Tesla Motors, Inc. is an automobile company that projects, produces and markets electric cars and vehicles, together with vehicle power-train details. Canadian and American governments have had a serious intent to present the electric vehicle to the major public. Tesla Motors’s debut into the Toronto market is well planned, taking into consideration the current political climate.
PESTEL analysis stands for the political, economical, social, technological, environmental and legal factors that affect car manufacturing of alternative energy vehicles.
Political factors related to Tesla Motors, Inc. focus mainly on how and to what extent the Canadian government intervenes with the economy of Canada. The review of political factors Incorporates such areas as tax policy, labor and environmental laws. It is no secret that prior endeavors to produce electric vehicles were dispelled in North America. Nevertheless, hybrid vehicles have been making a serious push in the marketplace and electric vehicles are gaining traction within provincial and federal government legislation in Canada. Legislation, which has been recently passed by Vancouver’s city council, now stands in need of all new dual ownerships, constructed in the city, in order to adjust the 240 volt outlets required to charge the Tesla in 20 % of all parking spaces. That is the first city in North America to apply such an action. The Ontario government has announced that it wants to have one in twenty vehicles, existing in Ontario, being electrically generated by 2020 (Carana, 2009). In order to help achieve this goal, the Ontario government introduced green vehicle incentives with rebates from $4,000 to $10,000 for qualifying vehicles purchased after July 1, 2010 (including Tesla’s). Qualified vehicles would also receive green license plates that would allow drivers to have special privileges, including unrestricted access to HOV lanes, regardless of occupancy, have an access to communal charging equipment and standstill at GO Transit and Ontario government car parking (Carana, 2009).
Economic factors incorporate economic development in the alternative energy industries, Tesla’s recent partnership and major changes within the insurance industry. These factors have key influences on how Tesla will be able to perform and carry resolutions. The cost of operating a vehicle is increasing due to many factors, mainly fuel costs and insurance. According to the Consumer Price Index, transportation prices in Canada rose 4% in the twelve months to May, after increasing 6% in April. In addition to paying higher prices for gasoline and passenger vehicles, consumers paid 5% more for passenger vehicle insurance premiums. In the past, it was true that crude oil prices were synonymous with the price of gasoline. However, since 2000, this historical trend has not held as pump prices have raised to almost 40% in the United States (Team, 2012). The new Harmonized Sales Tax in Ontario has increased the taxation on pump gas by 8% as of July 1, 2010. As taxation expands in order to incorporate some new practices of green business, the much exaggerated “carbon tax” and a number of policies and instruments to measure have not been implemented. Economic incentives from the Ontario government are putting forward concessions when insurance carriers are putting forward discounted prices on auto insurance for hybrid and EV (electric vehicle) cars. Thus, it is high time to consider alternative ways of transportation (Carana, 2009). The cost of electricity, however, is also increasing. Tesla has recently announced a partnership with Toyota Motor Corporation. The benefits from this partnership will be mutual and essential, as Japan is positioning itself to be a market leader in hybrids and EV vehicles. Recently, the media has portrayed the automotive industry, particularly for start-ups, as removed from the romance of yesteryear. It is increasingly difficult economically to create, design and manufacture vehicles (Alto, 2010).
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Social factors are, undoubtedly, related to political and economic circumstances and include the cultural aspects with increases in environmental consciousness, attitudes and emphasis on green/ eco products. These trends affect the demand for a company’s products and on company’s operating strategies. For example, Tesla provides a product that will produce zero emissions but at a cost (approximately $129,000 US) that limits it to very few, as a viable alternative to an economically friendly gasoline car. The debate is generally focused on the environment, carbon footprints and greenhouse gases. With the trend for consumers to purchase products that are deemed “eco” friendly, these trends can be finite, as price still plays a significant role in consumer buying decisions. Consumers are also losing faith in petroleum fuel and the associated costs in production, especially in the wake of environmental calamities like the BP oil spill in the Gulf. Tesla’s “zero sacrifice” Roadster and the $101,000 US price tag gives the affluent buyer a ticket to exclusiveness (Team, 2012). Part and parcel of the green revolution is the elite and celebrity aspect, historically associated with owning hybrid and electric vehicles. The consumer is also concerned due to hybrid and electric vehicle performance, or lack thereof. Tesla’s Roadster answers this with acceleration, faster than most sports cars of the same price, yet produces no emissions. Therefore, while the brand is not aimed at the purchase by every man, the cool and wow factor of the vehicle fits into the desires of car enthusiasts.
Technological factors include purchasing technology with incentives, mentioned earlier in the report by the government of Ontario. Technically speaking, the electric technology powering the Tesla line-up is state-of-the-art. The problem, however, is where owners will be able to charge, being away from home and beyond the roughly 400-kilometer range (Tesla, 2013). The Department of Transportation has originated various charging stations all along the state of California. This Department has also settled a list of them on a publicly available website. Canada is ready for electric charging stations because 120-volt outlets are already instilled in the cities. The same electrical outlets are applied to facilitate Canadian cars. Moreover, engine blocks, which are warm during the winter, can also be applied, in order to energize plug-in hybrid electric vehicles year-round. This would avert the need for extensive infrastructures, as the Tesla vehicles come with charging solutions for 110, 120, 220, and 240-volt outlets (Tesla, 2013).
