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Tesla Case Study Case

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Question 1: What are the risks for Tesla? Limited operating history Tesla may experience significant delays or other complications in the design, manufacture, launch and production ramp of new vehicles. Tesla growth is highly dependent upon the adoption by consumers of alternative fuel vehicles in general and electric vehicles in particular. If the market for electric vehicles does not develop as we expect, or develops more slowly than it expects, business, prospects, financial condition and operating results will be harmed. Tesla continues to burn cash: With the company’s aggressive spending on research and development, employee compensation, and expansion of its service centers, stores, and other aspects of its business, is making it…show more content…
Tesla’s supercharger network puts it ahead of the competition and creates an opportunity for increased revenue. Disadvantages: Negative Net Income: Perhaps the most obvious disadvantage is that traditional “value” investors are turned off by the company’s consistent negative net income, leaving nothing to return to shareholders in terms of dividends or share buybacks. Disconnected between technology and business model: The innovativeness of Tesla’s technology is not matched by the innovativeness of its business model. In fact, there is no change to the business model at all. Tesla is simply proposing to replace the standard gasoline car and gas station business model with the model S and a supercharge station network. What the model S needs is not a network of charging stations but a different business model. Issues: Increases in costs, disruption of supply or shortage of raw materials, in particular lithium-ion cells, could harm its business. We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such…show more content…
The much affordable price of the model 3 will probably result in a boost in its sales. The model X was issued in 4Q15, only 208 units was sold while 2400 units were sold in 1Q16. Therefore, we assume a 2400 units of sales of model X in each quarter of 2016. In 2015, 50580 automotive (model S and model S) were sold. There is a sales report from AUTHOR FORECAST which we used in the spreadsheet. There would be cannibalization of old models from 2020 and a more uncertain market environment, so the sales forecast after 2020 we made were relatively conservative. After 2020, the automotive revenue growth rate we assumed was 15% each year. Model S will grow at 18% from 2018 then 3% less year-to-year. This is because we assumed that model S will experience a declining growth as the similar new model X will grow. We assume model X will have a rising growth rate until 2020, when new models at the same price would replace the model X. After 2020, though EV will be more popular compared to traditional vehicles, fiercer market competition can affect the growth of Tesla’s
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