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How Tesla Makes Money? Business Model of Tesla 

Do you know who is making Revolution in Automobile Industry?

 

Tesla Motors, who is a leading Electrical vehicle Producing Company In the World and also working on clean energy generation.

 

Tesla has reached the Market Capitalization of 98.63 Billion.

Tesla is Ran by Elon Musk, who is a very famous Entrepreneur, whose Net worth is $30.2 Billion. A lot of People think that Elon Musk is the Founder of Tesla But they are not.

Tesla is working on upcoming great technology and a loss making Company who had never a single Profitable year till its Origin

So let’s Read the Case Study Amazing Company, How This Company making changes in the Globe

 

 

1. About Tesla Motors

Tesla Motors is an electric car manufacturing company based in California, America. Company is widely known by very Famous, ELon Musk who is presently chief executive of Tesla.

The company operates multiple production and assembly plants in America. Tesla has produced many famous car models which include Model Y, Roadster (2020), Model S and Model X, etc.

The company is very famous for adopting the latest technology and its innovation. Its co founder Elon musk is very passionate about innovation and also owned SolarCity and SpaceX, both are Innovative companies.

Tesla was founded in 2003 by Martin Eberhard Marc Tenpennin, but in Series A funding, Elon Musk was lead investor, they are allowed to call themself as a Co Founder of Tesla.

Tesla ranked as number plug-in passenger car seller and manufacturer with a share of 12% in toal plug-in cars selling.

Tesla is not a profitable company,company generated some profits in some quarters but never had any profit year.

The reason behind their loss is they work on latest technology who need to approve in the market, but in the long term Tesla can become a Profitable company because other cars will not sell in future due to finishing of fuel, electricity is a renewable energy that’s why in future only electrical car will be sold and Tesla earned early adopter advantage.

 

2. How Tesla Started 

Tesla is started by two engineers named Martin Eberhard and Marc Tarpenning in 2003. The name of Company Tesla is inspired by Engineer Nikola Tesla.

In Series A funding of company Elon Musk joined the company, he is the lead investor in Series A Funding and allowed to call themselves as a Co Founder of the company.

The main objective of Tesla is to produce an electric vehicle that can be better and quicker than a gasoline car. The company launched its first Product in 2008, Roadster. The company produces Model which is the world’s first premium class electrical sedan.

Elon Musk took a great role in the design of a Roadster. Elon Musk also leads investors in Series B Funding.

In the Series C Funding of the company, many great Entrepreneurs join the company which includes Segey Brin & Larry Page (Co Founder of Google), Jeff Skool ( Former President of Ebay). In 2015, Tesla Expanded its Product range to Model X that holds a 5 Star rating in Safety.

In 2016, Tesla introduced and Model and later Semi Truck. The company is continuously working on the production of High-Quality environment-friendly Vehicles at a low cost.

 

3. Business Model of Tesla 

Tesla is working on electrical Vehicles. So far the Company has launched Model S, Model X, Model 3, Model Y, Semi Truck, Tesla Pickup Truck, and Tesla Roadster.

All these models of electric vehicles are available in the market for Purchase.

Company’s manufacture Electrical cars in which electric motor, battery pack and battery chargers are developed by Tesla and other materials will be imported from other Suppliers.

The company’s other Work is designing the electrical vehicle, Research and Development, Software Development and  Sales Marketing.

After Production of Cars company directly sells to customers through its distribution channel. Company’s distribution Channel includes Retail Stores, Self Service online Store, and some partner channel.

The company also sells solar systems to Commercial and Residential Consumers.

 

Production of Tesla

Source Statista

 

4. Revenue Model of Tesla  

Tesla has an established brand in the market for is recognized for the electrical vehicle. The company’s Revenue Model includes three major components which are Sales of Electric Vehicles, Servicing and Charging of  Vehicles.

Tesla is using Direct Sell methods in which a company sells its vehicles on company owned showroom and supply through its international distribution channel.

The company also has a self-service online store. The company also owned Service Centers in which the company provides service for Electric Vehicles.

Tesla also creates a super Network of Charger in which Drivers fully charger for 30 minutes in free.

The reason behind these Charging Networks is people can charge their vehicles while on the go and it will help them to adopt electrical vehicles.

Revenue of Tesla

Source Statista

 

6. Fun & Facts

 

CategoriesAutomotive, Autonomous Vehicles, Electronics,
Headquarters RegionsSan Francisco Bay Area, Silicon Valley, West Coast
FoundersElon Musk, JB Straubel
Operating StatusActive
Funding StatusIPO

 

Number of Employees10001+
Legal NameTesla, Inc
IPO StatusActive

 

Company TypeFor-Profit

 

7. Fund Rising 

We have already discussed the business model of Tesla. The company is working on very innovative Ideas in Automobile Industry.

