SWOT stands for Strengths, Weaknesses, Opportunities and

Threats. It is a study undertaken by an organization to identify its

internal strengths and weaknesses, as well as its external
opportunities and threats.

Strengths.
 Tesla has multiple strengths which are major contributing factors in the company’s
success.

Tesla cars offer superior speed, style, safety, and overall performance, as well as
more storage space than traditional cars. All of which have allowed Tesla to meet and
exceed customer expectations of internal combustion engine cars. Environmental
friendliness and product quality have allowed Tesla to be successful in international
markets.

Also, Tesla’s product quality and brand integrity have resulted in pre-ordering of the
company’s newest Model 3 car.

Offering a more environmentally friendly and technological advanced alternative to

the traditional combustion engine has allowed the company increase investor buy-in,
receive federally backed funding, improve sales incentives through federal and state
tax credits for buyers, and partner with Wells Fargo Bank and U.S. Bank to offer
special buyer financing. Since 2004, Tesla has had significant investor buy-in and
funding, receiving “$145 million in investment capital raised in [the] first five
financing rounds”. Also, Tesla received “about $465 million in low-interest loans from
the U.S. Department of Energy” as investment financing.

Quality & Innovation :-

Since its foundation, product quality has remained a core focus at Tesla.  The
company is known for its premium cars. Tesla currently sells three models
including Model S, Model X and Model 3.  Apart from high performance, these
cars are also known for their attractive styling. The brand has continued to
improve its existing models through latest technologies and updates. Tesla’s
focus on innovation has helped it produce some of the best electric car
models in the world. The company has kept growing its investment in research
and development each year. In 2015, the R&D expenses of Tesla stood at $718
million and grew to $834.4 million in 2016. In 2017, its R&D expenses reached
$1.34 billion and then rose to $1.46 billion in 2018.  Tesla’s intense focus on
research and development and its commitment to quality, both have led to
fast growth in popularity which has started showing in the form of growing car
sales in 2019. While the company incurred a net loss of around $2 billion in
2017, the net loss reduced to less than $1 billion in 2018. With growing car
sales, the company’s bottom line is looking stronger and the loss run that has
continued for quite some years might be closing its end.

Tesla’s internally developed and managed designs, and core competencies are
also a strength.

Tesla has managed to develop core competencies in vehicle design and engineering,
power train, gear boxes, computer aided design, and crash test simulation, and has
even been able to use these core competencies to sell products to competitors. Tesla
also vertically integrated the production of vehicles upon the purchase of the
Fremont automobile plant. Tesla integrates and oversees the portions of the
production process that have a great impact on the quality of their product and the
integrity of the brand, including forward integration of retail sales and services, while
outsourcing of minor components that are not the core competency of the company.

Weaknesses. 
Tesla’s major weakness is price – both of car and of repair.

Though the company is in the process of offering a differentiated product line, the
cost of the vehicles currently on the market are still very high compared to other
alternatives. Cost of repair can also be very expensive for both for body work on the
aluminum body and general maintenance such as brakes that can cost around $8,500
(Hines, n.d.). Access to sales and service can also be a challenge for owners. Tesla has
only 36 total service centers across the U.S. which can make it very difficult for
customers to receive service in states without a service center or with only one
service center in a state.

Tesla’s low production rates are currently a weakness.

The company is not able to develop economies of scale and is struggling to

implement manufacturing efficiencies due to low sales volumes. Improved
economies are scale are very important based on the size of the competitors, the
resources available to these competitors and the competitiveness of the industry.
Tesla will also have to continue heavy investments into research and development to
continue innovation and technology advances to keep its place in the market.
Another weakness is the car’s battery.

The battery’s ability to only run about 300 miles on a full charge and the 75-minute
recharge time is restricting to owners (Thompson, 2015). Also, owners are facing the
difficulties with decreased battery capacity after extended use or use in adverse
weather, as well as high costs to replace the battery pack ($29,000 for the Tesla
Roadster).

Tesla’s Supercharger network is also a weakness.

