A History of Innovation
Tesla was founded in 2003 by engineers who wanted to capitalize on the growing market for electric vehicles (Tesla, 2016). Tesla was named after Nikolai Tesla, and the corporation uses several of his patents in the construction of its vehicles. Our major production was the Tesla Roadster, created in 2008. The Roadster could go from zero to sixty MPH in 3.7 seconds, making it one of the quickest vehicles on the market, let alone one of the fastest electric vehicles. The company would sell 2,400 of the Roadsters in total. In 2012, the company launched the Model S Sedan, which has all of the features of the Roadster but could seat a family of seven inside. As always, Tesla’s newest model achieved a five-star safety rating. We developed several other models, giving the company versatility in a world where competition and market diversity has made and broken big name car companies across the world, including even the American giants GMC and Ford.
Tesla currently has 50,000 vehicles on the road currently, making us a prolific corporation for the cost and peculiarities associated with an electric sports car company. Electric sports cars are a bit eclectic, as charging the fuel supply can be difficult. Tesla cars initially only could go two-hundred and sixty-five miles before needing a recharge, but that distance has been expanded upon a little as the technology developed. The American government and even individual states help subsidize consumers, as the drive to go green has been on political agendas for quite some time.
Tesla’s strengths are not just in the automotive industry. Our company has repeatedly pushed and expanded upon the boundaries of electric technology, and has shown a willingness to continue doing so for many years. This has marked Tesla as an innovator, especially during a time where energy competition remains relatively low. Our company has developed several innovative technologies, including an electric generator that absorbs sunlight and can run an entire house for three hours without a renewable energy source refueling it. Thus, Tesla’s innovation and uniqueness has given it substantial business opportunities for expansion across the globe.
Expanding Horizons: A New Market
The biggest potential market is in the Caribbean, where Tesla expansion will not only provide a profit, but also benefit the citizens of the island nations who struggle to afford basic commodities. The region as a whole pays much higher in energy costs, as gasoline is the primary source of energy and the costs of transportation to the region’s micro economies raises prices. As a whole, the region is relatively poor, as numerous factors contribute to reduce the real take away income of Caribbean nation’s citizens. However, the opportunity to invest in the area should not be ignored due to initial cost estimates, as Tesla’s future profits may be far larger than any short term losses.
The Caribbean has a serious need for renewable energy investment. The purpose of this study is to show how the market will soon be viable for Tesla’s expansion, ensuring future profits and a reliable source of income for our company company. Oil imports are expensive in the region for many reasons, and each island is unique in its economic issues. Some blame hedging as the root cause, some blame the national governments of the islands themselves as inflating prices (Youngs, 2016). Regardless, the real price of oil has driven down incomes where the average per capita income in the Bahamas (the Caribbean’s richest country) is at roughly $21,280, making poverty a very real factor in the lives of the citizens of the Caribbean. A cheaper, more renewable source of energy, is very possible due to the high wind speeds and high levels of continuous sunlight.
This is because Tesla is seeking to expand integrate its supply chain and become more vertically integrated. Tesla made SolarCity an acquisition offer and is attempting to purchase the majority of the company’s stocks (Kerber & McLaughlin, 2016). Though we received a severe blow when the price of our stock tanked by ten percent after announcing its plans, it is vital to Tesla’s long term interests to acquire the company. Thus, Tesla will dominate the energy industry, with its niche being in electric automotive production.
Tesla’s primary investment in the Caribbean would therefore not be automotive. If the company could provide cheap solar panels, it is likely that the regions will try and capitalize on the deals that Tesla could provide. We have never had trouble negotiating with governments before, as they received subsidies during the automotive bailout along with two other companies to help manufacture and produce fuel-efficient/electric vehicles.
If CARICOM nations worked with Tesla, they would have to end their subsidizations their current oil-based energy sector, which in many Caribbean countries is government run. This can be problematic, as it would be reducing the income of the government, but would benefit them in the long run by increased consumer savings, and therefore, increased consumption spending. The Caribbean countries are the perfect investment location for renewable energy companies; the Caribbean is sunny all year, and hot and humid. Not to mention, the area is perfect for wind farms, as several have already invested in wind farms, like Aruba and Puerto Rico. Thus, several countries have already recognized the need for investing in renewable energy sources.
