tesla-swot-analysis

Is Tesla Overvalued? Tesla SWOT Analysis In A Nutshell

Among the most recognized car manufacturers, Tesla is valued more than the combined market capitalization of GM and Ford. The company’s direct distribution is a strength. The key when it comes to Tesla is about understanding the size of the market the company is creating, which combines EVs, autonomous driving, energy storage and distribution, and real-time insurance.

Tesla’s strengths

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
  • Strong brand: Tesla has been able in the last decade to become among the most recognized brand, also thanks to its rockstar CEO, Elon Musk. A single tweet from Elon Musk is worth more than a hundred press releases from major publications. And that helped.
  • Direct distribution: Tesla benefits from a direct distribution model, where the cars are primarily sold in its store or online, and thus Tesla is able to cut the middlemen, thus still able to offer the car at an attractive price (at least the Model 3).
  • Manufacturing: Tesla has been investing massive resources in building up its own manufacturing facilities, which will be the company’s most important assets for years to come.

Tesla’s weaknesses

how-does-tesla-make-money
In 2021, Tesla generated $53.8 billion in revenues. Tesla primarily made money via automotive sales, $47.2 billion (almost 88% of the total revenues); services/other followed with $3.8 billion, energy generation and storage generated about $2.8 billion in revenues, and automotive leasing generated $1.46 billion.  
  • Single-sourced supply chain: while the company still sources most of the components from multiple suppliers, there are still certain, important components that are single-sources. This is in part normal in the car manufacturing space. Yet Tesla tries to prevent the risk of being without the proper stock to assemble the cars by piling stocks of components that are single-sources.

Tesla’s threats

  • Competition from leading brands: while Tesla is a recognized brand, it’s still a small player in a niche (electric cars) in the automotive industry. This makes Tesla easily attacked by dominating existing brands.
  • Still low electrical vehicle adoption: Tesla is surfing the growth of the electric car industry growth. If that becomes an industry larger than the current automotive industry, then Tesla will be well-positioned for that. However, if that doesn’t happen Tesla won’t be of as much value. And while the company can control part of this process, another part cannot be controlled.
  • Delays or other complications in the design, manufacture, launch, and production: if Tesla fails in its go-to-market strategy this can result in big, substantial losses. Therefore, the company will need to make sure to be able to reach its targets in terms of manufacturing and also in developing the proper capability for its manufacturing facilities.

Tesla’s opportunities

cybertruck-preorder-tesla

Tesla has become among the most recognized car manufacturers. Although, players like GM and Ford delivered more than 2mln cars, compared to Tesla’s over 367K vehicles. Yet Tesla is valued three times more than the combined market capitalization of GM and Ford as the market sees the potential of a market that might become much bigger than the current one.

This huge market potential is reflected in Tesla’s valuation, and the company able to develop new products categories in the space can become a “price setter” where its products will be so differentiated that the company might enjoy good margins for a long time!

Is Tesla a car company?

When Apple launched the iPhone, that indeed was a phone, but it was way more than that, it was a portable computer with Internet access.

The iPhone not only captured the largest market shares of the phone industry, but it also expanded the whole market.

Making the mobile phone market size increase exponentially. And Apple, as of 2022, still takes advantage of this market.

how-does-apple-make-money
Apple’s made over $365.8 billion in revenues in 2021, of which over $191.9 billion or over 52% of its total revenues came from the iPhone. Yet, the iPhone isn’t just a hardware product; it’s a business platform that combines hardware (iPhone), operating system (iOS), and a marketplace (the App Store). Thus, the company still makes most of its money around a single product which powers up an entrepreneurial ecosystem.

Tesla has borrowed Apple’s playbook to build a business model, starting with cars, but it goes way beyond that.

Is Tesla a car company?

It is, yet, just like the phone industry has been completely reshaped with the iPhone. The car industry is getting completely reshaped with the Tesla EVs.

In fact, Tesla is a car company, a self-driving company, an AI company, a storage and energy distribution company, and more.

This is on the basis of what I like to call market expansion theory.

what's Tesla market?

In short, just like in the 2010s, you could be called a mobile phone company if you just produced the hardware.

Today, the smartphone industry combines hardware, software, and the marketplace.

Therefore, going forward, when we’ll talk about the car industry, we’ll mean something completely different compared to what we think of today, and much much larger.

In fact, EVs combined with self-driving and AI will exponentially grow the size of what, today, we call the car industry.

Just like, in the previous decade what we called the mobile phone industry turned into the smartphone industry.

Read next: Tesla Business Model

Read more: What Is A SWOT Analysis

Related to Tesla

Is Tesla Profitable?

is-tesla-profitable
Yes, Tesla has been profitable since 2020. Indeed, Tesla generated $862 million in 2020. And it further generated $5.6 billion in net income by 2021.

Tesla Production

tesla-production-numbers-by-year

Tesla Production vs. Delivery

tesla-production-vs-delivery

Who Is Elon Musk

who-is-elon-musk
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.

Who Owns Tesla

who-owns-tesla
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.

History of Tesla

history-of-tesla
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.

Tesla Business Model

tesla-business-model
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.

Tesla Competitors

tesla-competitors
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.

Real-Time Insurance

real-time-insurance
A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm enable Tesla to scale its demand side of the business.

Tesla Business Model

tesla-financials
In 2021, Tesla generated over $53.8 billion in revenues, compared to $31.5 billion in 2020. The largest segment in automotive sales (comprising regulatory credits revenues), followed by leasing (as part of the automotive), generated $1.6 billion in 2021. Outside automotive sales (non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, and more) accounted for $3.8 billion. And energy generation and storage accounted for $2.8 billion. US and China are the primary markets, with almost $24 billion and nearly $14 billion, respectively, in 2021. In 2021, Tesla generated $5.6 billion in Net Income, a net margin of over 10%.

