Research project on TESLA

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Jun 19, 2024

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In my research project I have selected TESLA company. The reason that I choose this company because am very impressed by the products of this company as well as performance of the company in today’s market. Tesla Inc is automotive and energy company. It makes sustainable systems that results in great environmental benefits. Tesla has defined the automotive industry from niche to mainstream. The Tesla is the world of ambition, boundless potential, and human creativity. The company design, develop, manufacture, sell and lease high performance fully electric vehicles. Tesla is world’s most valuable company as of 2023. The company was founded in 2003, at that time the price of electric cars was very high. At that time the mission of company is to develop low volume cars with high prices such as sports cars, but this type of product is only suitable for high-net-worth clients. Later, company started focusing on vehicle with high volume and low prices so that average people can also afford it. Tesla started updating the hardware for its existing models rather than waiting to make the change in next year model, as like other companies does, this shows company’s client-oriented model which help to bring company forward. Another exciting fact about Tesla is that it allows its competitors to licence its technology, as company says that they want other companies to use world’s sustainable resource of clean energy. This process is conducted with proper licence agreements, where companies agree to not claim the company as patent suite and not to copy their designs. As the gas prices are reaching to sky in these days, people prefer to have electric cars. No doubt other companies are also investing in electric vehicles, but still Tesla’s market is at top as per current repots. The electric cars have low fuel cost and has no maintains charges. It more like a one-time investment. In this research project I will describe about Tesla in details such as its products services, business model, vision of company and annual report. Page 1 of 11

PART-1 BUSINESS DESCRIPTION Tesla Inc is an American multinational automotive clean energy company, and its headquarters is in Austin, Texas. It designs and manufactures electric cars, trucks and energy storages, solar panels, and solar tiles. The company was founded in 2003 in automotive renewal energy sector. Currently it has 1068 services and sales locations over different countries. The 2022 revenue of company was US$81.5 billion. Tesla was incorporated in 2003 by Martin Eberhard and Marc Tarpenning. The company’s name is tributed to engineer Nikola Tesla. In 2004 Elon Musk became the largest shareholder of company by investing $6.5 million in company. He became CEO of Tesla in 2008. Product and Services: - The company offer Model 3 with fours door mid-size sedan that we designed for manufacturability with a base price for mass-market appeal. Model Y is a compact sport utility vehicle (“SUV”) built on the Model 3 platform with seating for up to seven adults. Model S is a four-door full-size sedan that we began delivering in June 20-o6812. Model X is a mid-size SUV, which began delivering in September 2015. Model 3 Model Y Further company has lithium-ion battery energy storage products and solar energy systems. The company has several locations such as Manufacturing Facilities in the Bay Area, California, Gigafactory Nevada near Reno, Nevada, Gigafactory New York in Buffalo, New York, and Gigafactory Shanghai in China. The company has its import and export business in various countries such as Netherlands, Unites Staes, Ukraine, India, Australia, Hong Kong, China, and many other countries well. As many companies and now focusing on electrical vehicles Tesla has many competitors in market. The top ten competitors are companies like Nissan, BMW, Honda, Toyota, Ford, and Audi. Page 2 of 11

