Recent Issue
Certain recent issues faced by Tesla automobile company are mentioned below:
Tesla has its business locations all over the world including countries like Europe, Asia Pacific and North America. However, domestic market of the company is deemed to be most important target market for Tesla that can facilitate it in successfully tapping the European and Chinese markets.
US are responsible for half of Tesla’s sales and China has bypassed Norway to be second largest country served by Tesla. Europe is positioned as second largest region with increased purchase rate of Model S cars. Moreover, neither land is the second largest in Europe with 365 purchased Model S cars.
Annual Income Statement (values in 000’s) Quarterly Data
|
Period Ending: |
12/31/2016 |
12/31/2015 |
|
Total Revenue |
$7,000,132 |
$4,046,025 |
|
Cost of Revenue |
$5,400,875 |
$3,122,522 |
|
Gross Profit |
$1,599,257 |
$923,503 |
Profitability Ratios
|
Ratios |
Tesla |
Industry Average |
|
Gross profit margin ratio |
-2.77 |
78.1 |
|
Operating profit margin |
-0.46 |
22.8 |
|
Return on capital employed |
-0.04 |
1.68 |
Gross profit margin ratio, operating profit margin and return on capital employed are observed to be negative in comparison to industry average ratios. This indicates the company is not generating enough revenue through sales of its cars in all its geographical locations. The company is not being capable to sell its new car models and conveying its assets to cash.
|
Ratios |
Tesla |
Industry Average |
|
Debtor days |
26.02 |
0 |
|
Creditor days |
0.81 |
19.35 |
|
Stock turnover period |
2.61 |
20.91 |
Debtor’s days is observed to be higher than industry average. This indicates that Tesla is efficient enough to gather cash quickly from its debtors. However, creditor days and stock turnover period is observed to be less than industry average. These indicate that Tesla is not that capable in paying its creditors in a quick manner and is also not able to convert its stock into cash rapidly.
|
Ratios |
Tesla |
Industry Average |
|
Current ratio |
1.07 |
1.43 |
|
Quick ratio |
0.69 |
1.24 |
Current and quick ratio of Tesla Company is observed to be less than industry average but current ratio of Tesla is 1.09 and this ratio more than 1 is deemed to be preferable and can be said that the company has superior liquidity position. Moreover, quick ratio is observed to be less than 1 that indicates the company is not capable enough to address its debts.
|
Ratios |
Tesla |
Industry Average |
|
Gearing ratio |
2.75 |
1.67 |
|
Interest cover ratio |
2.75 |
0 |
Gearing ratio and the interest cover ratio of Tesla is observed to be more than the industry average. This indicates that Tesla Company is capable enough to determine how easily it can address its interest expenses on the outstanding debt. However, an increased gearing ratio indicates Tesla is using increased debt in order to pay off its continuous operations. This ratio measured the company’s borrowed funds proportion to its equity.
From the earrings per share analysis of Tesla that is observed to be -4.68 it can be stated that the electric car maker’s shares can weaken financial performance of the company. Shares of the company are deemed to underperform due to weak financial performance of the company. Such underperformance indicates that Tesla motors will continue to pay enough dividends than the company’s growth.
|
KPI (target) |
2016 (actual) |
KPI Met? |
|
System wide sales growth of 4-6% |
2% |
No |
|
Operating income growth of 5-8% |
4% |
No |
|
ROIIC in the high terms |
12.7% |
No |
Tesla initiated its business Roadster with a base price of US $109000 in 2007 and then in the year 2012 the presented with Model S that is priced at US $85,000. Moreover, model 3 launched with a starting price of $35,000. Former market of the company is focused on customers those are high end affluent consumers searching for automobiles that is efficient along with being eco-friendly but also drove being a real luxury sports car. With the launch of latest model of Tesla, a new target audience segment has been added to the company’s target consumer base. This market segment is not uber rich and is deemed to manage to afford an initial level premium luxury car. Tesla has entered automotive industry with high end and expensive automobiles in consideration to target consumers that can afford luxurious automobiles along with shifting to more competitive market through decreasing price of model 3.
