Strategic Imperatives for Tesla: A SWOT Analysis of Market Position

and Technological Innovation in the Electric Vehicle Industry

Pengcheng Wu

School of Vehicle and Engineering, Yanshan University, W. Hebeidajie, Qinhuangdao, China

Keywords: SWOT Analysis, Comparison Method, Tesla, BYD, Toyota.

Abstract: This research aims to find the problems that Tesla is facing by using SWOT analysis and in which way could

Tesla overcome these problems. The research question is the SWOT analysis on Tesla, BYD, Toyota and the

comparison analysis. The research use SWOT method and comparison method as the main methods. The

research found out that tesla’s threats are mainly on battery and the competition with hybrid cars. The solution

is to enhance the special design for EV and maintain a good relationship with battery supply companies.

1 INTRODUCTION

Tesla is an electric vehicle design and manufacture

corporation located in Silicon Valley. The company

mainly focus on producing electrical cars. Tesla has

many gigafactories that fulfill the demand. The

company was founded in July 2003 by Martin

Eberhard and Mark Tarpenning, who financed the

company before Series A was funded. Elon Musk led

the Series A round of funding and became the main

leader in the company (Bhardwaj, S., Pandey, R.,

Sharma, S., Sejal, S., Iyer, G., Sharma, S., ... &

Kulkarni, S., 2020).

The main goal for Tesla is getting profit by selling

electric vehicles and keep its leading position in the

market. Tesla target their product’s market location in

a very different way. They focused on high-

performance, high-price electric vehicle that can

stand with those luxury brand such as BMW and

Porsche (Hoffman, A. N., 2011).

As the leader of the industry, it seems that there is

no doubt that Tesla will continue to grow wild and

gain the entire market. But environment protection

then became a very important topic in the world.

People tend to buy EV. Governments hands out

policies that supports the development of EV

companies. Many competitors join in this market and

try to gain the market value that belongs to Tesla.

Under this circumstance, Tesla has to understand the

problems by diving into the problems they are now

facing. In order to raise the revenue, Tesla decide to

lay off their employers. This can affect everyone in

the supply chain. According to research, the lay-off

will have a negative impact on the company’s

reputation and eventually lead to the crash of the

supply chain. Tesla manufacture its own battery

system. Producing a battery requires lots of raw

materials such as copper, cobalt and nickel. Tesla

doesn’t control these raw materials and the violet of

price may cause huge loss. There are some

uncontrollable factors such as the unclear politics and

economic prospect (Sathish, S., & Weenk, E., 2020)

(Günther, H. O., Kannegiesser, M., & Autenrieb, N.,

2015). Tesla have to know the problems they are now

facing in order to avoid all the negative effect that the

uncontrollable risks bring to them.

2 LITERATURE REVIEW

There are some previous studies discuss about the

potential risk of Tesla.

One way of discussing the problems is by dive in

to this firm’s finical reports. By looking the data the

company reported, researchers have found out some

major problems. For instance, under the pressure of

low-cost and high-quantity Chinese EV, Tesla can’t

domain the EV market in China and thus the revenue

growing speed has already slow down. Compared

with those tradition automobile manufacture

corporations, Tesla’s product spends too much time

in the inventory. This will also add a lot of extra

expenses (Ivanchenko, N., 2017). Tesla’s decision-

making team also knows these problems and they

122

Wu, P.

Strategic Imperatives for Tesla: A SWOT Analysis of Market Position and Technological Innovation in the Electric Vehicle Industry.

DOI: 10.5220/0012911000004508

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Engineering Management, Information Technology and Intelligence (EMITI 2024), pages 122-126

ISBN: 978-989-758-713-9

have already improved some of the questions. Now,

Tesla works with Toyota in order to control the

inventory time. Another way to detect the potential

problems is comparing the object company with some

other companies that perform well in the same field.

