New Technologies Associated With Success Of Automotive Industries

Problem statement

Discuss about the different new technologies associated with success of automotive Industries.

Tesla Motors Company has created a new dimension to the mechanical industry following its tremendous innovative technology. The company has survived major challenges such as high production cost, and network effects. It is therefore a perfect choice in this study since it gives a true reflection of new technologies used within automotive industries to cut on the costs and increase product worth. To overcome insurmountable economic problems, Tesla invented battery electric vehicles which replaced fuel vehicles (Oak Ridge National Laboratory, United States, & United States, 2011). The company is continuously improving the energy sector into green energy. This initiative has made Tesla to gain much popularity having high-end encroachment marketing strategy against giant players in the market like Toyota, Ford, Honda, Mercedes, BMW, Volkswagen and so on(Hardman et al., 2014). The Space X technology has also helped Tesla to reduce the cost of space travel. These milestones define the success of Tesla Motors Company (Hardman & Steinberger, 2015).

The problem that prompted the study is automotive industries are faced with large fixed costs diminishing their profit margins. Most companies therefore spend a lot of money in innovative technologies to maintain their status quo without making further improvement on their current market products. Such a move causes a stretch on their budgets (Liu & Bloomberg News (Firm), 2013). Some have even lost network with their potential clients due to poor records of financial management and bankruptcy.

The aim of this paper is to access different new technologies associated with success of automotive industries specifically, product improvement, customer control and networking.

What strategies can be used to cut down on fixed costs in automobile industries?

Tesla Motors is an electrical car making company based in Palo Alto, California under the flagship founder of Elon Musk and Martin Eberhard. It came into existence in 2003. Its major success dates back to 2016 when it received a global recognition after delivering approximately 22,200 vehicles (Knox & McCarthy, 2012).Since then, the company has been on top of the market share towards power trains in passenger vehicles.  The company is well known for its diverse products ranging from Tesla Model S, Tesla Model 3, Tesla Roadster, and Tesla Model X. The company’s products are aimed at customers in the high-end market sphere. This company has established its markets in   North America, Asia and Europe (Oak Ridge National Laboratory, United States, & United States, 2015). In 2016, Tesla’s Model S was at the lead as the best sold car in the United States of America after selling 29,421 units. It was closely followed by model X with 17,129 units. In 2016 alone, the two models generated 4.2 billion US dollars to the company.  These models remain outstanding up to date in Norway and the United States. However, Tesla faced a stiff completion from BMW which sold 20,576 units in the same year (Bohnsac, Pinkse & Kolk, 2014).

Research aim

The company operates its own power train segment and Toyota RAV4 electric vehicles. In July 2014, Tesla was ranked as the largest battery factory in the US.  It is also known for developing driverless cars. Statistics show that the demand of electrical cars is projected to rise over from $84billlion to $272 billion in 2019 ( Mangram, 2012). This has been enhanced by increased need of environmental friendly cars, infrastructure improvements, and increase in gasoline prices. With such a projection, automotive companies should be at pace to reap big from the projection.  This can be enhanced through emulating Tesla’s business model categorically placed into selling, servicing, and charging electric vehicles (Oak Ridge National Laboratory, United States, & United States, 2014).Tesla commands a huge market due to its overwhelming innovative technology and networking strategies achieved through; direct sales, service, and supercharger network (Mangram, 2012).

Direct sales

Unlike other car industries that rely on franchised dealers to sale their brands, Tesla invests in direct sales via international show rooms and galleries (Halderman, 2010). In doing so, Tesla enjoys product development, better customer buying experience, and no conflict of interest. Customers deal with Tesla staff one on one creating a mutual understanding.  Equally, Tesla Motors sales its products to customers via online platforms.

Service

Chaston (2017) identifies that Tesla uses its service centers to deal with customer needs. For example, the newly opened Service Plus initiative allows customers to charge or service their vehicles. Mobile technicians are also standby to offer assistance in areas where need arises (Pride, 2017). The high tech in the Module S cars that supports wireless internet access, gives clients an easy time since problematic issues can be uploaded to technicians and offer solutions online without physically touching the car.  

Supercharger network:

Supercharger network stations help drivers to charge their vehicles faster at no fee. The initiative encourages most people into engaging with the company thus a strong brand loyalty. However, these stations are not enough in United States, Europe, and Asia which commands a huge population of electric car users (Gilles, 2012).

World’s car makers by market value

Table 6.4 showing automobile industries market value comparison (Chris, 2015)

According to figure 6.4 above, Tesla runs along the top 3 world car makers by market capitalization ahead of other competitors such as BMW, General Motors, and Ford Motor Company. The company’s value stands at $59.7 billion after Toyota Motor Corp at $172billion and Daimler AG at $78 billion. The success has been attributed to new technological advancements and improvements on the current market products (Eberhard &Tarpenning, 2006).

Research question

Tesla’s technology has beaten other automotive companies by far in that other car companies rely on it. For example, Daimler General Motors depend on Tesla for battery packs. Mercedes-Bend uses Tesla’s power train (Doeden, 2015). According to consumer reports, the S model is a technological marvel associated with numerous benefits ranging from cost, class, comfort, and durability.  The company is further expanded this concept with the Model S to its third-generation car, the Model 3 which equally attracted a massive market share.