Consumers will also recognize the benefits of renewable energy, as they will want to save as much money as possible, as even food costs in the region are high. The problem is that the real incomes of these countries is low, making it difficult to gauge how consumers will react. This is important, because some areas are currently in an economic meltdown, notably Puerto Rico. However, clean energy is vital to reversing the economic downturns of the region, so it is very important.
As time goes on, the market for Tesla’s automotive products will also rise, as real incomes will increase, as gasoline costs are likely to increase due to decreased demand and the cost of importing small amounts to island economies. Tesla cars are unfortunately usually expensive, making this a considerable setback. However, with increased government subsidies and increased wage earnings, this may change.
Other areas of the world are also ripe for investment, but come with their own set of difficulties. For instance, Middle Eastern countries are perfect for renewable energy production, but their economies typically revolve around the production of oil, making them dependent upon its success. Thus, the competition is severe. In Europe, the situation is different; most countries do not receive enough sunlight or wind to make substantial renewable energy investments viable, though Tesla does typically sell well in Europe (Rosemain, 2015). The company faces significant competition in Europe’s larger markets, as Europeans are more loyal to local brands and the Ford motor company. South America and Asia are also potential markets, but currently not as viable as the Caribbean. Both regions do not have an economic advantage for switching to renewable energy, though Tesla is expected to expand into the South American market in coming years. Tesla is already in China, though is facing considerable setbacks because of the high prices of its vehicles and the lack of recharging infrastructure available (Wang, 2016).
Thus, it is critical for Tesla Motors to use its renewable energy products to develop the infrastructure necessary to support our automotive products. The opportunities for growth are endless; while incomes in the Caribbean will likely remain low for years to come, there are plenty of other options available to generate profit. The region receives a huge amount of tourism each year, necessitating the need for side industries like car rentals for island viewers. Many rich people take advantage of the tax breaks that different islands offer, such as Puerto Rico’s. These tax breaks have necessitated a migration of some of America’s richest to the island, and as the island is small, a Tesla vehicle would be perfect for transportation. Even if the company only sold its renewable energy products, the market would be large in an area where consumers have to minimize energy usage to save money, due to high electricity costs (stemming from the costs of producing that electricity, meaning oil). Thus, the Caribbean nations offer an impressive investment opportunity for the company.
Absolute and Comparative Advantage: Who Will Win?
As far as costs are concerned, Tesla will not have an immediate absolute advantage in providing energy to its residents. This is due to the high costs associated with purchasing renewable energy technology. However, from the perspective of a national government, Tesla easily has an absolute advantage. Initial investments will always be high, but the amount of money saved after the investment will always trump using oil as a traditional energy source. If Caribbean countries decided to switch to renewable sources, the largest competition Tesla will face is from wind energy companies, something they have yet to expand into. Gasoline powered cars still have an absolute advantage in terms of ease of access and use, due to the fact that the current infrastructure for electric vehicles is virtually nonexistent.
Tesla has an absolute advantage in innovation, as the products they are developing are top class and unique. The Tesla battery is a perfect example, as they are capable of providing a unique generator that can run a house and provide electricity, even when energy is not being supplied. Tesla’s vertical integration has further increased the potential for dependence on the company and company loyalty, as it can provide a full range of products and services. Thus, the potential is huge.
In some ways, Tesla also has a comparative advantage. The cars are far more fuel efficient than gasoline powered cars, though they still rely extensively on oil to produce the energy. In an area where tourism constitutes a large portion of government revenue, reducing smog output is a key priority. However, the danger of the prolific gasoline driven economy can reduce the impact Tesla will have.
The potential for success in these markets is huge. The two products of concern for Tesla’s immediate promulgation are the new, top-of-the-line solar batteries, and the future production of solar panels from the acquisition of SolarCity. A SWOT analysis reveals the strengths and weaknesses.
