Tesla Case Analysis
Currently, Tesla, Inc. is a dominating player in the highly competitive electric vehicle
(EV) industry. Concerns are raised about its ability to meet consumer demand since it is having
trouble producing enough Model 3s to achieve its target. To satisfy consumer requests, Tesla
must overcome its manufacturing challenges and boost production. The main issue Tesla must
address is how to enhance the production process while keeping high-quality standards and
meeting its production target. To answer this question, we will use Porter’s Five Forces Model to
analyze the attractiveness of the EV industry and provide strategic recommendations concerning
this industry. To assess the EV industry, we must evaluate the bargaining powers of buyers,
bargaining power of suppliers, rivalry among competing firms, threat to substitute products, and
threat to new entrants.
The bargaining power of buyers in the EV industry is moderate to high. There are several
alternatives available to buyers, including conventional gasoline-powered cars, hybrid cars, and
other modes of transportation. Additionally, consumers find it simpler to move to alternative
choices if they are dissatisfied with their present EV because of the cheap switching costs related
to EVs. On the other hand, customers are more inclined to switch to electric cars because there is
a growing demand for sustainable options and because EVs have a low operational cost.
Suppliers of EV components have low bargaining power with EV manufacturers because
there are many suppliers and the components themselves are not specific to this industry. There
is an intense rivalry among competitors in this industry. The sector is crowded with participants,
including major automakers, new entrants, and startups.
Due to the intense rivalry, EV manufacturers are under pressure to stand out from the
competition and provide customers with distinctive value propositions. Due to significant upfront
costs for things like research and production as well as rising consumer demand for eco-friendly
alternatives, the EV industry also faces significant exit barriers.
The threat of substitute products is moderate to low. While the decreasing gas prices in
the US allow the consumers to opt for gas and hybrid vehicles, their impact is reduced due to the
increasing demand for sustainable zero emission options and government offering incentives to
encourage EV ownership.
The threat of new entrants/ barriers to entry is moderate. Since the worldwide sales of
EVs in the first 7 years are already more than 2 million, the established automakers have already
gotten their brands recognized and established their foothold in the market. The economics of
scale, optimized supply chains, and distribution channels allow these companies to dominate the
market. Even with the established companies and high capital investments, new entrants will be
still attracted to this industry due to the increasing demand for Eco-friendly transportation
options.
Based on the analysis of Porter’s Five Forces Model, the EV industry is an attractive
industry. The government's promotion of EV ownership and the growth in demand for
environmentally friendly transportation products prove the industry's potential for growth. The
increase of more than 1300 percent in 2017 over Tesla, Inc.'s IPO in 2010 further proves the
immense potential that investors recognize in the EV industry. The low threat of suppliers allows
a company to negotiate for prices in their favor and reducing the overall production costs. The
industry will advance even further due to the fierce competition between competing businesses
and the ongoing advances developed by all of them to dominate the market.
A company would need to concentrate on resolving manufacturing challenges and
enhancing production efficiency to fulfill consumer demand be successful in this sector. This to
may be done by streamlining their production processes and improving the distributions along
their supply chains. The use of automation technology would also contribute to higher
productivity. The second strategy would be to cooperate with governments to build more
charging stations and relay them in real-time to EVs- improving the infrastructure for charging-
so that consumers won't have to worry about their batteries running out and enabling them to
drive farther. The third strategy would be focusing on research to reduce energy consumption for
longer ranges. The business might investigate using electricity produced by the car wheels to in
turn power the car, increasing mileage significantly.
