Tesla Growth Essay

Tesla Motors:
The Next Big Thing

MGMT 310 G2

Introduction

Tesla is the smallest and newest of the US automakers. Like many technology companies in Silicon Valley, Tesla is very much young company just beginning to pick up traction. It was incorporated in 2003 and received multiple rounds of funding from investors. The company underwent an IPO in 2010 raising $202 million USD. Elon Musk is the chairman and CEO of the company. He is also the founder and CEO of SpaceX, Chairman and primary investor at SolarCity. Musk was also the co-founder of PayPal before it was sold to eBay in 2002. Musk also co-founded his first company Zip in 1995, which was sold to Compaq in 1999. Elon Musk’s strong history of success and leadership abilities, will be beneficial to the company.

Tesla has currently three electric vehicles (EVs) on the market: the Roadster, Model S, and Model X (recently launched in September, 2015). The company has been increasing production output each year. After producing 33,000 vehicles in 2014, 50,000 units are expected to be delivered in 2015, an increase of 51.1%. It is expected to reach a yearly target of 500,000 units by 2020, an increase of 1000% in production over five years. To support this growth, the company has increased capital expenditure to build important infrastructure, such as the factories and charging stations.

As of October 9, 2015 Tesla’s market capitalization was $29.4 billion. As a growth company, it has a strong 10x potential, based on its current market cap this would suggest a future value of $294 billion. This possibility is not all that ridiculous, during the 2014 fourth-quarter earnings call, Musk suggested the market capitalization could increase to $700 billion by 2025 (TheStreet, 2015). This projection essentially puts Tesla on the path of becoming the next Apple. It must mean the company is doing something right, after all, Apple is working its own electric car, which has a targeted launch year of 2019. Like Apple’s disruptive force in the phone industry, Tesla is a leader in the auto industry.

Could Tesla be the new big thing? It is revolutionizing the auto industry through new and disruptive technologies. It is leading the pack by delivering over-the-air software updates, launching autopilot features, and operating under a unique business model. These are just some examples of how the company consistently pushes the limit on innovation and technology.

Company Strategy

Tesla’s mission is to “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible (Musk, 2013).” Tesla launched its first electric car the Roadster back in 2008, Revenue generated. The profits were reinvested back into the company to develop the Model S, a full size luxury sedan and its second vehicle. Following the positive reception and success of the Model S, in 2015 it announced launched an SUV, the Model X. Pricing for the Model S and Model X vehicles begin at approximately $70,000 for the base model and increase to $120,000 depending on upgrades.