TESLA MOTORS-Evaluating A GROWTH COMPANY Case Study Solution
Tesla is an automobile company, which was incorporated in July 2003. Company has manufactured “Roadster” as its first manufacturing vehicle. As the company had less resources and production capacity, it was unable to deliver the vehicles on time. This failure had a very bad impact on the company, which resulted in the replacement of the CEO.
As the new CEO arrived, the company manufactured a new sleek design and highly developed electronic car, which was run by battery or plugging in any electric source. With this innovation, company received many reservations. Due to a large number of pre manufactured orders, and previous losses and a negative cash flow, company faced a serious issue of scarce resources and insufficient cash which resulted in slow production, delayed deliveries and the in ability to manufacture and deliver all the reservations.
To conclude, it is recommended that company should focus to decrease its operating and revenue costs, along with capital expenditures. Company should also increase its production capacity by investing into acquisition of a successful production company, which will increase the production resources and production capacity of Tesla.
INTRODUCTION:
Tesla is an automobile company, incorporated in July 2003. First production of the company was “the Roadster”. With the pre-sales of 570 Roadsters, company promised to deliver the vehicle by June 2007. However, the delivery wasn’t made until Feb, 2008. This situation resulted in significant cost overruns.
With the low cost and high energetic development of lithium-ion battery packs, portfolio for future foundation vehicles were developed. A new electric vehicle model was announced in 2009, named as Model S sedan. As soon as this model was introduced, company received tons of reservations that promised to deliver from 2009-2012.
However, from Tesla’s inception to 2009, company was not able to generate enough cash to build an electrical vehicle known as‘the Model S’.Using all the financing resources available, company faced many challenges for the development of a new model, as well as its distribution and delivery.
With all the financials and management issues in the country, company is facing a high short interest in ratio, which declines the value of shares.
DISCUSSION:
Due to the late delivery of Tesla’s first ever vehicle, Roadster, the CEO was changed. Elon Musk was an entrepreneurial legend, who sold many previous ventures. He set the company’s goal to sell sports car, with that money made an affordable car to provide zero emission of electro power generation. With this goal, company produced lithium-ion battery system, which was cost effective and a high energy provider. This development regained the lost trust to customers.
TESLA MOTORS-Evaluating A GROWTH COMPANY Harvard Case Solution & Analysis
In 2010, company entered into a relationship with Toyota and developed a full power train system for Toyota’s car manufacturing. In return, Toyota will facilitate Tesla by sourcing parts and production and engineering experts for Tesla’s upcoming car, Model S.
Due to late deliveries of Roadster, company had generated loss from the day of its incorporation to 2009 of $236.4 million, while earning revenue of $108.2 million. This resulted in insufficient cash for manufacturing the Model S sports car. The following funding policies were used by the company:
- Financing by Daimler, which resulted in 10% stake in the company
- $465 million loan from U.S department of Energy.
- Tesla raised an additional $100 million from equity.
Tesla was planning to enter into Global Electric Vehicle Market by manufacturing Model S as this market was growing from a CAGR of 135%. In 2011, with an increased demand of consumers, electrical vehicle comprised 0.1% of total global production.
As soon as Model S was revealed to the public, 500 reservations were received in a day and in 9 months, the reservations increased four times the previous number. Reservations payment were increasing by 64% CAGR...................
This is just a sample partial work. Please place the order on the website to get your own originally done case solution.
Related Case Solutions & Analyses:
Fritidsresor Under Pressure (C): After the Tsunami
Platform-Mediated Networks: Definitions and Core Concepts
Clearwater Seafoods
Note on Individual and Corporate Liability
Alibaba Group
Bank of America-Merrill Lynch
Re-THINK-ing THINK: The Electric Car Company
Aligning culture and Strategy at A.P Nichols
BMW FILMS
Driving Towards a Disruption