There are also lots of papers. Recent research points

out that the R&D route between Tesla, Toyota and

BYD is totally different. Tesla’s patient system is

purely based on EV. BYD also have some gasoline

engine patients, but they changed the strategy in some

point of time and begin to focus on EV technology.

Toyota, on the other hand, focus both the gasoline

engine and the EV technology for a long time (Park,

Y., Nakaoka, I., & Chen, Y., 2020).

Both of the methods have problems. For the first

method, it is not a good way to search for a solution.

Business is a very complex system and not every

point can be found in the chart that provided to the

investors. Most important, it can only find out

macroscopic problems. These problems are combined

by a series of small problems. So, it can’t touch the

core of the problem. As for the second method, it is a

good method to find real problems. But the

comparison in previous search doesn’t have a clear

logic system. That means, every paper will have a

different evaluate dimension. This will make the

reliability of the result become low.

What I want to do in this paper is to combine both

of the methods and to make the result more accurate.

SWOT is the best system that can be used to analysis

the case. SWOT analysis is aimed to find out the

strengths, weaknesses, opportunities, and threats in

order to find out the most urgent part that the

company should change (Jackson, S. E., Joshi, A., &

Erhardt, N. L., 2003). By applying this method, I can

use the SWOT matrix as a tool in order to dig more

details. Previous studies have already used SWOT to

analysis the smart driving system of Tesla, the

globalization of Tesla and so on (Kumari, D., & Bhat,

S., 2021) (Mangram, M. E., 2012). These papers are

focused on the operation strategy. But there are no

papers that discuss Tesla’s management model using

SWOT and compare both the strength and weakness

with other strong competitors.

This study is aimed at using SWOT to analysis

Tesla’s management model. Then I will stand from

the perspective of Tesla and see what can I learn from

the SWOT analysis from BYD and Toyota.

3 METHODOLOGY

In this part, I will start from the analysis of Tesla’s

SWOT matrix. Then I will use BYD and Toyota as

two targets and try to find out how to fix the WT area

in Tesla’s SWOT matrix.

3.1 Tesla’s SWOT

3.1.1 Strengths

I will discuss the strengths of Tesla in this paragraph.

Tesla is the most successful electric vehicle company

in the US and therefore it has a very good reputation.

With its reputation, Tesla has a license from the

government in order to push the program of the Auto

Driving System. Tesla also focusing on Auto Driving

System. The EV’s engine was designed and

originated by Tesla. Tesla supervises the manufacture

of battery system and control system. Therefore, the

EV is very safe and high-tech. A good reputation can

also let consumer trust their Auto Driving System and

the electric system. This is very important and is a

part of Tesla’s strength. Many people want a stable,

safe, high-tech EV that is produced by a high-end

company. Tesla can fit all of these requirements.

Therefore, when people choose an EV, they will first

consider Tesla’s product. Another point is that Tesla

has a very good design and innovation team. They are

very critical in Tesla. As EV uses the battery as the

power source and the electric motor as the engine.

The electric motor uses less space than the fuel

engine. But the battery needs lots of space. So, in

order to fully use the car space, the design team of

Tesla just made the frontier as a boot and put all of

the battery at the bottom of the car. The design is so

special that makes lots of people pay attention to the

car. This example shows that the special design based

on the characters of the electricity can be faddish, thus

increasing the income of the company. Third, the

leadership of Elon Musk is strong and unique. Elon

Musk has a lot of brilliant ideas and he is good at

managing the cost of producing a product. Tesla also

has many Gigafactory around the world. These fully

automated factories can produce huge amounts of

product in a short period of time. The technical group

can realize Musk’s ideas and products can be sold at

an acceptable price based on the Gigafactory. This is

also a very important reason that Tesla’s product has

an acceptable price and lots of special features. These

are three main strengths Tesla has.