Data collection

Data collection is gathering empirical evidence in order to gain new insights about a situation and answer questions that prompt undertaking of the research (Carlson & Robertson, 2014).The study used document analysis and questionnaires to establish market trends of automotive industries in the past years with Tesla in sight as a major case of study. Majorly, market analysis on competition, production processes and policies, innovative technologies, and costs of operations were well anchored from companies’ archives and websites (Berdichevsky, Kelty, Straubel &Toomre, 2006). Both qualitative and quantitative approaches were used to obtain data for a period dating from July 1^st to August 14^th 2017.  The methods were efficient since they allowed the researcher to access all possible factors of growth in a locomotive industry.

Data analysis and presentation

Data analysis is the process of systematically searching, arranging, organizing, and breaking data into manageable units, synthesizing the data, searching for pattern, discovering what is important and what is to be learned (Carlson, 2015).Data was presented in figures,  graphs, and tables. Percentages were equally calculated followed by brief explanations to describe the numerical figures obtained.

This includes non-linear text presented in form of graphs, statistical figures, tables and percentages based on the study objective.

Simpler user friendly technology

The figure shows Tesla’s profit margin witnessed after the company introduced Module S cars that are user friendly and easy to operate. This attracted more unit sales with increase in time from 25 in 2011 to 261.33 in 2014.  The X axis represents time in years and the Y axis represents total average units sold.

Figure 8.1 Graphical representation of Tesla’s profit margin (Source, author, 2017

Broadening the network through direct sale

Figure 8.2:  Impact of direct sales on buying experience, product development and conflict of interest (Source, author, 2017)

Heightening brand value

RESPONSE	N/A	AVERAGE	GOOD	BAD	TOTAL
TOTAL	8	5	23	4	40
PERCENTAGE	19%	13%	58%	10%

Table 8.3: Response rate on contribution of adding value to brand (source, author ,2017)

Literature review

Figure 8.3: Response rate to contribution of adding value to the brand (Source, author, 2017)

Simple user friendly technology

From figure 8.1 (Graphical representation of Tesla’s profit margin), it is clear that Tesla Motors Company has maintained a steady growth in its revenue since 2011. Specifically, Tesla’s success is attributed to the’ one thing at a time’ strategy echoed by the management where one product is dealt with at a time. According to the U.S. National Highway Safety Traffic Administration, Model S outscored Buick, Jaguar, Porsche, Fiat, Land Rover, and other cars in terms of safety. Tesla manages its brands by dealing with one product at a time hence giving the best car quality that is friendly to both the user and the environment.

The non-smooth curve shows evidence that Tesla has undergone a number of recession and peak seasons. However, despite all the economic challenges, the company has maintained its market share and further increased its profit margin due to increased innovation of highbred electrical vehicle models. The simplicity of technology counts a lot in manufacturing automotives and should be emulated by manufacturers. For example, Model S is controlled by voice on the central touch screen (Carbaugh, 2013). The system is equally easy to use and has instant response. It also connects to 3G wireless internet allowing users to update car systems and receive help from technicians via online system. Tesla screen are also big to allow easy controlling of car options while driving. Tesla has made their cars quick and efficient to use, a goal other car manufacturers should hit.

Broadening the network through direct sales

Figure 8.2 (impact of direct sales on buying experience, product development and conflict of interest shows that an increase in direct sales leads to a substantive increase in product development and customer buying experience.  From the figure we can also deduct that there is no conflict of interest in direct sales since clients interact directly with the staff who work at the capacity of the company (Cahill & System Design and Management Program).

Ideally, Tesla has invested much in service centers and stores in major states of Ohio, New Jersey, and New York. Therefore, there is less dealer business due to massive outlets that connect the end users directly to the company representative. This has necessitated the company in terms of customer experience giving them firsthand information on the expectations, complains, and other issues affecting their brand.  This move strengthens Tesla’s brand and saves the company’s money in the long run (Cahill, 2015).

Methodology

Heightening brand value

The magic of meaning theory defines the nature perceptions ranging from good, average and bad depending on personal tests and preferences. We tend to perceive things on the basis of experiences, usefulness, cognitive ability and moral judgment.  Figure 8.3 shows 58% of customers believe adding value to products would lead to a tremendous growth of automotive business. According to this category, value addition increases product usefulness creating a strong brand loyalty due to product reliability, huge audience reach, durability, brand adjustment, cost effectiveness and less labor requirements. 10% believe that there is no relationship between value addition and increased product use. They believe value addition attracts extra costs and can make reliable clients shift their loyalty to competitors’ products (Adam, 2016). 13% hold a belief that digital marketing can either be good or bad hence gives it an average score.  The undecided population commands 19%. Majorly, this is due to lack of knowhow on value addition strategy. Flexibility in testing new marketing trends is also a concern that shuts out majority who belong to this school of thought.

Creating high quality cars would increase sales to firms investing in car business. Similarly, exceeding consumers’ expectations works for the good of the company. Practically, getting more than what is paid for attracts most clients. For example, Tesla uses supercharger network station technology to help drivers charge their vehicles faster at no fee (Karamitsios, 2013). This attracts customers into doing business with the company more and more. Additionally, keeping contact with clients to remind them of maintenance, recalls, sending out service vans for checkup would place automotive industries at the top bar due to increased customer satisfaction.

Conclusion

Concisely, Tesla has successfully addressed the issue of large fixed costs on automotive industries giving possible solutions such as use of consumer friendly technology systems to solve customers’ dilemma, heightening brand value, and broadening the network through direct sales. These methods have proved successful in Tesla Motor Company hence effective to other automotive companies such as BMW, General Motors, Honda, Ford Motor Company and others (Allen, 2005).The only recommendation for Tesla is that it should also invest in corporate affairs of the general public to reap more clients and attract traffic on their website. Otherwise, its current position is well set for the future growth with$272 billion electrical cars demand projection in 2019.

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