The company like Toyota are bringing up new electric vehicles which may cause drop in share prices for Tesla. Apart from this Tesla has shortage of supply which can affect its market in future. Further CEO Elon Musk has erratic behavior which can also affect the reputation on company in future. PART-2 PURPOSE AND ENVIROMENT In annual report of 2022, the company says that their success will depend on ability to continue to expand our sales capabilities. They also frequently adjust retail operations and product offerings to optimize reach, costs, product line-up and model differentiation and customer experience. The mission of company is to increase the sustainable energy resources. According to me company is fulfilling its aim by continuous focus on production of electric vehicle and solar energy systems. Company is also stepping forward to help its client by offering portable charging stations. The mission of Tesla is to save environment from green house gas emission, which will be certainly achieved in near future as lot of other companies are focusing on as well. There are some ethical issues in company such as Tesla’s approach to climate change, environmental reporting, toxic chemicals, conflict minerals, supply chain management, executive pay, and tax conduct . The company received worst rating in environment because its environmental reports didn’t discuss key issues such as toxic chemicals. Ethical Consumer expects all electronics companies to discuss the use of potentially hazardous chemical. Further the company also faced charges for child labour. It is claimed that in China plant there has been minors working with below average pay rate. It paid a penalty if $1M in 2021 due to air quality violations at one of its assembly plants. In total 33 notices of violation were issued to Tesla by the Bay Area Air Quality Management District. This information has been stated in ethical consumer website. In my opinion this suppose to be not happened. As people know Tesla by its brand image as electric cars with vision of environment protection, the management team should test all product before claiming any results. SWOT ANALYSIS: - Below is the SWOT analysis for Tesla. Strength: - The strength of company is its innovative products, team management, worldwide brand recognition, energy efficient and commitment for environment sustainable products. Weakness: - Beside brand image there are still some weak points in company such as high coset of products, limited supply, long wait time for recent models. In addition to this company has many legal disputes. Opportunities: - If the company will stay focused on its vision the opportunities are limitless. As the demand of electric vehicle is high this market will not go down in future. In addition to vehicles the company is already working on other products like solar energy which add diversification to business, in long run this will stability in company. In annual report mentioned that future growth and success are dependent upon consumers’ demand for electric vehicles and specifically its vehicles in an automotive industry that is generally competitive, cyclical, and volatile. Threats: - As all the big companies also started investing in electric vehicles the competition is high now. To completes the market Tesla must be consistence for its mission. Further as company is planning to bring autonomous vehicle it may cause cyberattacks. Lastly the regulatory concern from environmental Canada is also a red flag. However, the annual report states that the Page 3 of 11

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worldwide automotive market is highly competitive, and we expect it will become even more competitive in the future as we introduce additional vehicles in a broader cross-section of the passenger and commercial vehicle market and expand our vehicles’ capabilities. Employee Perks: - In addition to manufacturing Tesla offers other career opportunities such as designs, engineering and information technology, environment health and safety, construction and facilities, legal and government affairs, supply chain operations etc. Apart from full time company offers part time, seasonal employment is available. Company also offers internships and apprenticeships. In terms of benefits company offers its employees discounted stock options, discount of company products and upgrades. It also offers free shuttles to work. It provided paid training. Company has free onsite 24/7 charging stations on all sites. Tesla also provides medical benefits to full time employees. It offers employees flexible work schedule. Currently 127,855 employees are working in Tesla. Below I will explain the employee benefits in FINACIAL Benefits  Paid Internships  Wellness Reimbursements  Matching 401k contribution  RRSP and pension plan Health and Wellness Benefits  Non-Primary Caregiver Leave  Fertility Assistance  Adoption Assistance  Medical Insurance  Dental benefits  Primary caregiver leave  Vision benefits Workplace Benefits  Flexible work arrangements  Provided option to work outside United States Apart from above discussed benefits company also offers compensation to its employees. The compensation is noncash payout that goes to selected employees at the end on each quarter depending upon their performance for specific quarter. The amount of compensation may differ depending upon the role. There is different option for equity compensation payments such as stocks, stakes etc. Stock options allow us to purchase the stocks of company at predetermined rate for specific number of years. The benefit of this option is that employees will be getting lower investing price for stocks as compared to the fair market value. So, the benefit is that employees can buy the sticks at low price and sell at high. The current stock price of Tesla as per today’s closing price is $242.65. Page 4 of 11

