Summary and REcommendations
Tesla Motors is continually expanding its consumer demand globally. With markets being expanded in Europe, the United States, and now with an increased focus on China, Tesla Motors’ vehicles are going to be in high demand for a long time to come.
From its start with the Model S, Tesla Motors has continually been able to increase its production efficiency. This had been done by increased experience by the builders which produced more Model S cars every week and expanding their manufacturing plants to keep up with demand.
Along with the increased production, Tesla has improved upon is supply chain network in order to reduce costs and get the right parts, at the right place, at the right time. In Quarter 1 of 2013 they saved $30 million in cash and reduced logistics expense through better supply chain management alone. Also securing a deal with Panasonic to produce batteries, a major limiting factor in production, in excess of 1.8 billion cells over 4 years has secured their largest potential for production disruptions. Tesla has announced plans to produce two of their own battery factories that will exceed current demand for their battery needs. This vertical integration will allow increased cost reductions of their vehicles, batteries accounting for 25% of the cost according to Elon Musk CEO, and quicker changes in production in order to improve or adapt their products due to safety or efficiency.
A major selling point, amounting to 90% of consumer’s top 5 concerns, is the availability of Tesla’s Supercharging stations. By increasing the ability of a customer to take his vehicle away from an assured charging location, customers are now able to plan their routes outside of their vehicles driving range. At a range limit of 244 miles, an electric car wouldn’t have been an ideal car to travel long distances in. One is the long charging times from a typical socket and two, knowing where exactly you can recharge. With the Supercharger network, you are now able to drive from the east to west coast while only waiting 30 minutes for a half charge on the battery.
The newest and largest potential market for Tesla Motors is China. With their one store and through word of mouth, Tesla has increased demand in China. Working with the government, to secure its compliance with Chinese law, plans are in the works to develop a Supercharger network in China. With the network in place and service centers planned to open, China is ready to receive ever increasing units of the Model S.
A potential challenge of Tesla is the risk of increasingly expensive batteries. As stated above they account for 25% of the vehicles cost and will likely be a more desired product globally with the shifting away from fossil fuels and increased number of hybrid cars expected to be on the roads.
Despite increasing sales, Tesla Motors has yet to a profitable year. This, however, does not dissuade my recommendation to invest in Tesla Motors. The company has been rapidly increasing its sales and has yet caught up to its consumer demand even through its better and more efficient production.
In 2017 Tesla will be launching a midsized electric car in order to gain additional market share. It will be priced at the $35,000 range with a predicted range of 200 miles. Through the use of creating high performance cars such as the Roadster and the Model S, they have been able to use that technology to build the midsized car. Offsetting the cost of R&D by using a low volume, high price for the Roadster S and producing the new model as a high volume, low price vehicle Tesla is securing it future. Having a lower priced vehicle can pose as an entry model for the brand. After a consumer is done with said model and appreciated its design, ingenuity, and reliability, Tesla would likely see a sale of a higher end model from that consumer.
With emerging markets such as China, Tesla will have enough demand to overcome their current high fixed costs of doing business. Because they are a high tech company, they require large amounts of research and development in order to stay ahead of competition and produce more attractive vehicles in the future. Also with the rapid expansion on their Supercharger network they are incurring high costs in order to eliminate a threat to their business and increase customer satisfaction. It is my recommendation that they keep pursuing this business approach as a long term investment in the success of the company.
From its start with the Model S, Tesla Motors has continually been able to increase its production efficiency. This had been done by increased experience by the builders which produced more Model S cars every week and expanding their manufacturing plants to keep up with demand.
Along with the increased production, Tesla has improved upon is supply chain network in order to reduce costs and get the right parts, at the right place, at the right time. In Quarter 1 of 2013 they saved $30 million in cash and reduced logistics expense through better supply chain management alone. Also securing a deal with Panasonic to produce batteries, a major limiting factor in production, in excess of 1.8 billion cells over 4 years has secured their largest potential for production disruptions. Tesla has announced plans to produce two of their own battery factories that will exceed current demand for their battery needs. This vertical integration will allow increased cost reductions of their vehicles, batteries accounting for 25% of the cost according to Elon Musk CEO, and quicker changes in production in order to improve or adapt their products due to safety or efficiency.
