Inside the electric motor industry, Tesla accounts for 70% of the electrical vehicles manufactured in 2021. Being an innovative and competitive company, allows for Tesla to ensure they stay Infront of competitors and maintain their growth and cash flows into the future. This PESTLE analysis of Tesla, seen on the slide, contains the major findings about the company, as well as their possible threats and opportunities within the industry. POLITICAL There is a wide range of political factors that can potentially affect automobile manufacturers. Specifically, political factors for Tesla include freedom of press, corruption and bureaucracy in local markets and trade unions activities. Tesla uses cobalt extensively as a raw material to build its Model S, Model X, Model 3 vehicles, with around 58% of the world’s cobalt production comes from the Democratic Republic of Congo, hence puts future risks and pressure on their supply of raw goods. ECONOMIC Changes in foreign currency exchange rates are one of the most noteworthy economic factors for Tesla. This is due to the international scope of business operations of the alternative fuel vehicles manufacturer. Although home market US remains as the largest market for electric car maker, the volume of sales from international markets are consistently increasing. SOCIAL With the Increasingly popularity of low-carbon lifestyles, preference for renewable energy and Improving wealth distribution in developing markets, all provide major opportunities to Tesla’s Socio-economic viability in the future. Tesla has an opportunity to boost its financial performance based on the increasing wealth distribution in developing markets, hence increases the population of potential buyers. TECHNOLOGICAL As both the increasing automation in business operations and production, and popularity of online mobile systems provide a viable opportunity to Tesla, with the increase of new innovative technologies. Though from the recent seen high rate of technological change, provides constant need for R+D and innovative change to stay ahead within their market. ENVIROMENTAL There are three major environmental opportunities towards Tesla and their industry environment, including Climate change awareness, expanding their environmental programs and the rising of standards on waste disposal globally. The company’s electric vehicles, batteries and solar panels are considered suitable in directly addressing these external factors linked to business sustainability and environmentally friendly products. LEGAL Tesla faces multiple legal opportunities, which include expanding international patent protection, allowing for themselves to separate from their competitors within their market. Though it also poses threats seen in the article, in relation to safety and dealership sales regulation in the United States, hindering their online sales model from B2C. Analysis of the Industry Environment Potential of New Entrants into an Industry The threat of new entrants is HIGH, as the barrier of entry is LOW. Chinese companies dominate the EV start-ups, including Nio, BYD, and Li Auto. They have a better competitive advantage because of their access to the biggest consumer market, well-established supply chain, and government support. Meanwhile, US and European companies dominate the traditional automakers and companies transitioning to electric vehicles, with GM introduced the electric Hummer and will go all-electric by 2035. Power of Suppliers The bargaining power of suppliers is HIGH due to a limited supply chain network. The electric vehicle industry is relatively new and in the development stage. Today, most Tesla vehicle parts come from German suppliers, with any disruption in the economy, will negatively impact Tesla’s production. Power of Customers The bargaining power of buyers is LOW, as Tesla segments its products at the highend market with premium pricing. The electric carmaker is currently leading in speed, safety, battery life, and autopilot system. Threat of Substitutes The threat of substitutes is HIGH, as Tesla owns a 1.2% market share of the overall automobile market and 14.55% of the global electric vehicle market. The big automakers have a solid customer base, and the start-ups saturate the markets. However, the critical source of competitive advantage for Tesla is brand loyalty. Competition in the Industry The industry rivalry among competitors is INTENSE, from start-ups, traditional automakers, and big automotive brands switching to electric. The competitors use pricing and differentiation strategies, restricting Tesla’s market penetration and profitability growth.
