Decision Made by Tesla to Manufacture Motor Vehicles in China

Decision Made by Tesla to Manufacture Motor Vehicles in China
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Decision Made by Tesla to Manufacture Motor Vehicles in China
Tesla is an American firm, which is a product of the popular Silicon Valley. The company specializes in the production of electric vehicles (EVs) with other products such as powertrains and battery storage packs complementing their primary operations. Tesla’s prominence has arisen because of various stakeholders’ fight against climate change that is becoming an existential threat to humanity. The company’s growth strategy compels them to expand to the greatest emerging markets in the Asian region including China. China has a stable political environment making it one of the best environments to exploit its exceptional economic opportunity. Both the government and its citizens complement the social factor that is fundamental in enhancing this course. Tesla’s expansion into the Chinese market marks a very vital move to the company’s growth as well as betterment for humanity.
Brief History of Tesla
Silicon Valley in San Francisco has long been recognized as the leader in tech innovations in the 21st Century. This assertion justifies the emergence of Tesla as a technologically innovative firm that has ventured into the automobile industry but in a relatively unique niche. Technology is a source of competitive advantage (Hanson, Hitt, Ireland, &Hoskisson, 2016) and fortunately, it has played in favor of the company’s prospects in the marketplace). Tesla Inc. was conceived in 2003 as a group of engineers resolved to create electric vehicles (EVs) (Perkins and Murmann 2018). The engineers were motivated to create zero carbon-emitting cars, unlike the internal combustion engines that were and are still popular. The acceleration of the entire world to sustainable transport was the other major goal, which is reflected in the company’s mission “to accelerate the world’s transition to sustainable energy” (Tesla 2020). It is right to ascertain that Tesla is headed towards this direction considering that it is the most valued automobile industry in the market currently eclipsing the likes of General Motors and Ford with over a century’s stay and experience (Klebnikov 2020). The company has gained popularity globally with customers flocking from every corner and more surprising is the number of customers who are comfortable with pre-orders of yet-to-begin production models. Tesla’s rise to stardom and eventual expansion to the Asian market has been faced with various challenges particularly finances, production, and supply sides of things.
Challenges Tesla has Faced Since Its Inception
Tesla has faced major challenges in the process of growing as a company. Production problems have been associated with the company and to a keener party, this challenge is expected in a startup. Besides, it is worth noting that Tesla is the first car company to conduct an initial public offering in more than half a decade considering that Ford went public in 1956 (Reed and Gelles 2010). This position conveys the difficulties for a startup including inaccurate estimations as a result of historical information as well as lack of experience (Garces 2018). Tesla faced major backlash in July 2017 has it had failed to deliver its Model 3s to over half-million customers that had made their reservations through a $1,000 deposit. Surprisingly, this was a year after the promised date, and to make matters worse, the first 30 Model 3 vehicles being issued were given to the company’s employees(Vlasic, 2017). The company’s production problem arose from the integration of new robots that had replaced humans but was too slow. In retrospect, the company recognized its mistake and hired humans to accomplish these sections. Nevertheless, ramped productions exposed other weaknesses, which were primarily based on delivery logistics(Sherman 2018). This factor is another Elon Musk recognized. Eventually, the company had to align its delivery mechanisms coupled with the help of their analytically-driven engineering solutions to ensure that their customers received their products.
Tesla has faced financial struggles much more often considering this economic activity is highly capital intensive. The company has to employ qualified personnel including software engineers and designers, purchase materials, buy producer goods, and continue the construction of their gigafactories. The 2008 financial crisis posed a significant moment for Tesla as sales were highly affected. Consumption levels among customers had dipped considering that most were on savings mode in light of the prevailing economic circumstances. On the other hand, the company’s management was keen on managing an ever-growing level of debt. Its Chief Financial Officer (CFO), Ahuja notes that it was a testing moment for the company that it was headed for collapse (Rosenbaum 2018). In retrospect, he downsized ruthlessly. The company was relying upon Elon’s investment to maintain its going concern. Fortunately, they avoid a collapse and an eventual exit from th...