Introduction
Tesla was founded in the year 2003 to accelerate the advent of clean energy transportation and storage. It is currently producing 4 different models of electric cars and is set to manufacture a semi-truck and cyber truck to further expand its dominance in the EV sector. Tesla has diversified its range into energy storage and production to further its initial mission of clean energy acceleration (Tesla, 2022).
Discussion
Throughout the year Tesla faced several issues to scale up manufacturing and was multiple times investigated by the SEC into public announcements of its CEO Elon Musk and its effects on stock prices. However, Tesla has gained an edge over other manufacturers by streamlining its models and reducing the parts needed to run the car. This strategy paired with the supply chain issues brought upon by Covid has allowed the company to bounce back faster than its competition. As of 2022, Tesla has become the most valuable car company in the world equaling the value of the 9 other biggest car companies (Ewing, 2022).
The article highlights the car industry as a key example of deglobalization. It points out the strategic advantages and consequences of some strategic decisions that have been made in the past. It talks about the revival of vertical integration as a core advantage in a market where supply chain issues can make or break a car company and how this has and will affect the share price of third-party suppliers like Continental or Panasonic. The newfound importance of semiconductors, software, and its effects on manufacturers such as Qualcomm or NVidia is laid out. The article concludes that the future of car manufacturers is unclear as they have to walk the fine line between restructuring the companies, avoiding backlash from governments and unions, and managing now-stranded assets. The future is wide open but will be electrified (Ryder, 2022).
Outsourcing could be a challenging process in the company, implemented only in crucial cases. Tesla Motors implements a comprehensive outsourcing strategy in a situation when the company is not able to produce a particular material or a part of a vehicle. Tesla used the outsourcing strategy to obtain electrical engines for the Roadster model due to their cost-effectiveness (Chen et al., 2019). In contrast, most parts of a vehicle are manufactured in-house. The in-house production allows Tesla to acquire full control over the process of production. The in-site production also allows Tesla to decrease the cost of production and improve the financial status of manufacturing (Rengarajan, 2019). Tesla primarily utilizes in-house production due to its effectiveness in sectors of gaining control and cutting costs.
The idea of an electric car is based on the utilization of effective batteries that have an increased capability, allowing users to travel far distances without charging a battery. To solve the challenges with vehicle batteries, Tesla has signed a partnership contract with Panasonic, the biggest supplier of batteries in China (Jiang & Lu, 2018). The partnership will be directed toward pursuing innovation as Tesla will implement the most effective batteries that will be created by Panasonic. Moreover, along with the batteries, cars of the new generation heavily depend on proper software. Companies such as Tesla understand the importance of proper software and release regular updates to prevent challenges (Endsley, 2017). Software in the car could be considered the brain of the vehicle, and its integrity may guarantee the safety of the driver.
The strategy of Blue Ocean is based on entering a new market that has growing demand and does not have existing players. The Tesla campaign of electric vehicles set a trend for innovative cars and increased demand from customers, thus the company entered the Blue Ocean of manufacturing electric cars (Gayathri & Kumari, 2019). As a result, Tesla became the company that established initial standards in the market for electric vehicles.
BYD is one of the largest manufacturers of EVs in China, and it could be a competitor of Tesla, as both companies utilize lithium-infused batteries in their products. To improve the supply of lithium, BYD targeted the lithium mines in Africa as its supplier (Cao et al., 2018). The mines in Africa may allow BYD to have a stable supply of lithium which is enough for producing a large volume of cars. The American competitor of BYD, Tesla, also utilizes lithium batteries to produce high-quality vehicles that can travel for an extended period without recharging. Tesla Motors is directed towards the acquisition of lithium mines in Nevada and California, as it may improve their supply of the material and expand their production (Grant et al., 2020). Opposite to BYD, Tesla is searching for national lithium mines.
The partnership between Tesla and Nvidia is promoting innovation as the largest manufacturer of microchips is collaborating with the most famous producer of electric vehicles. The microchips created by Qualcomm and Nvidia could handle a vast number of operations simultaneously and provide Tesla with power and precision. The software of Tesla is based on 3840 CUDA cores developed by Nvidia (Marinova, 2018). The new generation of cars will depend on proper hardware and software, and the partnerships between the EV and microchip manufacturers may encourage progress in both fields.
Conclusion
Tesla Motors was the only large manufacturer of electric vehicles at the beginning of the trend. However, nowadays Tesla has various competitors that do not only compete with Tesla in volume but also in quality. Tesla Motors is trying to hold the leadership in producing EVs by encouraging in-house production, outsourcing, utilization of the latest technology of batteries, and reaching partnerships with the best technology companies.
References
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Endsley, M. (2017). Autonomous driving systems: A preliminary naturalistic study of the Tesla Model S. Journal of Cognitive Engineering And Decision Making, 11(3), 225-238. Web.
Ewing, J. (2022). Why Tesla soared as other automakers struggled to make cars. Nytimes.com. Web.
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Jiang, H., & Lu, F. (2018). To be friends, not competitors: A story different from Tesla driving the Chinese automobile industry. Management And Organization Review, 14(3), 491-499. Web.
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Ryder, B. (2022). How supply-chain turmoil is remaking the car industry. The Economist. Web.