Domestic Norms and Regulations
The American car market has one very distinctive feature: carmakers have no right to sell their products to the customers directly. Such a prohibition is directly related to the so-called “dealer franchise laws” (Crane 2013, par. 1). Tesla Motors Inc. manufactures luxury electric cars that are unique in the US and the world’s car markets due to their special features and their ability to take advantage of electricity.
The price of Tesla S, as the flagship model of the company, is considerably high, and the car requires special maintenance stations since it is an electric and innovative vehicle. The company has no rights to sell it directly to the customers and thus, set reasonable prices and satisfy customers’ needs as well as possible. Tesla’s cars were produced in the manufacturing plants in California while the company was expanding its locations in Europe (Randall 2016).
The decision to penetrate other markets became a logical solution. Today, Tesla sells more cars abroad than on the domestic market because of the policies that different countries adopt to motivate the local population to purchase environment-friendly electric cars (Doyle and Adomaitis 2013). It is the situation when local laws and regulations work against the manufacturer of cars that can reshape the market and change the preferences of the customers. Electric cars have become one of the trends that cannot be ignored in any society. It is time to change the laws that came from the era of powerful gasoline engines, enormous consumptions, and wastes.
Domestic Taxes
It is rather obvious that since the domestic regulations are against the competitive approach to car sales from the manufacturers directly, Tesla Motors Inc. went global. The company has zero preferences on the domestic market as the producer of the innovative, ecologically appropriate cars. It is the policy of equal opportunities that every carmaker has to have since the beginning of the 20th century when the situation was very different from the
modern one. In Norway, for example, the state regulations are aimed at the promotion of the environment-friendly cars’ purchase. According to Doyle and Adomaitis (2013), the government implements the programs that provide electric car buyers with subsidies up to $11,000. It makes Tesla cars affordable, not to mention other benefits that the owners of electric cars have.
Thus, according to Ole Marius Lauritzen, Tesla owner, “the benefits are… too good. You can take bus lanes, get free parking, and it costs very little to refuel…” (Doyle and Adomaitis 2013, par. 19). The approach of the US government shapes the success of Tesla Motors Inc. on the global market to a certain extent
Meanwhile, following the international strategy assists the company in avoiding regulations related to taxes. For example, currently, Obama is concerned about introducing a new tax system to obtain more governmental profit from companies with high profits overseas (Timiroas and McKinnon 2015). The companies have a tendency to save a significant share of the income while operating in the foreign markets, as they can avoid paying additional taxes. Tesla pursues a similar strategy since this approach helps the company maximize its profits and strengthen its financial positions.
Lastly, the focus of the operations on the international market assist in maintaining the labor and transportation costs low (Randall 2016). For instance, the company has established a new manufacturing plant in Europe to ensure the rapid delivery of its products to the customers in this region (Randall 2016). The highly automated production lines with multitasking possibility and suitable locations allow the company to avoid high transportation and labor costs, which are present in the United States of America.
Based on the factors provided above, the international operations and ambitions have a significant influence on the company’s success while helping it minimize costs related to labor and taxations. The rationale behind Tesla’s globalization strategy is clear, and keeping up with these objectives is critical for the company’s profitability and stability in future.
Lobbying Efforts
Tesla Motors Inc. has rather complex relationships with the American government institutions, regulating the issue of the direct sales from the manufacturer. According to Crane (2014), “Tesla has been lobbying for legislative reforms at the state level, thus far with mixed success” (par. 3). The success of the company can be described using the example of New Jersey, where Tesla (and only Tesla) obtained the right to sell its products directly to the customers after pursuing its global strategy. However, it became eligible for the several outlets only. Ohio is another state where the company achieved certain success due to its lobbying efforts.
State’s legislators considered providing Tesla with the exclusive right to sell cars directly to the customers. The majority of other states have passed the laws that only strengthened the prohibition to sell directly, stating that it would disrupt the principle of the fair competition in the market (Lao, Feinstein and Lafontaine 2015). It seems that the company has to come the long way to allowing its customers buy Teslas from the company directly.
References
Crane, Dan. 2013. “Tesla and the Auto Dealers Lobby.” Truth on the Market. Web.
Doyle, Alister, and Nerijus Adomaitis. 2013. “Norway Shows the Way with Electric cars, But at What Cost?” Reuters. Web.
Lao, Marina, Debbie Feinstein, and Francine Lafontaine. 2015. “Direct-to-Consumer Auto Sales: It’s Not Just about Tesla.” Federal Trade Commission. Web.
Randall, Tom. 2016. “Check Out Tesla’s Hot New European Factory.” Bloomberg Technology. Web.
Timiroas, Nick, and John McKinnon. 2015. “Obama Proposes One-Time 14% Tax on Overseas Earnings.” Forbes. Web.