The automobile business is very high capital centric business.Thus it requires a lot of money to run this type of business. The need for finance is very big for companies like Tesla. Tesla raised  $19.9 Billion dollars.

Elon Musk, who is CEO of Tesla’s funding also includes in this funding amount. In SeriesA round of funding, Elon Musk was lead Investor.

He also invested in other funding rounds of Tesla. Tesla also launched its IPO in June 2010 on the Nasdaq Exchange. The Company offers share at a price of $17 per share and raised $226.1 Million from IPO.

On the first day of listing on the Stock Exchange, Tesla’s share is closed at $23.89. Its share currently trending for $510 per share.

 

Investor NameFunding Round
Shanghai Pudong Development BankPost-IPO Debt-Tesla
China Construction BankPost IPO Debt Tesla
Industrial & Commercial Bank of ChinaPost IPO Debt Tesla
Agricultural Bank of ChinaPost IPO Debt Tesla
China Merchants BanksPost IPO Debt Tesla
Tencent HoldingsPost-IPO Secondary
Goldman SachsPost IPO Equity Tesla
Bank of AmericaPost IPO Equity Tesla
Deutsche BankPost IPO Equity Tesla
CitigroupPost IPO Equity Tesla

 

8. Management Team  of Tesla

 

CEOElon Musk
Senior Software EngineerTerence Pae
Operations Commodity ManagerAJ Vandermeyden
Chief Accounting OfficerVaibhav Taneja

 

9. Acquisition 

Tesla has also acquired some organization to run its business more successfully.

Tesla has acquired 6 organizations.Their first acquisition was  Riviera Tool LLC who is the manufacturing of the stamping die system.

Tesla acquires SolarCity for $2.6 B. SolarCity is a big company who provide Solar energy services to homeowners, business and government. The following are the list of acquisitions made by Tesla.

Acquiree NamePrice
Deep ScaleNot Disclosed
Maxwell Technologies$218M
PerbixNot Disclosed
Grohmann  EngineeringNot Disclosed
SolarCity$2.6 B
Riviera Tool LLCNot Disclosed

 

10. SWOT Analysis 

Strengths

  • Tesla has the greatest strength of adopting the latest technology for production.
  • Tesla has a very strong R&D Department which is responsible for the development of new technology. Many other famous companies use technology developed by Tesla.
  • The company has good support from the Government. The company obtained $465 Billion for Energy Management Project from the US Energy Department.
  • Tesla also has a strong Brand Recognition, Its CEO, Elon Musk is a very popular Entrepreneur in the world.

Weakness

  • Very low capacity in its manufacture unit.
  • Very low cash liquidity as compared to its competitors.
  • Making environmentally friendly products but it has very low awareness regarding It Products.
  • Very high-cost production, Thus its Prices are also very High.

Opportunity

  • Expand its sales in the untapped market.
  • Global expansion.
  • Distribution channel in Asian countries.
  • New technology adoption.

Threats

  • Face aggressive competition
  • There are a lot of fluctuations in automobiles of material.
  • Tesla is working on Self-driving which includes a lot of risks.
  • Customer Adoption is very slow in the technology in which Tesla working. In Asian countries, people are using diesel and petrol vehicles. It becomes difficult for them to adopt new technology like electrical vehicle

11. Future Plan of Tesla 

Tesla is expanding their business very quickly to other countries and working very large projects.

The future plan of Tesla is following

  • The company is planning to launch Roadster 2020 which is an electrical car. Elon Musk announced that these cars will be able to go to 0 to 60 miles per hour in 1.9 seconds and has the capability to run on a maximum speed of 250 miles per hour.
  • Tesla is planning to launch a Semi which an electrical truck vehicle. The production of these vehicles will start in 2020. These vehicle has the capability to run 640 kilometers on a charge of 30 min. Its cost is expected around $1,80,000
  • The company also planning to launch Model Y which is an SUV vehicle and have the capability to run 340 miles on the basis of full charge. It is expected to arrive in the market in March 2020. Its expected cost is $39000 to $60000

 

12. Competitor  of Tesla 

 

Like all other Companies, Tesla also facing great competition. Tesla is mostly competing with General Motors, Ford Credit & Hyundai Motor . Tesla’s estimated revenue is $25.1 Billion annually. General Motor is a major Competitor of   Tesla, is also a Us Based manufacturer and marketer of Vehicles. General Motors generate $144.1 Billion annually. Ford Credit, manufacturer and distributor of car and SUV is also competing with Tesla. Ford Credit is generating more than $158 Billion per year. Hyundai Motor, a Japan-based company who is especially known for the manufacturing of automobiles and Motor Cycles is also competing with Tesla.

Tesla case Study
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