There are two types of stock compensations non-qualified and incentive stock options. The nonqualified enable the employer to purchase the stock at specific price while incentive allow to buy at discounted price. However, the profit made in either case subject to tax implication from specific jurisdiction. According to my personal view the compensations are very valuable for employees. It is also considered as a reward for company’s hard-working employees. Each employee has his/her own financial goals and circumstance. They should use stock option carefully. For example, if they are choosing to go with nonqualified stock option in future the price may drop, and investment will be worthless. No doubt the chances of price drop are very rear for this company, but still employees should do their research before making any decision. Key People in management team Elon Musk: - He is the CEO and co founder of Tesla. He has completed is bachelors in physics at the University of Pennsylvania and a bachelor's degree in economics from the Wharton School of Business at the University of Pennsylvania, is both an engineer and inventor. He is also founder of SpaceX. Initially he entered Tesla as investor. Zachary j. Kirkhorn:- He is Chief financial Officer in Tesla since 2019. Before becoming CFO, he worked as Vice President, Finance, Financial Planning and Business Operations from December 2018 to March 2019. Kirkhorn holds degrees in economics and mechanical engineering and applied mechanics from the University of Pennsylvania and an MBA from Harvard University. Page 5 of 11

Andrew Baglino :- He is senior vice president in company since 2019. He has degree in electrical engineering from Stanford University. He is working with Tesla since 2009. Vaibhav Tanjeja:- He is working as CA in Tesla previously and became CFO in 2023.He earned degree in Chartered Accountant from Delhi University. He worked as senior manager in various companies such as Pwc in India and Unites States. He also worked in SolarCity as corporate controllers. The management leaders of Tesla are doing an amazing job. Most of the senior leaders are working in company from more than a decade. All of them are focused on there goals and leading the company in positive directions. PART-3 Products Branding is a process of research, crafting, testing, and fining of products. Great brands rely on strong foundations, interconnected pillars of strength and other elements. Tesla brands comes from the concepts of luxury, innovation, futurism, and performance. Today when someone talk about electric vehicles, Tesla came into mind automatically, this is called brand image. Michael Eisner Disney CEO says, “brand is a living entity- and it is enriched or undermined cumulatively over time, the products of a thousand small gestures”. (Roth.O,2023) Products: - The major products of company are electric cars. It has Model S, Model 3, Model X, and Model Y. The second product of company is battery energy storage such as Powerwall, powerpack and megapack. Further company offers solar products like solar panels solar roof tiles. It also has retail and service sector. Lastly company also offers power stations for electric vehicle and sells electrical vehicle components. Target Market: - Tesla is a customer-centric brand with focus on its audience. The phenomenon marketing behavior of its CEO keeps customer engaged with brand updates. As per study the company has 80% male and 15% female customers. In the demographic segmentation of company, the average buyer is an older individual in 34-55 age group. Its target market is families, executive professional, senior managers, and all other individuals with high income. In terms of geographic segmentation Tesla products are more popular in North America, Asia, and Europe. As per current repots China is becoming fast growing geographic segmentation with double sales in 2021.Futehr Tesla’s Solar products are more popular in sunny and warm weather countries and this type of weather is more efficient for products. Page 6 of 11