Though there are 828 Supercharger stations with 5,339 Superchargers in the US, the
infrastructure of the Supercharger stations still needs large investments to improve
and expand (Supercharger, 2017). There are still several states within the US where
Supercharger stations are non-existent or scarce, such as Arkansas, Maine, North
Dakota, and New Mexico.

Tesla’s current marketing strategy is based on word-of-mouth referrals, as well as

free media coverage of the company, products and awards. Tesla is still in the early
stages of the product life cycle, so outside marketing and referrals have been
beneficial. However, going forward, Tesla will need to create a competitive marketing
strategy to continue to set themselves apart from traditional combustion engine car
manufacturers in the market.

Limited Presence :-

Tesla is faced with a major challenge and it is doing a real balancing act. On the one
hand, it is trying to establish itself in a hyper-competitive industry and on the other, it
has to increase its presence globally to grow its profits. Since, the company deals in
only electric cars and vehicles, its portfolio is limited compared to BMW, Volkswagen,
Audi or Ford and Toyota. However, United States is still its core market and growing
its presence in the other regions of the world becomes difficult due to several
barriers. China is the second leading market for Tesla products.

To grow its presence in more markets, it would first need to establish its presence in
these regions. The company would need to establish its supercharger network in
these regions as well as its service stations. Currently, the company’s focus is on its
core markets. U.S. accounted for around 70% of its revenue in 2018. China’s
participation in its revenue is much lower comparatively. While United States
generated around $14.9 billion in 2018 as revenue, China generated $1.8 billion. So,
apart from heavy competition from the incumbent players in the industry, Tesla’s
journey becomes all the more challenging due to the need for accompanying
superchargers. United States and China are both the leading and most profitable
markets for automobile brands and focusing on these two markets initially could
help it grow its market share and customer base faster.

Opportunities. 
Tesla’s advanced technology and expansive investments in continued research and
development offer major opportunities.

Advances in battery pack technology including faster charger and increased traveling
distance on one charge will help further develop the adoption rates and market
share of electric cars. If Tesla could offer an economical, high performing model, like
the Model 3, with a battery pack that was able to charge in the same amount of time
as fueling up at a gas station and drive more miles on one charge, it would reduce
barriers to adoption.

Autonomous driving technology :-

The automobile industry has evolved a lot in the recent decade driven mainly  by
technological changes. Auto brands are investing in digital technology to give their
customers the best riding experience and to grow their market share. Autonomous
driving is currently a hot area and most of the leading automobile brands have
already taken significant steps in this direction. Tesla’s autopilot technology has
already acquired enough fame for its safety and convenience features.  However, the
autonomous driving technology while it holds immense potential has still a lot of
space to evolve.

Tesla provides regular software updates on its car models for the safety and
convenience of its riders. Autonomous driving is an important area and cars
equipped with autopilot are gaining popularity over time. Self driving cars may be
the future of the automobile industry. However, the technology has to be perfected a
lot and Tesla is carrying out more work continuously on its autopilot features. Tesla’s
autopilot is loaded with features but with limitations mainly meant to prevent abuse
and carelessness by riders.

Tesla also has some major opportunities with increased demand and production
allowing for economies of scale, as well as manufacturing and supply chain
efficiencies associated with increased experience. These improvements and
efficiencies will help to reduce costs of production and materials. Tesla could then
reduce the sell price of the cars in order to increase demand and sales. Another
option would be to reinvest the revenue increase back into research and
development. This opportunity is supported by Tesla’s manufacturing plant in
Fremont, California also being able to facilitate increased growth and production.

Asian markets: –
The Asian markets and particularly China and India can prove a leading market for
Tesla. China is the largest market for automotives. However, while United States
accounted for close to 70% of the brand’s revenue in 2018, China’s share is still
below 10%. Given the brand can improve its dealer network in China as well as its
super-charger network there, it could find a larger customer base in the  world’s
second largest economy. Asian markets are among the fastest growing in the world
and there are more opportunities waiting for Tesla in China including a large market
for its other products than automobiles.

Tesla’s brand recognition is also an opportunity within the market.

