ABSTRACT
Tesla Inc. is a technological company that operates in the automotive industry and the battery energy storage industry. Tesla sells unique products such as tesla solar roofs that serves two purposes in one. Tesla solar roof serves as the roof cover and also as a source of energy. Tesla solar roof have the potential to succeed in the market, given that home owners do not have to incur double cost of purchasing roofing products and additional expenses of connecting to the national grid for electricity. This report explores the company and industry analysis in detail.
INTRODUCTION
Tesla is a technologically based company that deals with the manufacturing of electric vehicles and solar products. This report explores the industry in which tesla operates, the background information on tesla, the assessment of tesla’s products and services, as well as the economic outlook. The economic outlook will explore the macroeconomic indicator that poses the external concern to tesla Inc., and one macroeconomic indicator that provides some reassurance to the future growth of tesla. The economic outlook will also explore the outlook for investors in the short and long term, highlighting the favorable and unfavorable elements from the research.
BACKGROUND AND PRODUCTS
Tesla Inc. is an American company that manufactures clean energy products and electric vehicles ranging from household to grid-scale, solar panels and solar roof shingles. Tesla operates in three industries namely automotive industry, photovoltaic systems and battery energy storage industry. Tesla operates in the oligopoly market structure. An oligopoly market structure is characterized by few firms in the industry selling differentiated products, and each firm is a price maker. There are few competitors in the solar industry such as SunTegra, Dow powerhouse, and Certainteed Apollo (Ecohome, 4). Firms in Oligopoly engage in high level advertisement to guard their market share from going over to competitors. Tesla engages in intensive advertisement, which is marked by the intensive social media presence by the current CEO Elon Musk. Tesla is always in the news with its continuous stream of innovation and unique products.
Tesla manufactures the following products; Model 3, Model S, megapack, Model Y, powerwall, powerpack, , solar panels and solar roof (Tesla.com, 1). Tesla also deals with automobile servicing and charging, insurance, updates and upgrades of software, and premium connectivity of tesla solar power.
ASSESSMENT OF COMPANY AND PRODUCTS/SERVICES
Tesla products are premium priced as the company targets the upper and the middle income earners with its products. The high price of tesla solar products is beyond the reach and affordability of many customer, which is likely to impact the supply and demand. In the law of demand, the higher the price of a good or service, the fewer the number of products that will be demanded. The lower the price of a commodity, the higher the number of goods and services will be demanded. The law of demand is applicable to tesla solar roofing products. Given that tesla deals with non-basic commodities, the high price makes the demand to be inelastic since people will not buy the product at a high price (Ecohome, 4). Another economic actor that is likely to impact the demand for tesla solar roof is the readily availability of substitute products (Zeder, 3). There are plenty of substitute products such as ordinary roof shingles and tiles and separate solar panels. A consumer who wishes to use solar energy is likely to use an ordinary solar roof and use an ordinary solar panel at a pocket friendly price rather than using the expensive tesla solar roof tiles.
Other notable economic characteristic that impacts the demand for tesla solar roof is the kind of product that the roof is. Tesla solar roof not a basic good, but rather it is a secondary want. As such, customers can do without it as they cater for the more pressing needs like food and shelter. If the economic times are harsh, people will attend to the more pressing and basic needs before contemplating on Tesla solar roofs. Because of the way tesla products are priced, they can be categorized as luxurious products (Tesla.com, 1). Luxury products are beyond the reach of many and can be afforded by the few rich consumers who can afford the product.
NON-ECONOMIC FORCES
There are various non-economic forces that impact the demand supply of tesla solar products. Weather patterns is one factors that can impact the demand. The United States of America is characterized by extreme weather events such as hurricanes, hailstorms, wild fires, earthquakes, cyclones among others. These weather events may result in infrastructural damage such as destruction of electricity connection lines. That may result in power disruptions and blackouts in the affected areas. Governments, institutions and individual customers might opt to purchase tesla solar panels and solar roofs before connection on the national grid is restored.