3.2 Weaknesses

Then, I will discuss the weakness of Tesla. Elon Musk

likes to speak about some controversial topics. He

also likes to share his ideas about Tesla on the X

platform. This may potentially damage the

company’s reputation. Another weak point is that

Strategic Imperatives for Tesla: A SWOT Analysis of Market Position and Technological Innovation in the Electric Vehicle Industry

123

Tesla doesn’t have a resilient supply system. For

example, Tesla only uses Panasonic’s battery because

of their partnership. I will dive into the battery

problem in the threat part later. The supply company

list for Tesla is so short that until 2011, there were

only 9 companies served as Tesla’s suppliers

(Karamitsios, A., 2013). There is no replacement

company for Tesla to use when the supplier has

problems. This may raise the potential waiting time

for buyers when their cars are affected by one

supplier’s problem. Eventually, the selling volume

will drop down.

3.3 Opportunities

There are some potential opportunities for Tesla. The

first is to combine AI technology with the driving

control system. Tesla has already developed their

own autopilot hardwire called FSD Chip. As I said

before, Tesla is the leader of the Auto Driving System

so they gain a lot of data to make the system more

stable and reliable. Second is that there are still lots of

potential markets for Tesla to gain. For example,

Thailand and Vietnam don’t have so many EVs on

sale. If Tesla can sell their EV in the market, that will

be a milestone for their revenue.

3.4 Threats

Finally, I will point out the threats that Tesla faces.

Although Tesla owns Gigafactory all over the world,

the company still doesn’t have the ability to produce

batteries. Battery is the most important technology in

the EV sector. Elon Musk and Panasonic still want to

use cylinder power batter. This is mainly because the

4680 battery can contain more power and the

assembly of the power unit will be much easier.

Unfortunately, the 4680 cylinder power battery has

many technical problems. Panasonic said they won’t

provide 4680 cylinder power battery to Tesla (

Hyunjoo Jin, Kiyoshi Takenaka., 2023). Without a

low-cost battery solution, Tesla will soon lose its

leadership position. Both the Lithium Iron Phosphate

Battery and Nickle Cobalt Manganese Battery are

much safer and can contain more power in the same

weight compared to the traditional Li-ion Battery.

The second problem is more dangerous. Now,

companies are focusing on the Hybrid EV. Hybrid EV

uses an internal combustion engine as a

supplementary power source. The Hybrid EV has

some advantages. There are many places that don’t

have the charging pile because the area is too far from

the rich area and Tesla doesn’t want to construct

there. If you are in peak hour, you need to wait for a

long time to charge your car and your car may spend

all of the power before you charge it. With the

combustion

engine, these worries won’t exist. Also,

the combustion engine will only run in the most

efficient area so the fuel consumption of the engine

will be lower than the usual fuel car. The hybrid EV

combines the internal combustion engine’s benefits

and the EV’s benefits. Companies can also deploy an

auto-driving system on the car. But Tesla doesn’t

have such a plan to produce the hybrid EV. This

means that Tesla will lose one track and the market

share will drop significantly.

3.5 SWOT Matrix

This research shows the SWOT analysis by using

the matrix below.

Table 1: SWOT matrix

Strengths

Good Reputation

Special design and

innovation based on EV.

High-quality product sells

at an acceptable price.

Weakness

Elon Musk’s behaviour.

The supply chain is not

resilient.

Opportunities

Auto-driving system.

Untouched market.

Threats

Low energy density

battery.

Facing the challenge of

brid EV.

After the SWOT discussion, what I want to know

is how to eliminate the threats that are listed on the

matrix. I can use comparison methods to find out

solutions.

4 DISCUSSION

There are four kinds of improvement that the

company can use after SWOT analysis. Strengthen

the strengths, seek and grab the opportunities, avoid

weakness, and eliminate threats. I choose the method

of eliminating the threats. A threat such as hybrid EV

is a very new topic, and there have been few

discussions about how to solve the problem.

In order to find out the solution for Tesla to

eliminate the threats, I decided to find out the

companies that are good at what Tesla is under threat.