Tesla’s competitive business rivals encompass most renowned German car manufacturers such as Porsche, BMW, Mercedes-Benz and Audi within the battery generated category of automobiles. Although Mercedes was considered as the last to belong to the group, however its strategies are highly effective. The company is observed to work effectively for a range of innovative electrical car models. Based on the marketing reports, Mercedes is deemed to spend more than three billion dollars in order to design and develop its innovative car models. BMW and Audi also provides a tough competition through investing increased capital in development of electrical car models that are considered as direct competitors of Tesla automobile. Porchse is also providing high competition in designing superior quality automobile models that has technology of high voltage battery storing along with certain electric motors that are quite innovative and are focused on providing Tesla Company with strong competition. The automobile company has explained its plans for developing a model version of its mission E impression. However, such competition level is not deemed to be a bigger concern for the company. The owner of the Company Elon Musk holds the opinion that a concept of battery operated car’s responsibility is focused on inspecting the previously established manufacturers. Major goal of Tesla is to promote advancement of a sustainable transport system.
Product
Product mix strategy of Tesla Inc considers identifying products sold by the company to its target consumers. The company offers profitable products that offer value that is paid by consumers. Tesla’ automotive business offers products such as automobiles, batteries and electric vehicle power train aspects.
Price levels along with associated strategies are explained within marketing mix. Tesla Motors Inc employs premium pricing strategy that considers employing high price aspects relied on basis of uniqueness along with high value based on the company’s offerings. Consumers are observed to pay considerably increased prices for Tesla automobiles that are considered advanced in consideration to ecology and technology.
The locations that are used by Tesla in reaching consumers are considered as a marketing mix element. The company provides or sells its products through these locations that include official company websites, company-owned galleries and stores along with company-owned service centres. Additionally, Tesla offers its cars through their own stores or online medium and there are several stores that display the company’s luxurious cars.
This aspect explains the marketing communication tactics and strategies employed by Tesla Motors Inc for promotion of its automobiles. Promotion of the company’s automobile products is conducted through direct marketing, sales promotions, personal selling, viral marketing and public relations. Marketing mix of Tesla is deemed to be exceptional within automobile industry due to its dependence on viral marketing. This marketing strategy has largest contribution in capability of the company in interacting with customers.
Tesla Inc conducts a project for educating their employees regarding quality education on Tesla automobiles in order to enhance competitiveness along with advancement of the company and job retention promotion. The target group includes the company’s employees along with key area of education that includes development program, IT area training, language learning, soft skill development and technical training.
Tesla has a functional Human Resource Management (HRM) structure and this involves organizational function to be a major defining factor. Moreover, organizational culture of Tesla Motors is to ensure human competence that is vital for innovative products within automotive business. Different characteristics that are observed in HRM structure that is present in the company’s structure at a decreased significant extent. The below mentioned characteristics are considerable in Tesla’s HRM structure:
Value Chain
Figure : Tesla Value Chain
(Source:)
Support Activities
Primary Activities
Primary activities of Tesla Motors are focused on certain aspects based on its automobiles that include:
|
Strengths |
Weaknesses |
|
· Tesla has exceptional position within automobile market- Along with selling innovative car. Tesla is also delivering innovative technologies. Tesla is not just an auto manufacturer that provides manufactured electric vehicles but has also captured luxury market with long range electric cars. · High sales growth- Tesla is growing rapidly that is resulting in huge aspect of consumer excitement for the automobiles. New models of the company are being successful all across the worlds. |
· Burning through cash- Tesla is observed to be in a state of burning through increased amounts of cash that is large because of its large investments in research and development for producing transformative technology cars. · Increased debt load- Tesla is dealing with increased debt load. Moreover, the interest payments on such debt are considerably significant and are deemed to continue to cut into the company’s earnings. |
References
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