Another non-economic force that can impact tesla’s sales and profitability are business cycles. When the economy is in the boom economic cycle, the economy grows as there are plentiful of jobs in the market, and the market brings high returns to investors (Levin, 5). In such cases, consumers income levels increase and may consider investing in the expensive solar roofs, or if they are using ordinary roofs, they might consider upgrading their roofs in accordance to the increased income levels.
Finally, the tenure of the current chief executive Elon musk might impact sales and profitability. Elon musk represents tesla in a great manner. Tesla is one of the most controversial companies because of the aggressive nature and strategies that sometimes seem unachievable. However, Elon Musk has held on to his word, and he saves the face of Tesla Inc. in the event that Musk vacates the office, tesla is likely to suffer a great deal given that the company is highly dependent on his services. Investors may feel insecure to hold tesla stock if Elon Musk was no longer running in the corporation.
ECONOMIC OUTLOOK
Macroeconomic Indicator That Poses an External Concern
In terms of GDP and growth, unemployment and utilization, inflation and interest rates, debts and deficits, external balances and exchange rates and savings and investment, unemployment and utilization is the macroeconomic indicator that poses the external concern to Tesla Inc. the rationale behind this reasoning is because unemployment causes the amount of consumer disposable income to reduce. When incomes reduce, customers will minimize their spending on non-basic commodities in order to maximize their utility on basic commodities like food (Levin, 5). Consumers are presumed to be rational actors, meaning that they make rational choices such as attending to basic needs before going for non-basic items.
According to the rational choice theory, consumers use coherent calculations to make lucid decisions related to maximizing the consumer’s self-interest. Utilizing rational choice is projected to result in outcomes that give consumers the maximum utility and satisfaction since they have limited existing options (Levin, 5).
A macroeconomic indicator that provides some reassurance
GDP and growth is the GUIDE macroeconomic indicator that provides some reassurance to future growth. When the economy grows, the income levels of consumers increase, and consumers have more disposable income to spend. In accordance to the rational choice theory, when consumers have more disposable incomes, they are likely to spend as much in order to maximize their utility. As such, customers are likely to purchase more luxury and non-basic items as they have more disposable income.
Also, when there is growth in the economy, people have more disposable income to spend on development activities such as buying and developing property. As such, they would want to use stylish roofing solutions such as tesla solar roofs, which is likely to present a bright future for the company.
Summary of the short-term elements favorable from the research
From the above research, the outlook for investors in the short-term is promising given that the current CEO who is aggressive is on the throne and is assertive and determined to make tesla product work. Investors have so much faith on Elon Musk as it was highlighted in tesla, Inc. form 10-K that the business is highly reliant on the services of Elon Musk (Ross, 2).
Outlook in the long term
In the long term, the outlook for investors is bleak because other competitors will have joined the market, thereby decreasing the supernormal profits that tesla is currently enjoying. Tesla products are very expensive, especially electric vehicles. Other competitors notably Nissan Leaf and Chevrolet Bolt have come up in the market and talking on tesla’s competitive merit. For instance, Chevrolet Bolt goes for $36,500 with a range of 259 miles while Tesla’s Model 3 goes for $39,490 with a range of 220 miles (Ross, 2). Secondly, Elon musk successor may not be as influential as musk, and investors may lose confidence in the stock. Other companies have back-up plans, such as the way Berkshire Hathaway has Charlie Munger as “plan B” if something happens to Warren Buffett. Tesla has no such a plan in the event that musk is not able to devote time for the company (Ross, 2).
CONCLUSION
The above report explores Tesla Inc. with major focus on tesla solar roof, among the many products that tesla manufactures and sells. Tesla operates in the oligopoly market structure and deals with products like solar panels, solar roofs, electric cars such as Model 3, Model Y and Model S. the high price of tesla solar roof impacts the supply and demand, while the nature of product such as the secondary nature of the good also influences the demand and supply of Tesla solar roof. Non-economic forces such as weather have the potential to impact tesla’s sales and profitability. In terms of economic outlook, unemployment poses an external concern to the growth of tesla as customers will not have disposable income to purchase the product while GDP and growth provides reassurance to the future growth of Tesla.