By comparing Tesla with the company, I can get the

final result and lead to a conclusion.

The first problem Tesla is now facing is the

battery problem. The second problem Tesla is now

facing is the challenge of Hybrid EVs. Toyota is a

traditional car manufacturing corporation. They have

also changed into the EV section. How did they

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manage to do so? Maybe Tesla can learn something

from them. BYD is also a very important example as

the company is good at manufacturing batteries, EVs,

and Hybrid EVs. This is also a very strong competitor

which I can learn from.

Toyota is a traditional internal combustion engine

automobile manufacturing corporation founded in

Japan. Due to the lack of energy in Japan, Toyota has

already tried a series of technologies in order to save

fuel usage. They have already spent a lot of money on

Hybrid EV technology and fuel cell technology. The

reward is very good. Now, Toyota is the leader in the

Hybrid EV sector (Liu, J. H., & Meng, Z. 2017).

Now, I can find out the difference between Toyota

and Tesla. Toyota has already designed and

manufactured the internal combustion engine. Hybrid

EV is a very good choice because they don’t have

battery technology. In order to follow the trends,

Toyota decided to use Hybrid cars as a way to prove

to the public that they have the determination to

change. This is a bad point as Tesla was founded for

pure EVs and they don’t have any internal

combustion engine patent. But Toyota doesn’t have a

special design for the EV car. Their design ideas are

locked in the traditional mode. From this point of

view, the best way for Tesla to compete with these

Hybrid EVs is the design. The innovation team and

the design team can make full use of the extra space

that the electric system provides and make the car

larger, safer, and more comfortable. Finally, Tesla

still needs to spend money on building charging piles.

This is the key infrastructure for EVs. Nowadays, you

can find a gas station in any city no matter how poor

it is. However, the charging piles need a stable

electric grid that covers the entire country. Tesla

needs to invest heavily in this part in order to

eliminate the anxiety of EV drivers.

BYD is a manufacturing company that mainly

focuses on battery and IT technology. Based in

Shenzhen, this company focuses on frontier

technology in the battery and electric engine section.

Now, BYD is a leader in new energy vehicles in

China. BYD created a new battery form that is called

The Blade Battery. Tesla and Panasonic focus on the

cylinder battery. This is where the problem is. The

blade battery can be put together without wasting any

space but the cylinder battery will have some blank

space due to its shape. This means that BYD can save

more energy in the same space compared with Tesla.

Blade Battery is also much safer than cylinder battery.

So, it is obvious that Elon Musk has to change his

mind. As I have talked about before, Tesla should

widen their supply system in order to make sure it can

handle all of the problems that it may face. It is

obvious that either the decision made by Elon Musk

about the 4680 battery is wrong, or Panasonic has

some research and development problems. No matter

what happens, the problem will eventually affect the

users’ experience because they expect to have a

longer trip with only one charge. From this prospect

of view, Tesla should reconsider their relationship

with BYD and Panasonic. The company should have

a balanced relationship with both of the companies in

order to keep the company’s leader in the pure EV

sector.

5 CONCLUSION

In conclusion, this paper mainly focuses on Tesla’s

SWOT. The strengths of Tesla are its reputation,

special design, and acceptable price. The weaknesses

are Elon Musk’s personal controversial behaviors and

the weak resilience of the supply chain. The

opportunities for Tesla are the Auto-Driving System

and the untouched market. The threats for Tesla are

the 4680 battery technology can’t be used to

manufacture huge quantities of batteries and hybrid

EV becomes the strong competitor. Then, I use BYD

and Toyota as two targets in order to see if there are

some possible solutions to eliminate the threats. The

conclusion is that the company can go through the

problems by strengthening its special design based on

the EV system provided and widening the battery

supply chain. This research will serve as a base for

future studies in the EV operation sector. The method

I provide in the paper may inspire others to analyze

problems more accurately.

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