not always the case. The perception of electric cars has always been associated with particular features, but the vision of Tesla broke the stereotypes and reinvented the sports car market through an environmental perspective. The shortfall of a sustainable equilibrium is far from being reached due to the dependence of oil in the car industry—a sacrifice that is still under contemplation. In these grounds, Tesla is an inspiring company that is a breakthrough and example for other companies to follow.

C. What makes you believe this company is really ethical and why you trust it?:

We will use several aspects to support why and explain why Tesla Motors is a prime example of an inspiring company in a profit driven economy. The arguments are linked with ideas studied throughout the course material from in-class, but we also correlate the arguments with an emotional level to enhance understanding. Unavoidably, the automobile industry plays a pivotal role in our daily experience, but the lack of attention Tesla plays is tremendously undermined. The aim for Tesla is simple yet complex to achieve in a dynamic world where profits speak louder than innovation. Elon Musk, CEO and cofounder of Tesla Motors, planned a game changing method for clean energy for the entire world. The revolution in energy has peaked an interest in shareholders; however, the interest does not arise in profit-driven incentives. The groundbreaking news of global warming in the twenty-first century not only serves as a platform for Tesla Motors but it is also its vehicle in venturing to innovative alternatives in a heavily dependent industry for all individuals.

The assumption that shareholders are driven and focused solely on profit is a misconception that Tesla’s business canvas unpacks. In a traditional approach, shareholders interest to invest is black and white where a company’s numbers are heavily taken into consideration. Tesla’s profits are far from the best, but shareholders desire to invest due to its accomplishments in technology and achieving a game changing method in clean energy. Unavoidably, the accomplishments in technology surpass the expectations of many and serves as an inspiration for prospective shareholders. In April 2017, Tesla Motors has become the first US automotive industry in terms of market capitalization. The classification not only proves to be reputable, but it also hints at the potential it has played in the electric car industry. The misconception of electric cars has changed due to the venture Tesla has undertaken as a high performance sports car. In the chart below (Chart 1), the market cap is calculated and contrasted with competitors (GM & Ford), thus providing a better understanding of the value of a firm, its revenues and net income as a whole.

Tesla became the largest automotive US company under market capitalization and becoming a twenty-eight billion dollar company. This represents a big success, as the financial year calculations of 2016 highlight a $-0.8 billion loss and its close competitors (GM & Ford) surpassed Tesla’s losses. We personally consider, that all this data suggests that shareholders not only care about profits, but rather concentrated on the eco-friendly technologies and its impact within the market niche. In essence the investors seek to invest in a company that not only meets their personal interest, but also attempt to change the way the world uses and stores power. Spreading clean energy to the entire world has become one of the aims for Tesla Motors, but its decision to branch off to in the The long run for this kind of investors, that also take into account further elements than profitability. The interesting and inspiring aspect of this, is that once it is demonstrated that there is an alternative way of a prosperous business, many will follow.

D.The possible challenges facing the company in the future and how you think this company may improve:

By assembling and improving electric vehicles technology Tesla is contributing to combating global warming which serves as an element in reducing individuals’ footprint in the environment. Tesla has invested time and thought in their business canvas where owners of a Tesla are welcomed to utilize their newly launched “superchargers” where the car’s battery is fully charged in less than thirty minutes at no cost. At these stations, electricity is produced by the station’s very own solar panels to further protect the environment and promote their business mission of reducing CO2 emissions. The numbers in chart 1 compares the goals met by Tesla, GM and Ford which are three of the most explored in the electric car manufacturing. While the numbers of Tesla are not as impressing, the market cap it holds in the industry showcases its value in this year. Tesla is the first made premium sedan powered purely by electricity, designed to have speed, range and not a drop of gas. Oil is a finite resource where alternatives will have to be discovered. Tesla is in the process of triggering a transport revolution and bring electric motoring to the masses. Since their inception in 2003, Tesla Motors has been pursuing their electric car revolution with a step by step strategy. In an unconventional business move, Elon Musk stated Tesla must invest in their reputation first and worry about profit later down the line.

In addition to reducing carbon footprint, Tesla aims to steer away from the concentration in automobiles to home installations of solar panels. This step not only serves as an extension, but also as a consideration to broaden their mission. The innovation of installing solar panels does not only assist in charging the Tesla, but also a change in electricity bills for homeowners. Tapping into a distinct, yet relevant industry has allowed Tesla to establish a reputable reputation among conscious consumers in a global market. The numbers in the chart below not only speaks volume on the profit Tesla has reached, but the competition it runs with competitors in electric cars. While more and more automotive companies are exploring the arena, the value gap held by Tesla is unreachable. As a sports car, Tesla has become a specialized company in luxurious energy efficient products. The market cap as of this month illustrates the value Tesla has through the consumer’s eyes. While statistics may personify Tesla as a small business in the industry, the market cap states otherwise.

Bibliography

https://www.statista.com/chart/8925/tesla-vs-gm-and-ford/
https://www.statista.com/chart/9245/tesla-doubles-revenue-as-losses-widen/
http://www.slate.com/articles/business/the_juice/2016/04/tesla_s_real_innovation_is_its_business_practices_not_its_electric_cars.html
http://www.cepn-paris13.fr/epog/wp-content/uploads/2015/09/Chen-and-Perez-2015.pdf
https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me
https://seekingalpha.com/article/4013862-tesla-disruptor

Location: Palo Alto, CA 94304 (United States)

Sector: Electricity, gas, steam and air conditioning supply, Transportation and storage

Official website: http://www.tesla.com/

Key figures:

Infographic: The Numbers Behind the 'New Big Three' | Statista

Infographic: Tesla Doubles Revenue as Losses Widen | Statista

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