SWOT and the Regional Market Opportunities
Tesla has a serious opportunity in the Caribbean. The area receives typically nine hours per day of continuous, direct sunshine every summer, with slight variances during winter months. Solar panels have a wide range of estimated costs, depending on the individual home sizes or building sizes. However, we will assume the rough cost is $15,000 per consumer, which is very generous in favor of a higher cost. Many energy companies subsidize installation because it saves them money in some cases, and governments often do the same. Thus, Tesla can receive a profit stemming from the numerous incentives offered, while consumers have a significant incentive to purchase renewable energy products, due to the long run benefits. It is important to remember that in this region, energy costs are the highest in the world; increased competition from other sectors of the economy can help reduce the burden consumers face.
Tesla’s solar battery is likely to be a hot product too, making their innovation another strength benefitting the company. The battery costs about $3,000, and can help cut existing power bills in half (Pagliery, 2015).The battery powers houses at night and is recharged through solar panel usage, making the two go hand in hand. In areas where AC usage is high, the battery can do wonders in saving costs for homeowners by cutting the electricity they use down. The battery has an estimated life of three hours, so while it is not good for long term usage, it would take several to power the home for an entire night. The savings passed on to customers is worth it in some cases.
Later down the road, Tesla will be able to seize the favorable opportunities created by increased renewable energy sources and begin driving automotive sales in the region. The benefits of owning an electric vehicle, on an island where distances remain small, are incredible. Thus, logical reasoning can deduce that investment in Tesla will provide significant savings later on, provided consumers are willing to put up the money and make the substantial investment in our products. This will go far beyond the needs of a simple marketing campaign; to fully induce customers, it is necessary to truly convey the future benefits of purchasing a Tesla Motors product.
Thus, Tesla’s greatest asset and strength is the need for renewable energy sources in the Caribbean market to reduce consumer costs. Tesla has the opportunity to capitalize on this with its SolarCity acquisition, provided it seizes the day and begins negotiation with the local governments to discover the true state of the regional economies.
Tesla also faces several weaknesses affecting possible expansion. The costs associated with a Tesla product are not small in nature, and can affect how well the product sells. Financing in the region is unlikely at a consumer level, as many in these island economies have poor credit ratings to secure the loans, even if there was an adequate financial infrastructure in place to provide credit. Governments in the Caribbean are also very poor, making subsidization difficult to come by. In Puerto Rico, this is not necessarily a problem, as the American government provides many of the financing, but other areas can be problematic. Without local government support due to financial reasons, Tesla’s expansion may never become a reality due to the full costs of Tesla products being so expensive. In order to fully expand into this market, Tesla must find a way to reduce the costs of its products.
There are a few weaknesses consistent with our products, though these will likely change over time due to innovation and expansion. Namely, the short life of the Tesla battery. It is not worth the investment if it only lasts a few hours; consumers must either purchase several of the batteries or only run their air-conditioning at certain hours. In a region where home-owners already have to cut costs by hand washing clothes and leaving the air-conditioning off, they may not see a significant benefit to other Tesla products. Thus, it is imperative that Tesla redesign its product to deliver.
The only other notable weakness is directed at the vehicles Tesla produces. As mentioned earlier, the rechargeable infrastructure for Tesla vehicles and other electric cars is virtually non-existent in the area. This will change over time, provided the company is smart in its investment and expansion strategies, so it is not as notable as the region’s poverty and the expense of its products.
Tesla’s opportunities come from a lack of serious competition in the area. There are no major renewable energy companies investing in the Caribbean, other than the local governments themselves. This is in part because Tesla is truly the first of its kind, meaning that no other powerful electric motor companies exist on the market that deliver the kinds of products and services as Tesla does. Tesla has the opportunity to achieve a near monopoly on the solar energy market in the region, though Tesla vehicles will remain a luxury few will be able to immediately afford. It is important to note that Tesla does not just have this opportunity on one island alone; the potential for market expansion is available on every Caribbean island, though they all have differing income levels (Hirtenstein & Bloomberg, 2013). By seizing the opportunities currently afforded, Tesla can place its name in the conversations of island residents long before competitive companies emerge to interfere.