More resources:

SWOT Analysis Case Studies

McDonald’s SWOT Analysis

mcdonalds-swot-analysis

Nike SWOT Analysis

nike-swot-analysis

Samsung SWOT Analysis

microsoft-swot-analysis
Samsung was founded in South Korea in 1938 by Lee Byung-Chul. Originally a trading company, it took Samsung 22 years to become the fully-fledged electronics company that most people recognize today. Indeed, the company is a leader in technological innovation through telecommunications, electronics, and home appliances.

Costco SWOT Analysis

costco-swot-analysis
Costco is a large American multinational corporation with a focus on low-cost, membership-only retail warehouse clubs. Costco is the 4th largest retail operator in the world, operating 785 warehouses in 10 different countries. Indeed, it has enjoyed rapid success growing from zero to $3 billion in sales within six years.

Walmart SWOT Analysis

walmart-swot-analysis
From humble beginnings just over 50 years ago, Walmart has grown to become the world’s largest retail company. A single small discount store in Arkansas has now expanded to over 11,000 stores in 28 countries. Some reports suggest that the company now makes $1.8 million of profit every hour.

Uber SWOT Analysis

uber-swot-analysis
Headquartered in San Francisco, California, Uber started as a peer-to-peer ridesharing platform. In more recent times, the company has moved into food delivery, rental cars, and bike-sharing. In one form or another, Uber now has a presence in over 900 cities worldwide.

Disney SWOT Analysis

disney-swot-analysis
It would be hard to argue the case for a more recognizable entertainment brand than Disney. Disney is of course synonymous with Walt Disney, but it was Walt and his brother Roy who started the company in 1923 in Burbank, California. Disney content is now broadcast on over 100 channels in 34 different languages across the globe.

Coca-Cola SWOT Analysis

coca-cola-swot-analysis
Coca-Cola is the market leader of the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo. However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.

Ford SWOT Analysis

ford-swot-analysis
Founded in 1903 by Henry Ford and is the fifth-largest family-owned company in the world. Ford is a globally recognized brand in the automotive industry for a couple of reasons. First, Henry Ford is well-known as the inventor of the production line and thus the modern automobile industry. Today, Ford has also maintained relevance as the seventh-largest car manufacturer worldwide, selling a range of passenger cars, trucks, and vans.

Tesco SWOT Analysis

tesco-swot-analysis
Tesco was founded in 1919 by Jack Cohen, as a small group of market stalls. After rapid expansion in the following years, the company became the largest retailer in the UK and is now the second-largest in the world. To put their dominance into perspective, consider that Tesco serves around 66 shoppers per second across 7000 retails stores, delivering approximately $180,000 worth of sales every minute.

Nestlé SWOT Analysis

nestle-swot-analysis
Nestlé is a large multinational food and beverage manufacturer with more than 2000 brands spread across 197 countries. Some of Nestlé’s well-known brands include Nescafe, Kit-Kat, Purina, Aero, Butterfinger, Maggi, and Haagen-Dazs. Originally a producer of infant food in 1867, it is now considered to be the world’s largest food manufacturer.

Amazon SWOT Analysis

amazon-swot-analysis
Amazon is among the most diversified business model in the tech industry. The company is well-positioned to dominate e-commerce further. And while its online stores have tight profit margins, Amazon still unlocks cash for growth, while consolidating its dominance in the cloud and grabbing new opportunities like voice.

Facebook SWOT Analysis

facebook-swot-analysis
Facebook, with its products, with its strong appeal, and consumer brand has a solid business model, threatened in the last years by privacy concerns, which open up the way to potential regulation to break up the company. If that will not happen, Facebook will have the chance to expand to define other markets like VR.

Starbucks SWOT Analysis

swot-analysis-of-starbucks
Starbucks is a global consumer brand with direct distribution, recognized brands, and products that make it a viable business. Its reliance on the Americas as a primary operating segment makes it a weakness. At the same time, Starbucks faces risks related to coffee beans price volatility. Yet the company still has global expansion opportunities.

Tesla SWOT Analysis

tesla-swot-analysis
Among the most recognized car manufacturers, Tesla is valued more than the combined market capitalization of GM and Ford. While the company’s direct distribution is a strength, its lack of financial viability is a weakness. Competition is a future threat. However, if Tesla defines a new market for car manufacturing its potential growth will be massive.

Netflix SWOT Analysis

netflix-swot-analysis
Netflix is among the most popular streaming platforms, with a subscription-based business model. The brand, platform, and content are strengths. The volatility of content licensing and production are weaknesses. The streaming market is a potential blue ocean. Inability to attract and retain premium members, and its fixed long-term costs are threats to its business model.

Apple SWOT Analysis

apple-swot-analysis
Apple can leverage a strong consumer brand and set of successful products as a strength. Yet the company is still too reliant on the iPhone as a primary revenue stream. Though Apple is working to open up new markets as an opportunity, it has to make sure to sustain its stores’ sales.

Google SWOT Analysis

google-swot-analysis
Google’s strength is its strong consumer brand. The company is grabbing new opportunities by opening up industries like voice search and consolidating in industries like the cloud. As a weakness, its revenues primarily come from advertising. A primary threat is the quick change of search and potential intervention by regulators.

Read Next: SWOT Analysis, Personal SWOT Analysis.

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