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In its behavioral segmentation company appeals its customer about environmental concerns. The prospective of company is to generate sustainable resource with clean energy. As company is branding its products as renewal resource of energy, it also makes impact on its customer to be more aware about environmental issues and keep environment clean. Marketing Channels: - The company does direct sales from its once showrooms which are well established in urban areas, unlikely other companies sell through franchised dealerships. This makes Tesla different from traditional companies. Secondly Tesla use Digital marketing strategies to reach its customers. As CEO of Tesla is influence on social media, it makes the global brand image of company and adds more client to its chain. He remains very active in new and media which directly attracts customers from market. Marketing Mix (4Ps) Analysis: - Tesla has maintained significant control on its marketing mix over past years. This brings effectiveness in achieving targets and optimizing profits. The company is major producer of electric cars in US market and in other countries as well. It is continuously focusing of its market mis for further market penetration and expansion in other countries, I will explain the 4Ps below. Product: - As we discussed in previous page Tesla offers electric cars, energy storage and solar products. This element of marketing identifies the output sold to target customers. The electric cars are major product of company in addition it sells batteries for home and industrial use. Place: - This is the second element of marketing mix. It is used to reach target customer by locations and venues. To communicates its customers company, use its own established stores by direct sales. It uses its official website to target online customers. Further companies service center and charging stations other source to connect its clients. Promotions: - Company promotes its products by using this marketing component. Thia is done by viral marketing, personal selling from stores, and by giving sale promotion on various products. Direct sales from showroom are big player in this marketing mix. Price: - Price strategies are linked in this mix. The company makes change in the price of products depending upon the demand and supply of specific product. For example, customer is now willing to pay more price on Tesla cars which are considers as advanced in terms of technology and ecology. Tesla use its Premium pricing strategy and Market oriented strategy in this marketing mix (Kissinger D, 2018) Competitors: - As I discussed earlier the major competitors are Nissan, Fors, Toyota, Fors, Audi and BMW. All this companies are now focusing on electric cars. Many of them have already put hybrid cars in market in earlier years. As these companies are well established in future, they can become major competitors for Tesla. These companies have more plant and location worldwide, which can affect the global market of Tesla. Moreover, these companies have less wait time to ship product which is a drawback in Tesla. PART-4 Financial Performance Tesla’s revenue showed remarkable growth over past years. Is has achieved a milestone in consistent revenue growth in previous quarters. The has been huge increase in vehicle manufacturing and delivery over various countries. The stock Page 7 of 11

performance is also boosting by volatility in its market with raid appreciations. The company has achieved higher rank in automaker companies in term of revenue.  Tesla gross profit for the quarter ending June 30, 2023, was $4.533B , a 7.06% increase year- over-year.  Tesla gross profit for the twelve months ending June 30, 2023, was $20.203B , a 11% increase year-over-year.  Tesla annual gross profit for 2022 was $20.853B , a 53.26% increase from 2021. Overall, the company is going in profit from last few years. The are been small losses occurred in these years as well, but the amount is very low. Page 8 of 11

In my opinion company did well in term of its gross profit. As we know most of the market are down in current time. But still Tesla maintained to be in good standing in this tough time. If we check with performance of company in pandemic period, it was far better than most of other business and companies. The reason behind the wonderful performance is Tesla’s product quality and its brand image. The company is continuously impacting by eternal factors like competition, and legal disputes, but its still maintaining its overall performance. The current stock price of Tesla is $242.65 which is very great. If we check the performance of stock from past 6-8 months from yahoo finance, it states: - Page 9 of 11

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From above data its crystal clear that Tesla is on its track to rule the electric vehicle market. To conclude, I would say Tesla is doing very great job in all areas including its sale, profit, revenue, and customer centric environment. In this research project Tesla exceed my expectations. I was aware about the brand name, but its performance is also amazing which make me surprised. In this project I came to know about additional products and services offered by this company. Below are the references above project: - How ethical is Tesla, Inc? | Ethical Consumer Tesla, Inc. - Wikipedia Top 10 Tesla Competitors & Alternatives (2023) (businessmodelanalyst.com) SWOT Analysis Of Tesla in a Simplified Way - Business Mavericks TSLA $242.65 ( ▼ 1.10%) Tesla Inc | Google Finance Roth.O,2019- The Tesla Brand: A look under the hood | timelapse (medium.com) Hodgson S- Tesla Marketing Strategy, Segmentation, Positioning And Targeting (fabrikbrands.com) Kissinger D,2018- Tesla, Inc.’s Marketing Mix (4Ps) Analysis - Panmore Institute Tesla Gross Profit 2010-2023 | TSLA | MacroTrends Tesla, Inc. (TSLA) Stock Historical Prices & Data - Yahoo Finance Page 10 of 11

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Research project on TESLA

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