Essay about Tesla and Renewable Energy

Company Overview

Tesla Inc. is an automotive and energy production company based in California, United States of America. The company specializes in electric car manufacturing with an emphasis on eventually producing affordable mass-market electric cars and hence revolutionizing the automotive industry for the better.

Founded in 2003 by engineers Martin Eberhard and Marc Tarpenning, the company was joined by Elon Musk during its first capital raising stage allowing him to be known as one of the company’s co-founders. As of 2019, Tesla Inc’s products include the Model S, Model X, and Model 3 cars; while also accepting reservations for the Model Y and Roadster. The company also sells batteries, solar panels, and other renewable-associated products.

After being on the market for 10 years, Tesla ranks as the world’s bestselling plug-in car manufacturer with over 245,000 units delivered and an approximate 12% market share of plug-in sector sales. In the US Tesla vehicle sales increased 280% from 2017 to 2018 and over 138% in the same period globally.

Tesla has adopted a unique targeting strategy that is for the most part unique to its industry. The company emulates typical technological product life cycles to target affluent buyers initially, and then move into larger markets at lower price points. The company has products for every segment of the market to stay diverse in its sales strategy. The Roadster is low volume produced and priced at US $109,000, Model S and Model X targeted the broader luxury car market, and Model 3 and Model Y are aimed at the higher volume market of affordable consumer passenger vehicles.

External Environment Analysis

Industry Identification

The industry in which Tesla finds itself at the forefront is known as the Automotive Energy Storage Industry, a unique branch from the automotive industry as a whole, this industry is one of the fastest growing on the planet, and this can be widely attributed to the growth of renewables and a broader growth in consumer awareness surrounding major issues such as climate change and how we may wish to slow or reverse the devastating effects of global warming.

Players in the market have been on a mission to marry technologically advanced networks with supreme connectivity and storage to help store energy harnessed from renewable resources. Many industry analysts claim the missing link between intermittent power such as solar and wind, and around-the-clock reliability; is affordable storage.

The stationary battery storage market had an estimated total evaluation of US $4 Billion in 2017 and is expected to exceed $35 Billion by 2030. This industry is a rapidly growing example of how renewables are changing the market for consumer and mass-market products and services globally.

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General Environment Analysis

Political Factors

Government entities are among the main societal forces that affect businesses and wider industries as policies on trade can limit companies’ revenues and industry performance as a whole. Some of the political external factors that are most significant to Tesla and the industry it resides in are government incentives for electric automobiles, new global trade agreements, and political stability in most of the business's major markets.

Tesla has an opportunity to greatly strengthen its performance through incentives from the government, this is directly related to the low carbon output of the manufacturing and production of involved with the company’s products. Governments advocate for the reduction of the burning of fossil fuels and in most cases provide subsidies and resources for those companies with the lowest carbon footprint, of which Tesla is one. Expanding free trade agreements means that Tesla has an opportunity to expand its operations internationally through entrance into growing markets such as China, where its carbon footprint is large and personal transport usage is high. The political stability of the major markets such as the United States makes the macro environment suitable for Tesla’s competitive strategies such as market penetration. Overall, the political landscape surrounding the industry presents opportunities for Tesla to grow their already rapidly expanding company even further.

Economic Factors

Economic factors of the macro environment include conditions such as market growth, trade levels, and currency rates, for example, the solar energy market growth affects the company’s ability to sell its solar panel products. Some of the main economic factors specific to Tesla’s position are decreasing battery costs, decreased costs of renewable energy, and economic stability issues. Tesla’s business performance is highly reliant on low battery costs, this external factor directly translates to the affordability of the company’s electric automobile products, when the costs of obtaining and running batteries for the storage of renewable energy is low, then the running cost of Tesla’s cars is lower, this relationship is similar the regular cars and the price of unleaded fuel. As the cost of renewable energy such as solar energy decreases due to an expansion of investment and research into renewables, the affordability of Tesla’s renewable-based products becomes higher. As batteries and renewable energy are both direct inputs in Tesla’s operational activities, the cost of both of these being low benefits the company greatly and allows for easy growth throughout their industry, however economic stability in Asia and Europe especially threatens the company’s financial performance. Despite great opportunities for growth in these regions, economic instability caused by currency fluctuations and political feuds between neighboring countries in the EU may lead to higher barriers to entry in some of these markets.

Sociocultural Factors

Social trends and conditions focus on the company’s relevant stakeholders such as employees’ customers and investors, and how the change in their attitudes can affect the company’s overall financial performance. Tesla’s managers need to consider how the company aligns with social trends in its target markets.

Some of the main sociocultural factors affecting Tesla in its market are the growth and increasing popularity of low-carbon lifestyles, an increasing consumer preference for renewables, and improved wealth distribution in emerging markets. Analysis of these factors shows that Tesla has a great opportunity to expand its company internationally based on the rising preference for both renewables and a low-carbon lifestyle, as consumers become more aware of environmental and social consequences of their lifestyle, moving away from the traditional “economic minded” thought of traditional consumerism, both of these factors result in increased demand for Tesla’s new energy saving products, the shared values of renewables are becoming more and more sought after meaning Tesla is in a great position to grow its products with great financial benefit. Furthermore, Tesla has an opportunity to boost its performance due to the increased wealth distribution in emerging markets such as India and China. This increased wealth distribution increases the total population of potential buyers for Tesla’s products as they are considered relatively expensive and in most cases luxury goods. Based on sociocultural factors, Tesla overall has a huge opportunity to grow its business and increase its financial performance.

Technological Factors

The advancement of Tesla’s automotive and renewable energy solutions business is heavily reliant on the technologies that are available to the company. For example, the engineering technology of the company’s materials affects the overall cost-effectiveness of their energy storage products. The most significant technological factors crucial to the success of Tesla’s operations are the high rate of technological change, increased automation in business, and the increasing popularity of online mobile systems.

The high rate of technological change can be assessed as both an opportunity and a threat for Tesla. One on hand new technology can be crucial for gaining a competitive edge in the industry, and with appropriate research and development can be harnessed to create new and effective products with the ability to take over the market, on the other hand; rapidly growing technology on the renewables front means many modern technological principles and technologies themselves become obsolete very quickly, some of Tesla’s products may be in jeopardy of this as newer and more viable solutions to renewable energy problems become available. Increasing automation of business processes is an opportunity for almost any company in any sector, as it allows for maximum efficiency and often reduces costs associated with combining different sectors of the company’s operational capabilities. The increased popularity of online mobile systems is also an opportunity for Tesla as they have these systems in their automobiles, this trend gives Tesla’s products a strategic edge over most other automobile computer systems.