Environmental factors, such as growing awareness to climate change, are affecting companies and the products they offer. It has also affected the consumers, who are increasingly becoming more aware of the environmental impacts of production. An event like the catastrophic BP oil spill questions Tesla Motors reliance on petroleum and strengthens environmentalism as ideology already prevalent throughout society. This disaster will definitely influence future decisions worldwide on the procuring of oil from deep-sea operations and, more importantly, push stricter legislation within the industry. This will provoke petroleum products cost increase. Growth of the world population, particularly in the emerging countries, and a significant increase in per capita income are the key trends that will influence oil demand (Huda, 2013).
Legal factors encompass the House Bill 3351, which allowed manufacturers of electric cars to sell directly to consumers in Texas. Moreover, program by $8 US billion for innovative vehicle technologies supported designing and manufacturing of the Model S sedan, and the creation of power-train technology. In addition, the pedestrian Safety Enhancement Act was legislated in 2011. It was passed to protect the safety of blind pedestrians.
Tesla Motors have deliberately deviated from the traditional automotive industry model, by both exceptionally concentrating on electric power-train technology, and owning their vehicle marketing and facilities chain. The company is the first and for now the only company to manufacture a federally accessible highway-configurative electric vehicle on an industrial scale. This vehicle stands for the Tesla Roadster, which conjoins a market-leading range on a single charge with nice-looking design, driving performance and zero exhaust pipe emissions.
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Tesla Motors works in a substantially distinctive approach and structure than traditional automobile manufacturers to chase what they consider is a key valued opportunity, meaning the capability to build up a unionized company, which effectively commercializes electric vehicles without renouncing on performance, range, or styling. In addition to drafting and outputting their vehicles, Tesla Motors markets and facilitates them through their own market and facilitation chain (Team, 2012). This is remote from the traditional automobile companies in the United States, which usually franchise their market and facilities. Tesla Motors consider that their route of approach will provide them an opportunity to work more cost efficiently, grant an improved experience for their customers and include their customer feedback more quickly into their product alteration and production processes. Tesla Motors continue to enlarge their distribution network on the global level. Thus, for the time being, Tesla Motors managers ten Tesla outlets in Europe and North America (Team, 2012).
SWOT analysis incorporates the identification of the key goals of the business venture or project. It defines the internal and external forces that are appropriate and inappropriate for the major goals achievement.
Strength and weaknesses stand for the internal factors, while opportunities and threats stand for external factors.
Strengths encompass several points. Firstly, Tesla Motors produces the quickest and most energy-efficient electric car on the market. The figures show that roadster can reach the range of 400 kilometers on a single charge and reach 60 mph in 3.7 seconds (Tesla, 2013). Secondly, they have patented technology together with other technologies. This point encompasses the Electric power-train components, the fact that Tesla Motors Builds many of the components in its car, the fact that they have the largest, safest and most advanced lithium-ion battery used in car. Finally, they have top-echelon clients, including Arnold Schwarzenegger, Jay Leno, and George Clooney. Thus, Tesla brand is respected worldwide (Sparks, 2013).
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Weaknesses include four main points. Firstly, they have no economies of scale, thus all operations are small-scale and low sales volume (1,000 sales to date). Secondly, Tesla Motors products are expensive. Therefore, Tesla Motors can only serve to a certain target group. For example, Roadster costs $125,000. Thirdly, Tesla Motors have a limited product line. Finally, Tesla Motors has restricted its operating profile (Sparks, 2013).
Opportunities include four main issues. Firstly, Toronto is a new market for Tesla. The Canadian market is already untapped and Tesla will be the only fully electric vehicle. The facts show that approximately 9,500 hybrid vehicles were sold in Canada in 2006, which makes 0.5% of total car sales; nevertheless, this number is expected to rise dramatically in future. Secondly, according to Frost & Sullivan, the market for electric-based vehicles is expected to grow to approximately 10.6 million units worldwide from approximately 1.75 million units (3% of new vehicles sold in 2008). This will make approximately 14% of new vehicles sold by 2015. Thirdly, Tesla Motors has a strong possibility to create the partnership with Toyota Motor Corporation. The last point stands for the volatility of the oil market and industry. Such disasters like BP exemplify the need for clean-energy alternatives (Sparks, 2013). Moreover, oil is not a sustainable energy source; therefore, governments and companies are looking for alternative energy opportunities. This is a very strong opportunity for Tesla Motors to announce themselves.
Major threats include two main issues. Firstly, large motor companies are dedicating more means to the electric cars and cars fuelled by other alternatives elaboration. For instance, Toyota and GM have each deposited over $1 billion in plug-in electric and hybrid vehicle projects (Alto, 2010). Secondly, there exists a limited charging infrastructure (Tesla, 2013).
Thus, several elements of internal and external environment have to be addressed, as soon as possible, in order to achieve a sustained competitive advantage. Tesla Motors has to use the fact that the world is looking for the clean-energy alternatives, in order to declare itself. Due to the fact that they have small-scale and low sales volume, it is important to develop the partnership with Toyota Motors. This will allow them to develop electric vehicles, parts, and cooperate on production system and engineering support. This will help to expand their narrow product line and will attract more customers. Moreover, it can help to lower the number of large motor companies, which might become their main competitors, or even leaders of the market. They also need to deal with their high costs, as this will expand the limited number of their purchasers.