Tesla Inc. is a technological company that operates in the automotive industry and the battery energy storage industry. Tesla sells unique products such as tesla solar roofs that serves two purposes in one. Tesla solar roof serves as the roof cover and also as a source of energy. Tesla solar roof have the potential to succeed in the market, given that home owners do not have to incur double cost of purchasing roofing products and additional expenses of connecting to the national grid for electricity. This report explores the company and industry analysis in detail.
INTRODUCTION
Tesla is a technologically based company that deals with the manufacturing of electric vehicles and solar products. This report explores the industry in which tesla operates, the background information on tesla, the assessment of tesla’s products and services, as well as the economic outlook. The economic outlook will explore the macroeconomic indicator that poses the external concern to tesla Inc., and one macroeconomic indicator that provides some reassurance to the future growth of tesla. The economic outlook will also explore the outlook for investors in the short and long term, highlighting the favorable and unfavorable elements from the research.
BACKGROUND AND PRODUCTS
Tesla Inc. is an American company that manufactures clean energy products and electric vehicles ranging from household to grid-scale, solar panels and solar roof shingles. Tesla operates in three industries namely automotive industry, photovoltaic systems and battery energy storage industry. Tesla operates in the oligopoly market structure. An oligopoly market structure is characterized by few firms in the industry selling differentiated products, and each firm is a price maker. There are few competitors in the solar industry such as SunTegra, Dow powerhouse, and Certainteed Apollo (Ecohome, 4). Firms in Oligopoly engage in high level advertisement to guard their market share from going over to competitors. Tesla engages in intensive advertisement, which is marked by the intensive social media presence by the current CEO Elon Musk. Tesla is always in the news with its continuous stream of innovation and unique products.
Tesla manufactures the following products; Model 3, Model S, megapack, Model Y, powerwall, powerpack, , solar panels and solar roof (Tesla.com, 1). Tesla also deals with automobile servicing and charging, insurance, updates and upgrades of software, and premium connectivity of tesla solar power.
ASSESSMENT OF COMPANY AND PRODUCTS/SERVICES
Tesla products are premium priced as the company targets the upper and the middle income earners with its products. The high price of tesla solar products is beyond the reach and affordability of many customer, which is likely to impact the supply and demand. In the law of demand, the higher the price of a good or service, the fewer the number of products that will be demanded. The lower the price of a commodity, the higher the number of goods and services will be demanded. The law of demand is applicable to tesla solar roofing products. Given that tesla deals with non-basic commodities, the high price makes the demand to be inelastic since people will not buy the product at a high price (Ecohome, 4). Another economic actor that is likely to impact the demand for tesla solar roof is the readily availability of substitute products (Zeder, 3). There are plenty of substitute products such as ordinary roof shingles and tiles and separate solar panels. A consumer who wishes to use solar energy is likely to use an ordinary solar roof and use an ordinary solar panel at a pocket friendly price rather than using the expensive tesla solar roof tiles.
Other notable economic characteristic that impacts the demand for tesla solar roof is the kind of product that the roof is. Tesla solar roof not a basic good, but rather it is a secondary want. As such, customers can do without it as they cater for the more pressing needs like food and shelter. If the economic times are harsh, people will attend to the more pressing and basic needs before contemplating on Tesla solar roofs. Because of the way tesla products are priced, they can be categorized as luxurious products (Tesla.com, 1). Luxury products are beyond the reach of many and can be afforded by the few rich consumers who can afford the product.
NON-ECONOMIC FORCES
There are various non-economic forces that impact the demand supply of tesla solar products. Weather patterns is one factors that can impact the demand. The United States of America is characterized by extreme weather events such as hurricanes, hailstorms, wild fires, earthquakes, cyclones among others. These weather events may result in infrastructural damage such as destruction of electricity connection lines. That may result in power disruptions and blackouts in the affected areas. Governments, institutions and individual customers might opt to purchase tesla solar panels and solar roofs before connection on the national grid is restored.