There are a few threats facing Tesla expansion. While energy costs on the islands are high, oil prices around the world remain relatively low due to a supply glut that is interfering with the market. Tesla must ask itself if the incentive to invest in renewable energy is high enough with current prices, or if the impending cost increase of oil will make the expansion opportunities more feasible in a few months or years.
Tesla must also face threats from other car companies. Right now, gasoline is king of the Caribbean, and several car companies offer competitive alternatives even in the electric/hybrid vehicle industry, such as the Ford Focus Electric and the GMC Volt on the American market (Schaal, 2015). Toyota, Nissan, and Volkswagen also all offer alternatives to Tesla vehicles, which will inevitably threaten sales of the vehicles offered by the company, ironic as the only way our company will ever sell vehicles on the CARICOM market is if they help invest to create the infrastructure necessary. Thus, but investing in the infrastructure necessary to expand electric technology, Tesla will directly open the doors for other car companies to swoop in and steal a market percentage.
However risky the threats and however strong Tesla’s issues are, there is still plenty of potential in the region. The population of the entire Caribbean is nearly forty million people in total, making it a sizable market and one that has a strong possibility to become dependent upon renewable energy. Tesla must seize the potential of the market and begin investigating the viability of the region immediately; even if the end result did not result in automotive sales, the company would still be able to make a huge profit selling solar panels and batteries. Our company has proven its willingness to survive and thrive in tough situations, helping to ensure our success in the long run. The current technological market has been cornered by us, and provided we can build customer loyalty to our product, our future in the market is secured.
This loyalty can be built by not only increasing customer satisfaction, but also by expanding our product lines to be more affordable. The upper echelons of Tesla have been rumored to be considering introducing motorcycles into the product lines; this would be a big hit provided they remain relatively inexpensive, as motorcycles are a preferred means of travel on the islands. Tesla must also consider inventing new models of vehicles that are only sold on specific markets (other car companies do this in other markets). This is the best way to circumvent the low incomes of the Caribbean citizens. It is not always necessary to sacrifice quality in order to do so. If this company can follow these instructions, our expansion into the market will be total and complete, ensuring Tesla does not only have a high foreseeable profit in the long run, but an entire market devoted to the company for increasing consumers’ quality of living, which will provide an immense boost to our public image.
Works Cited:
Tesla. (2016). About Tesla. Web. July 7, 2016 < https://www.teslamotors.com/about>
Youngs, R. (2016, March 30). Cheap oil and renewable energy compete in the Caribbean. Web. July 7, 2016 <http://www.cleanenergyfinanceforum.com/2015/03/30/cheap-oil-and-renewable-energy-compete-caribbean>
Kerber, R., & McLaughlin, T. (2016, June 23). Behind Tesla carnage, signs of support for musk’s SolarCity deal. Web. July 7, 2016 < http://www.reuters.com/article/us-solarcity-m-a-tesla-idUSKCN0Z72WP>
Rosemain, M. (2015, September 16). Why Tesla struggles in Germany. Web. <http://www.bloomberg.com/news/articles/2015-09-16/tesla-struggles-in-germany-with-buyers-unswayed-by-model-s-cult>
Wang, Y. (2016, May 16). Tesla upbeat about Chinese Preorders, but does it translate to success with china’s consumers? Forbes. Web. <http://www.forbes.com/sites/ywang/2016/05/16/tesla-upbeat-about-chinese-preorders-but-does-it-translate-to-success-with-chinas-consumers/#73b2e64d3774>
Pagliery, J. (2015, May 1). Tesla home battery: Worth the cost? Depends where you live. CNN. Web. <http://money.cnn.com/2015/05/01/technology/tesla-home-battery-price/>
Hirtenstein, A., & Bloomberg. (2013, March 22). Unlocking renewable potential in the Caribbean. Web. July 8, 2016, <http://www.renewableenergyworld.com/articles/2013/03/unlocking-renewable-potential-in-the-caribbean.html>
Schaal, E. (2015, September 16). 10 car companies that sell the most electric vehicles. Web. July 8, 2016 <http://www.cheatsheet.com/automobiles/10-car-companies-that-sell-the-most-electric-vehicles.html/?a=viewal>l
