Despite Tesla’s astronomical ascent, its market capitalization remains highly volatile, frequently fluctuating by hundreds of billions of dollars within a few days. Several factors explain why Tesla̵s future remains uncertain. Transition to Electric Vehicles. Many observers wonder if and when a change to EVs will happen. In 2021, 14% of all new cars registered in Europe and 9% in China were EVs, but in the United States EVs made up a mere 4% of new car registrations. Consumers feel “range anxiety,” worrying that EVs are limited in the number of miles they can be driven before requiring recharging. Moreover, EVs still sell at a premium over comparable internal combustion engine (ICE) cars, which are refilled easily at the many gas stations that dot the land. Competition. Although Tesla enjoys a first-mover advantage, the legacy carmakers such as GM, Ford, and Volkswagen have committed billions of dollars to develop electric cars within the next decade. Tesla is also facing increasing competition from pure EV startups such as Rivian and Lucid in the United States and NIO, XPeng, and Li in China. Global Scale. To continue to drive down the cost per car produced and to meet demand, which exceeds supply, Tesla must continue to ramp up its global scale. Tesla needs multiple factories across continents to make more than 1 million vehicles a year in each plant. In 2020, Tesla began producing cars at scale in Giga Shanghai, its most productive plant. In 2022, Tesla opened Gigafactories in Berlin, Germany, and Austin, Texas. Still, Tesla needs a much larger production footprint to meet global demand. Of the threats listed in Part II of the ChapterCase, which do you consider the most significant? How would you recommend that Musk and Tesla address each of these challenges?
Despite Tesla’s astronomical ascent, its market capitalization remains highly
volatile, frequently fluctuating by hundreds of billions of dollars within a few days.
Several factors explain why Tesla̵s future remains uncertain.
Transition to Electric Vehicles. Many observers wonder if and when a change to
EVs will happen. In 2021, 14% of all new cars registered in Europe and 9% in China
were EVs, but in the United States EVs made up a mere 4% of new car
registrations. Consumers feel “range anxiety,” worrying that EVs are limited in the
number of miles they can be driven before requiring recharging. Moreover, EVs still
sell at a premium over comparable internal combustion engine (ICE) cars, which
are refilled easily at the many gas stations that dot the land.
Competition. Although Tesla enjoys a first-mover advantage, the legacy carmakers
such as GM, Ford, and Volkswagen have committed billions of dollars to develop
electric cars within the next decade. Tesla is also facing increasing competition
from pure EV startups such as Rivian and Lucid in the United States and NIO,
XPeng, and Li in China.
Global Scale. To continue to drive down the cost per car produced and to meet
demand, which exceeds supply, Tesla must continue to ramp up its global scale.
Tesla needs multiple factories across continents to make more than 1 million
vehicles a year in each plant. In 2020, Tesla began producing cars at scale in Giga
Shanghai, its most productive plant. In 2022, Tesla opened Gigafactories in Berlin,
Germany, and Austin, Texas. Still, Tesla needs a much larger production footprint to
meet global demand.
Of the threats listed in Part II of the ChapterCase, which do you consider the most significant? How would you recommend that Musk and Tesla address each of these challenges?
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