Tesla Continues to Improve Its Technology

Tesla Inc began in 2003 with a few brilliant engineers who wanted to eliminate the trade-offs to drive electric. Before Tesla, electric cars were slow and needed frequent recharging. These engineers believed ”you could have your cake and eat it too.’ They developed the fastest car with zero emissions.

They named the company Tesla after Nikola Tesla who developed the alternating current induction motor which later was the basis for the industrial revolution. Tesla was created by combining brand spanking new technologies using the ion lithium battery developed by AC Propulsion, a hobbyist company, who developed the tzero.

That battery spawned a breakthrough in high speed and zero emissions cars. Martin Eberhard, a successful innovator, got divorced and wanted a fast sports car. Early on, Malcolm Smith, a product designer, who later became vice president, went for a test drive in the tzero with Eberhard.

Eberhard said to Smith, “Try and touch the dashboard.” (Baer, 2014). Eberhard floored the car, and it leapt from 0 to 60 in 2.

28 seconds. He was surprisingly thrown back into his seat and never touched the dashboard. The vision statement focuses on directional growth. Tesla wanted to build a multinational company that makes electric vehicles. The Mission is to “to accelerate the world’s transition to sustainable energy,” by making the electric cars affordable and desirable in the mass market. Elon hand-picked the smartest employees. Another strength comes from the type of management. The team has vast experience with start-up companies. The CEO, Musk, started SpaceX and PayPal. JB Straubel started Volacom.

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These start-ups all involve advanced technologies in new inventions. Tesla has excellent brand recognition. Consumer Reports claims that Tesla is comparable to other top auto brands in quality, design, value, and safety. US News listed the model S as the #1of all large luxury cars made. As well as the excellent brand recognition, the company has strong sales growth. In just four years, sales went from 204.24 million to 4.05 billion. For the customer, the strength of the dealerships is in offering a unique shopping experience. The staff educates the customer about the technology of the electric car and helps them design the vehicle of their choice. Unfortunately, Tesla has a higher debt than many of its competitors.

Becoming a mass producer of electric cars is an expensive revolution in transportation. For example, the two essential elements for the ion-lithium battery are cobalt and nickel and not limitless metals. A lot of the earth’s nickel is not of good enough quality for the electric battery. (Shilling,2017). Tesla has solved its recharging infrastructure problem. Tesla needs to get the charge time down and to increase the availability of electricity. Tesla is expanding production by selling model 3 at half the price of the original. ( Saphir,2016). This sedan is reasonably priced, and it is big enough to transport a family. More consumers are willing to invest in this sedan. Tesla created a global market for their cars. As of 2016, Tesla sold more cars internationally particularly in Asia and North Western Europe. The States and the Federal government offer financial incentives to people who buy electric cars.

This incentive boosts the numbers of customers for Tesla. Another opportunity for Tesla is to keep improving their technology. For example, Tesla has developed an autopilot program. By merging with other sustainable energy companies, like SolarCity, Tesla expands their control over the market. The threats Tesla is facing aren’t any different from any other electric car companies, except the head start they had is diminishing. Jaguar, Porche, and Audi are serious competitors as seen Geneva Car Show this year. ”The Jaguar’s I-Pace, which matches up almost spec for spec to something like the entry-level Model X from Tesla.’ (O’Kane, 2018).

The price of raw materials, such as steel, aluminum, or lithium could increase. These price increases would cost Tesla more to make the car which would cause the price to go up. This increase could cause the price to go up, and fewer people would be able to afford to buy the car. ”Government regulations can delay or postpone production and sales.”( Saphir,2016). Michigan refused to let Tesla sell cars because they are not franchised auto dealers. Tesla is appealing the ruling to cut through the red tape and sell cars in Michigan. Many other car manufacturers are unionized. If the employees at Tesla vote for a union it could drastically change their financial responsibilities. Tesla nearly collapsed in 2008 during the financial crisis.

To stay afloat, Elon Musk put $35 million of his own money into the company. However, big money came from the government. ”Tesla was able to secure $465 million in low-interest loans from the government in 2009.” (Badkar, 2013). ”The 2010 Tesla initial public offering took the automaker public at a price of $17 per share; now shares are around $220.’ (Divine, 2016). The price per share grew phenomenally. As an investment, despite wild fluctuations in market value, Tesla remains a darling of Wall Street. ”Billionaire investor Ron Baron, for one, has said he thinks TSLA stock could multiply in value by 20 times over the next 10 to 20 years.” (Divine, 2016).

However, there are sound reasons not to invest in the stock. The Model X was delayed for two years. Tesla appears unreliable which hurts the company. Tesla also has a negative cash flow. Tesla is seemingly a good investment for long-term stock purchasers. ” The strategy, in this case, is to wait for the stock’s value to rise over an extended period. (Watson ).

• Elon Musk, CEO, and president of the Board of Directors graduated from the University of Pennsylvania with a BA in Physics. ‘He put school on hold to start Internet companies Zip2 and PayPal. In addition to his Tesla duties, he serves as CEO and CTO of SpaceX, and he’s Chairman of SolarCity.’ (Tesla, 2018).
• Brad W. Buss retired as CFO of SolarCity Corporation and has served on the board since 2016. Robyn Denholm is their COO since 2017 and served on the board since 2014.
• Ira Ehrenpreis brings knowledge and experience as a venture capitalist. He also teaches a course at Stanford University in Venture Capital.
• Antonio J. Gracias is an expert in international finance and economics. He is multilingual and has a working knowledge of Japanese; which could be strategic as they expand in Asia.
• Steve Jurvetson was the founding venture investor in Hotmail. Forbes calls him one of Tech’s best venture capitalist.
• James Murdoch ‘has been instrumental in the company’s robust social impact initiatives, including its decade-long leadership on environmental sustainability.
• ‘ Kimbal Musk is the co-founder of The Kitchen. Brother of Elon, ‘seeks to empower thousands of young entrepreneurs to become real food farmers.’ (Tesla, 2018).
• Linda Johnson Rice has ‘extensive corporate board experience, having previously served on the boards of a number of companies across a variety of industries.’ (Tesla, 2018).

References

1. Watson, C. (n.d.). Long- Term vs. Short Term Stock.
   Retrieved from ttps://budgeting.thenest.com/long-term-vs-short-term-stocks-3399.html http://ir.tesla.com/corporate-governance/board-of-director https://peakon.com/blog/workplace-culture/tesla-company-culture/