A major selling point, amounting to 90% of consumer’s top 5 concerns, is the availability of Tesla’s Supercharging stations. By increasing the ability of a customer to take his vehicle away from an assured charging location, customers are now able to plan their routes outside of their vehicles driving range. At a range limit of 244 miles, an electric car wouldn’t have been an ideal car to travel long distances in. One is the long charging times from a typical socket and two, knowing where exactly you can recharge. With the Supercharger network, you are now able to drive from the east to west coast while only waiting 30 minutes for a half charge on the battery.
The newest and largest potential market for Tesla Motors is China. With their one store and through word of mouth, Tesla has increased demand in China. Working with the government, to secure its compliance with Chinese law, plans are in the works to develop a Supercharger network in China. With the network in place and service centers planned to open, China is ready to receive ever increasing units of the Model S.
A potential challenge of Tesla is the risk of increasingly expensive batteries. As stated above they account for 25% of the vehicles cost and will likely be a more desired product globally with the shifting away from fossil fuels and increased number of hybrid cars expected to be on the roads.
Despite increasing sales, Tesla Motors has yet to a profitable year. This, however, does not dissuade my recommendation to invest in Tesla Motors. The company has been rapidly increasing its sales and has yet caught up to its consumer demand even through its better and more efficient production.
In 2017 Tesla will be launching a midsized electric car in order to gain additional market share. It will be priced at the $35,000 range with a predicted range of 200 miles. Through the use of creating high performance cars such as the Roadster and the Model S, they have been able to use that technology to build the midsized car. Offsetting the cost of R&D by using a low volume, high price for the Roadster S and producing the new model as a high volume, low price vehicle Tesla is securing it future. Having a lower priced vehicle can pose as an entry model for the brand. After a consumer is done with said model and appreciated its design, ingenuity, and reliability, Tesla would likely see a sale of a higher end model from that consumer.
With emerging markets such as China, Tesla will have enough demand to overcome their current high fixed costs of doing business. Because they are a high tech company, they require large amounts of research and development in order to stay ahead of competition and produce more attractive vehicles in the future. Also with the rapid expansion on their Supercharger network they are incurring high costs in order to eliminate a threat to their business and increase customer satisfaction. It is my recommendation that they keep pursuing this business approach as a long term investment in the success of the company.
REferences
"Panasonic Hesitant to Commit to Musk's Tesla Battery Gigafactory." Bloomberg.com. Bloomberg, n.d. Web. 06 July 2014.
"Panasonic, Pondering Tesla Investment, Unsure on Battery Cost Cut Goals." The Wall Street Journal. Dow Jones & Company, n.d. Web. 06 July 2014.
Rogowsky, Mark. "Tesla Talks China, Battery Deal With Panasonic As It Gears Up To Launch Model X." Forbes. Forbes Magazine, 07 May 2014. Web. 06 July 2014.
"Tesla Motors Inc." Tesla Motors. N.p., n.d. Web. 06 July 2014.
"Tesla Motors Inc." TSLA Stock Quote. N.p., n.d. Web. 06 July 2014.
Undercoffler, David. "Tesla Motors Plans to Debut Cheaper Car in Early 2015." Los Angeles Times. Los Angeles Times, 15 Dec. 2013. Web. 06 July 2014.
"Panasonic, Pondering Tesla Investment, Unsure on Battery Cost Cut Goals." The Wall Street Journal. Dow Jones & Company, n.d. Web. 06 July 2014.
Rogowsky, Mark. "Tesla Talks China, Battery Deal With Panasonic As It Gears Up To Launch Model X." Forbes. Forbes Magazine, 07 May 2014. Web. 06 July 2014.
"Tesla Motors Inc." Tesla Motors. N.p., n.d. Web. 06 July 2014.
"Tesla Motors Inc." TSLA Stock Quote. N.p., n.d. Web. 06 July 2014.
Undercoffler, David. "Tesla Motors Plans to Debut Cheaper Car in Early 2015." Los Angeles Times. Los Angeles Times, 15 Dec. 2013. Web. 06 July 2014.