Tesla has become a well-known brand, and was “America’s fifth best-perceived car
brand” in 2014. (2014 Car-Brand Perception Survey, 2014). The Tesla brand has
helped define a positive perception of electric cars, and prove that owning an electric
car is better for the environment and does not reduce performance. The Tesla brand
is recognized for advancements in technology and top of the line performance.

Tesla’s opportunities with continued technology advances, economies of scale,

improved production efficiencies, and brand recognition contribute to the
opportunity for continued international and product expansion. The company has
many opportunities internationally as more governments are supporting electric
vehicles initiatives, such as “Canada, China, France, Germany, India, Italy, Japan,
Korea, the Netherlands, Norway, South Africa, Sweden, [and] the United Kingdom”
(International Energy Agency, 2017). Tesla also has opportunities in expanding its
product line to include new models, such as pickup and commercial trucks.

Threats. 
Tesla’s electric cars are a potential disruption to the automotive industry, and the
company’s successful entrance into the electric car market has spurred the
competition to follow suite in order maintain market share as the automotive
industry transforms. Volkswagen, in particular, stated in 2013 that “it intended to
become the world’s largest seller of electric vehicles by 2018” competing directly
with Tesla’s market share. Volkswagen and other existing car manufacturers have
large assets at their disposal to invest into research and development, and many of
these manufacturers are already producing electric vehicles that compete with Tesla
(Welch, 2017, p. 271). Tesla faces threats of competition with competitor’s more
economical models that are already in production, as well as consumers purchasing
used cars from other manufacturers rather than purchasing a new Tesla model.

Competitive pressure :-
The automobile industry is marked by intense competition and all companies invest
heavily in research and development as well as marketing. Tesla being a premium
brand competes with some of the leading premium car makers including BMW, Audi
and other sports and SUV brands. However, due to the intense competition growth
in the initial phase remained slow for Tesla. Car sales have accelerated but the
company will still have to focus a lot on marketing as well as ramping up its
supercharger network to gain ground faster. Competitive pressure also leads to
higher operational costs and reduced profit margins in the automotive industry.

Regulatory threats : –
The automotive industry is also marked by heavy government regulation. All over the
world governments and regulatory agencies are getting stricter in their regulation of
the  automobile brands. Apart from emission control, labor laws and other laws also
affect automobile businesses, driving the compliance costs higher for them.
However, tesla being a maker of all electric cars would not have to worry about
emission controls and yet the level of regulation affects market expansion plans.
Government regulation is also a barrier to Tesla’s Robotaxi plan. Overall, profitable
growth for automobile brands all over the world has become difficult due to heavier
regulation.

Currency and economic fluctuations: –

Another major threat to the profitability of leading car brands are the currency and
economic fluctuations. A stronger dollar worldwide is already hurting the profits of
the international car brands. U.S. is the leading market for Tesla products accounting
for around 70% of its revenue in 2018. However, as Tesla continues to expand into
overseas markets, currency and economic fluctuations are bound to have a larger
impact on its profitability. Since Tesla transacts globally in multiple currencies like the
Euro, Japanese yen, Canadian dollar, Chinese yuan and Norwegian krone, currency
fluctuations risks related to its revenue, operational expenses and cost of revenues
will remain.

Tesla is also at risk for not having long term agreements with suppliers.

Tesla could be missing supply chain efficiencies and lower cost options by not
creating agreements while the company establishes itself in the market. Because of
this, material prices can be more volatile and Tesla could be at risk for unanticipated
increases in material costs directly affecting the bottom line.

Decreasing fuel prices, lack of charging station infrastructure, and poor publicity on
safety are also threats to Tesla.

As fuel prices decrease, drivers are able to save money and are less likely to adopt
an electric vehicle. Lack of charging station infrastructure also creates a challenge for
consumers who may be less likely to purchase an electric vehicle given the
restrictions of the current infrastructure. This creates a challenge for the electric car
industry as a whole, including Tesla.

Analysis of Tesla  – Recommendations

In considering the results of this SWOT analysis, with the goal of improving business
competitiveness, growth, and development, it is recommended that Tesla Inc.:

1. Expand operations in foreign markets to exploit the global growth of the

renewable energy industry.
2. Continue or increase investments for product innovation.
3. Diversify the supply chain to reduce supply-side risks.