Another non-economic force that can impact tesla’s sales and profitability are business cycles. When the economy is in the boom economic cycle, the economy grows as there are plentiful of jobs in the market, and the market brings high returns to investors (Levin, 5). In such cases, consumers income levels increase and may consider investing in the expensive solar roofs, or if they are using ordinary roofs, they might consider upgrading their roofs in accordance to the increased income levels.
Finally, the tenure of the current chief executive Elon musk might impact sales and profitability. Elon musk represents tesla in a great manner. Tesla is one of the most controversial companies because of the aggressive nature and strategies that sometimes seem unachievable. However, Elon Musk has held on to his word, and he saves the face of Tesla Inc. in the event that Musk vacates the office, tesla is likely to suffer a great deal given that the company is highly dependent on his services. Investors may feel insecure to hold tesla stock if Elon Musk was no longer running in the corporation.
ECONOMIC OUTLOOK
Macroeconomic Indicator That Poses an External Concern
In terms of GDP and growth, unemployment and utilization, inflation and interest rates, debts and deficits, external balances and exchange rates and savings and investment, unemployment and utilization is the macroeconomic indicator that poses the external concern to Tesla Inc. the rationale behind this reasoning is because unemployment causes the amount of consumer disposable income to reduce. When incomes reduce, customers will minimize their spending on non-basic commodities in order to maximize their utility on basic commodities like food (Levin, 5). Consumers are presumed to be rational actors, meaning that they make rational choices such as attending to basic needs before going for non-basic items.
According to the rational choice theory, consumers use coherent calculations to make lucid decisions related to maximizing the consumer’s self-interest. Utilizing rational choice is projected to result in outcomes that give consumers the maximum utility and satisfaction since they have limited existing options (Levin, 5).
A macroeconomic indicator that provides some reassurance
GDP and growth is the GUIDE macroeconomic indicator that provides some reassurance to future growth. When the economy grows, the income levels of consumers increase, and consumers have more disposable income to spend. In accordance to the rational choice theory, when consumers have more disposable incomes, they are likely to spend as much in order to maximize their utility. As such, customers are likely to purchase more luxury and non-basic items as they have more disposable income.
Also, when there is growth in the economy, people have more disposable income to spend on development activities such as buying and developing property. As such, they would want to use stylish roofing solutions such as tesla solar roofs, which is likely to present a bright future for the company.
Summary of the short-term elements favorable from the research
From the above research, the outlook for investors in the short-term is promising given that the current CEO who is aggressive is on the throne and is assertive and determined to make tesla product work. Investors have so much faith on Elon Musk as it was highlighted in tesla, Inc. form 10-K that the business is highly reliant on the services of Elon Musk (Ross, 2).
Outlook in the long term
In the long term, the outlook for investors is bleak because other competitors will have joined the market, thereby decreasing the supernormal profits that tesla is currently enjoying. Tesla products are very expensive, especially electric vehicles. Other competitors notably Nissan Leaf and Chevrolet Bolt have come up in the market and talking on tesla’s competitive merit. For instance, Chevrolet Bolt goes for $36,500 with a range of 259 miles while Tesla’s Model 3 goes for $39,490 with a range of 220 miles (Ross, 2). Secondly, Elon musk successor may not be as influential as musk, and investors may lose confidence in the stock. Other companies have back-up plans, such as the way Berkshire Hathaway has Charlie Munger as “plan B” if something happens to Warren Buffett. Tesla has no such a plan in the event that musk is not able to devote time for the company (Ross, 2).
CONCLUSION
The above report explores Tesla Inc. with major focus on tesla solar roof, among the many products that tesla manufactures and sells. Tesla operates in the oligopoly market structure and deals with products like solar panels, solar roofs, electric cars such as Model 3, Model Y and Model S. the high price of tesla solar roof impacts the supply and demand, while the nature of product such as the secondary nature of the good also influences the demand and supply of Tesla solar roof. Non-economic forces such as weather have the potential to impact tesla’s sales and profitability. In terms of economic outlook, unemployment poses an external concern to the growth of tesla as customers will not have disposable income to purchase the product while GDP and growth provides reassurance to the future growth of Tesla.
