Executive Summary
Tesla is a successful company, yet it has not achieved the same success in Germany as in other markets. Despite its ability to sell more than 200000 vehicles in the U.S., Tesla has difficulty selling in Germany and must overhaul its strategies for manufacturing cars there. This report discusses Tesla’s history of facing challenges; an analysis of its sales performance, including Model S and Model X sales figures; an exploration of what can be done to overcome obstacles faced by competitors BMW and Audi; an examination of how Tesla may restructure operations in Germany, with a specific focus on management capabilities (such as leadership, marketing, and sales); and recommendations for building a better business strategy based on these findings.
Introduction
In 2016, Tesla was valued at $2 billion and had just delivered its first Model S. In 2018, the company was worth $56 billion and had sold more than 200000 vehicles (Thomas & Maine, 2021). Several factors have contributed to this success, but one of the biggest has been Tesla’s focus on developing self-driving technology. Tesla first began to break into the self-driving market with the introduction of Autopilot in 2015. This feature enabled cars to drive under certain conditions, such as on highways or with a driver behind the wheel. In 2017, Tesla launched its Model 3 electric car – a vehicle that can be used as an autonomous test bed for future technologies. The company’s focus on designing advanced software and sensors for self-driving cars has paid off in spades, and it has developed a strong foothold within this niche market.
With the Tesla Model 3, Tesla aims to bring electric vehicles to the mass market. But for this strategy to succeed, the company will need a robust supply chain. Fortunately, that’s precisely what they have at their disposal: engineers with an unparalleled understanding of manufacturing. Tesla is a car company, first and foremost. While the company also produces batteries and solar panels for home use, its primary business revolves around manufacturing electric cars that can run off battery power exclusively or from a gas-powered generator as backup. This focus on designing and building automobiles puts Tesla’s engineers in touch with some of the latest techniques used by automotive manufacturers worldwide. This report will give you an insider’s look into what makes Tesla so unique in automotive engineering and how it might shape the future of automotive design and development in Germany.
For a company that is known for high-end manufacturing cars, few of them are manufactured outside the U.S. The same cannot be said about other automakers who have established a strong presence in foreign markets such as Germany. The automotive industry is experiencing a renaissance in Germany. This has been fueled by legislation that makes it easier for car manufacturers to operate. As a result, several global car brands have set up shop in the country. Here, we will look at how Tesla can grow its presence in Germany and how this could impact the automaker’s bottom line.
Analysis of the Electronic Car Market in Germany
In the automotive industry, Germany is a significant player. With one in every five cars on the roads in Europe being of German origin, the country has been a fixture for many years. Moreover, German manufacturers have been producing vehicles since World War I. Consequently, it is safe to say that Germans have become accustomed to having a significant presence in the automotive industry – even if that presence doesn’t always go smoothly. For example, Volkswagen had to spend more than ten years for its emissions scandal to be fully resolved and more than €30 billion on that effort alone (Haluch et al., 2021 ). As such, Germany has seen much change over time regarding how automakers interact with society and operate within different governmental structures.
New laws and regulations will come online in European markets over the next three to five years. To operate profitably, automakers need a business model capable of adapting to these changing market conditions. According to Bloomberg, Tesla is the first European automaker with a fully electric lineup of cars. Its new business model will be affected by these upcoming changes, and here’s how:
Shortly, all automakers will have to sell more electrified vehicles than their combustion engine counterparts. The goal is for every automaker to have one electrified vehicle in their lineup. This has led car makers such as BMW and Daimler to adopt a new business model called Bavarian Model or Buy One Get One Free (BOGU). Under this plan, customers are offered another car at a discount when they buy one car from an automaker. The only catch is that it cannot be an old car but must be newer than six months old. Additionally, if you buy a new electric vehicle from them within 12 months of purchase, they are then allowed to sell you another one at no additional cost. The idea behind this strategy is that once an automaker introduces electric vehicles into their lineup, they want to keep selling them because it brings more profit over time.
With Tesla’s ability to drive down the price of its electric cars, automakers are now starting to manufacture them massively to compete. Many automakers have been hesitant about entering the electric car market due to the high capital costs of building a new vehicle and the limited demand. But as they continue to lower the cost of production, more and more automakers are starting to see advantages in entering this market segment.
The United States and Germany share many similarities in the automotive industry. Both countries have a strong economy, demand for new cars is high, and their automobile manufacturing sectors are highly competitive. However, there are some critical differences between them as well. For example, while both countries are members of the European Union, Germany has a separate trade agreement with the U.S. known as the North American Free Trade Agreement (NAFTA). These differences have implications for Tesla’s operations in Germany and its operations in the U.S.
Recommendations
Tesla has a history of marketing struggles. In the Model S and Model X’s first two years on sale, Tesla sold fewer than 1,200 cars through its retail network (Liu, 2021). To reverse this trend and overcome the challenges it will face once again in future sales cycles, the company should develop a new strategy for its German operations. The automaker has been aware of these issues for some time, with marketing chief Jeffrey Berns even acknowledging that the brand needs to be “breathed new life into” if it is going to be successful in Germany.
In light of these changes and other factors affecting Tesla’s business model operating within the E.U., it is time for Tesla’s Autonomous Driving Services (ADS) segment to become an independent company. In the second quarter of 2018, Tesla pre-announced its plans to invest $2.6 billion in manufacturing and expanding its electric vehicle assembly plant in Fremont, California. These funds will also be used to create 13,000 new jobs by 2020. Tesla is not alone in facing the challenges of operating a manufacturer within the European Union (E.U.). Nearly every automaker — including Volkswagen, Daimler, and BMW — has been fighting to prove that they are not responsible for excess emissions produced by their vehicles. This year alone, the E.U. has introduced more than 1,200 amendments to E.U. laws explicitly related to automobiles.
To streamline manufacturing processes and reduce costs, Tesla should consolidate operations at fewer sites within its more extensive networks of plants and factories. Tesla operates several productions and sales centers around the world, with each location specializing in specific activities. For example, the manufacturing center in Fremont focuses on building new vehicles, while the assembly plant in Gigafactory 1 in Nevada assembles cars. While distances between different locations can be an issue for any business operating throughout multiple countries, it is particularly challenging for Tesla. The automaker has limited suppliers and works with just a few manufacturers to produce most of its parts and components for electric cars.
References
Haluch, E. L., Júnior, O. C., & Sampaio, C. A. C. (2021, July). Impacts of the Sustainable Automotive Chain: Faced with the Perspective of Electromobility in Consolidated Markets in Germany, the United States, and Japan. In IFIP International Conference on Product Lifecycle Management (pp. 3-14). Springer, Cham.
Liu, S. (2021, March). Competition and valuation: a case study of Tesla Motors. IOP Conference Series: Earth and Environmental Science (Vol. 692, No. 2, p. 022103). IOP Publishing.
Thomas, V. J., & Maine, E. (2019). Market entry strategies for electric vehicle start-ups in the automotive industry–Lessons from Tesla Motors. Journal of Cleaner Production, 235, 653-663.
write