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Issues of Tesla: Despite the Worldwide Success Essay

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Updated: Jul 22nd, 2021

Tesla is the leading American vehicle company manufacturing electric cars, solar roof tiles, and solar panels. Tesla Motors’ foundation belongs to two engineers Martin Eberhard and Marc Tarpenning, who established the company in 2003, attributing its name to Nicola Tesla. The integration of ingenious technologies and forward-thinking led to the creation of an environmentally conscious, powerful, and modern automobile, preserving the sustainability of energy. Elon Musk, as the CEO of Tesla Motors, managed to uplift the company’s name and the vehicles on the global level. Even though Tesla has been a successful manufactory for over a decade, it still faces issues that are to be solved in the future.

Among the main problems the car industry encountered was the issue of cash flows that turned into net losses according to the constant colossal investment in research and development of new vehicles. A currently best-selling model-Tesla 3-was a source of continuous expenses, but due to the company’s policy of cutting its price by 8% for making it affordable to everyone, cash difficulties became a reality. This move led to the dissatisfaction of the employees as they were devoid of bonus per sales.

The previously mentioned issue led to another one concerning the layoffs. After the expansion of the workforce in 2018, the company decided to cut off around 7% of the personnel to raise the profitability of selling low-cost vehicles. However, according to the source, Tesla closed many of its stores, converting them into galleries and information centers, which led to the amount of dismissal in 2019 (Matousek, 2019).

Thereby, around 8% of the staff were laid off in 2019. These events resulted in complete disappointment among the workers and ruined the communication because of the upper manager’s attitude. Not only the lower staff was affected by the turnover, but also the executive department suffered firing. According to Matousek (2019), “The company’s CFO, vice president of global recruiting, and general counsel have departed this year” (para. 10). It only means that the company cannot refrain employees from leaving, and such an inability calls into question the industry’s stability.

Another question Tesla faced was the one concerning production. The company pursues the highest standards and invest a lot of money into manufacturing vehicles. Therefore, Tesla has never had a profitable year; however, it managed to gain profit during some quarters since 2010. Due to the amount spent, the company has to bear delays in Model 3 because of the financial losses from sales of other models. Musk The firm’s policy was to sell expensive high-quality cars for earning money for constructing less expensive cars in the future.

There are also external factors that Tesla cannot control. For capturing the world car market, the company launched the production of its automobiles in Shanghai, China. The Gigafactory was built in a short period for assembling Model 3 and the future Model Y. According to Matousek (2018), the factories were shut down, and car sales were blocked in March of 2019, also because of various irregularities, which later were fixed.

Moreover, the outbreak of coronavirus postponed the delivery of the vehicles. The other external factor happened to be the lack of batteries provided for every vehicle. The batteries consist of such fossils as nickel, copper, and lithium, which are globally extinct now, so Tesla’s lack of investment in the mineral industry may turn into a lack of supplies for the company. Also, the issue of batteries is in charging as it takes 6 hours to run the battery. Time spent on charging is a substantial drawback that is to be improved.

The head and provisionary of Tesla, Elon Musk, is a courageous entrepreneur, and goal-setter proved to have an eloquent tongue on promises. Once, he told about the autopilot car, that was supposed to be on the go without a driver, but later admitted that such a technology was hard to create these days. Moreover, Musk, as a skilled user of Twitter, likes to tweet hints about upcoming models, improvements, and events. According to the source, Musk once tweeted about releasing five hundred thousand vehicles in 2019, later editing his statement, thus violating the settlement reached in 2018 (Sherman, Greiner, Baker, Schmitz, & Tse, 2019).

Therefore, the United States Securities and Exchange Commission (SEC) filed for him, saying that he overstepped the settlement and posted private information before the company approved it. Later, Elon Musk and SEC reached an agreement according to which Mush lost his position as a chairman of the board of directors and paid a fine equal to 20$ million. After all, Tesla has to control the CEO’s communicative activity on social media, particularly on Twitter.

The problems mentioned earlier, and ramifications are interdependent and interrelated as one issue caused another. First of all, these affairs impact the workforce of the company as people who used to occupy positions of senior-level employees and executives leave calling the company’s credibility under question. The profitability and brand name are affected as well because of the cash flow problems and Musk’s statements concerning the company’s budget and plans. However, the lessons were learned by both the CEO and the company, and so they are trying to see future opportunities for more beneficial production.

Both constraints and opportunities are standing on the way of Tesla. The main impediment is the global lack of resources, which are necessary for constructing electric vehicles. Other technologies worry Tesla as they consume a lot of copper and lithium that are necessary for the production of the cars. Also, the underinvestment of Tesla in the fossil and metal industry was a drawback for the company’s existence. Nowadays, Tesla is trying to negotiate with mines in the U.S.A. and Australia to solve the issue of batteries. It is clear that resources are always limited, and so instead of copper, Tesla concentrates on nickel now.

On the other hand, there are also opportunities to establish the financial situation of the manufactory and lead it to another level. New-made global trade agreements, the reduced cost of energy batteries, regulation of energy consumption, and popularizing low-carbon lifestyles can sufficiently promote Tesla to a level of a truly global industry. Also, such possibilities may significantly fix Tesla’s financial issues.

In conclusion, it is relevant to mention that despite the worldwide success of the company, there are issues to be thoroughly considered and improved. Its success depends on the strategic actions that are not efficient enough, judging from the problems presented, to gain profit. Therefore, they are to be improved in further years to guarantee the stability and profitability of the production. Even though there are some constraints, the number of opportunities outweighs them providing a base for future prosperity.

References

Matousek, M. (2019). Tesla is having another chaotic year-these are the biggest challenges Tesla has faced so far in 2019. Web.

Sherman, I., Greiner, A., Baker, T., Schmitz, A., & Tse, J. (2019). The history of tesla and elon musk: a radical vision for the future of autos. Web.

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1. IvyPanda. "Issues of Tesla: Despite the Worldwide Success." July 22, 2021. https://ivypanda.com/essays/issues-of-tesla-despite-the-worldwide-success/.


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IvyPanda. "Issues of Tesla: Despite the Worldwide Success." July 22, 2021. https://ivypanda.com/essays/issues-of-tesla-despite-the-worldwide-success/.

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IvyPanda. 2021. "Issues of Tesla: Despite the Worldwide Success." July 22, 2021. https://ivypanda.com/essays/issues-of-tesla-despite-the-worldwide-success/.

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IvyPanda. (2021) 'Issues of Tesla: Despite the Worldwide Success'. 22 July.

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