Tesla Case Study

A CASE STUDY ON TESLA MOTORS

Cost/Benefit Analysis

In business, every decision that has to be made requires thorough evaluation. And one of the most convenient and straightforward methods to do this is through Cost/Benefit Analysis. In CBA, an estimation of the total value of all the benefits of a certain project is compared to that of the value of the costs that are needed in order to realize such project (Watkins, n.d.). In order for the assessor to come up with a better angle of comparison, these values must be expressed into a uniform unit of measurement. Usually, in computing CBA, the values of the cost and benefits are converted into their monetary value. Once all the costs and benefits of the project have been taken into consideration, comparison may be done. If the value of the benefits outweighs that of the costs, it means that the project is a worthwhile endeavour. The next point of evaluation would be the calculation of the break-even point – the time at which the benefits of the project pay off the costs (Hill, 2012). It would be most preferable to have a shorter payback period.

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Generally, CBA helps business people to decide whether or not to undertake a particular project. It allows them to frame the best and appropriate project objectives. Furthermore, CBA can be used to prepare the necessary resources as well as develop before and after measures of the project’s success. For example, the move to promote more ecological operations and processes for the company may need a Cost/Benefit analysis to determine the probability of its realization. As the corporate world is becoming more and more aware of the effects of Climate Change, companies are looking to implement environment-friendly practices in their offices. The same holds true for huge manufacturing companies. CBA allows the companies to evaluate probable gains and losses that these actions may bring.

Tesla Motors: A Case Study in Environmental Impact

Background and Operations of Tesla Motors

Leading the advent of a more sustainable transportation system and its innovations, Tesla Motors has established quite a reputation in the automotive industry. Since its establishment in 2003, the company has grown to be the biggest manufacturer of electric cars in the market. It has contributed more than 50,000 cars in roads all over the world as of today (Tesla Motors, n.d.). Its main goal is to create a transportation system that is more environment-friendly and sustainable.

Electric cars are charged at home and do not require refuelling of gasoline unlike the cars designed by other manufacturers. Quite expectedly, these zero-emission cars were not easily accepted in the market as they were deemed impractical, not to mention consumers were not really impressed with their rather tacky design. Fortunately, Tesla Motors was able to flip that equation. By releasing their trailblazer electric sports car for the high-end market, the Tesla Roadster, they were able to capture the attention of car enthusiasts and change the face of the green car market.

After releasing the Roadster, Tesla pushed for more space in the industry by releasing their luxury sedan, the Tesla Model S in 2012. More and more consumers are looking to buy electric cars because of the innovations that were done by the company. In fact, reservations for their next model releases are already piling up. There is much anticipation for the Tesla Model X and Model 3 releases.

How Green is a Tesla Green Car?

The very purpose of an electric car is to promote energy innovation; and Tesla Motors’ goal is to achieve this without causing any negative impact on the environment. However, a new technology such as the innovative green car production cannot be made to pass without being thoroughly criticized by the public. Green cars are, by principle, more environment-friendly than the conventional fuel-based cars. The process, by which it is being manufactured, on the other hand, says otherwise. Furthermore, green cars do run on electricity. But, how is electricity being processed? Does it not come from coal and petroleum too? All things considered, is a Tesla green car green after all?

The company admits that the degree of being environment-friendly of their cars – take the Model S for example, mostly depends on where and how often the car is being driven. In the US, each state has a different mix of energy sources that basically goes into their grid. In other words, a “cleaner” source of electricity makes a Model S a more environment-friendly car. Generally, it is still cleaner than the internal-combustion design of their competitors in terms of emissions-per-mile; considering the efficiency of battery-powered cars in converting stored energy into a useful form (Oremus, 2013).

Tesla Motors and the Campaign for Environmental Sustainability

Tesla Motors have established its campaign to promote a greener personal transport system through its electric vehicles; but how does it impact the environment in the industrial context? Are its processes and operations considered as environment-friendly?

The company is very much aware of the fact that they are indirectly releasing carbon emissions through power plants – considering that electricity is the main power source of the vehicles. This is the reason why Tesla moves to promote the absolute removal of indirect carbon emissions by using Supercharger Stations that only uses grid electric power from solar panels (Walsh, 2014). Moreover, Tesla is teaming up with SolarCity to provide electric car owners an option to charge their cars using solar panels in their respective homes. This is like hitting two birds with one stone. By eliminating the need for coal-based electricity source, they are indirectly reducing carbon emissions in the atmosphere; and they are promoting the use of renewable energy source at the same time.

Tesla is basically solving the world’s dependence on gas. Through their revolutionary innovations in electric vehicle technology, they have addressed an issue that has been thought as an improbability for many years. By making more convenient adjustments in their electric cars, and at the same time proving that electric cars are indeed effective, Tesla has convinced more consumers to patronize their product. The company is winning more and more battles as they advance into bigger ventures.

In order to cater to their growing consumer demands, Tesla is building their very first Gigafactory. Panasonic will be a huge investor in this project, along with Tesla’s other major partners. The best thing about this gigafactory is the company’s plan to run it mainly on wind and solar energy. Nevada is the perfect site for the factory because it is where the biggest solar power plant in the world is located.

Tesla does not only serve as a leader in electric car technology, it is also becoming a model for other companies to consider more environment-friendly processes. Coal mining and processing has created many environment-related issues and are still causing problems in many places around the world. If Tesla becomes successful in eliminating the need for non-renewable sources of energy in order to generate electricity, it can change the face of the automobile industry forever. Not only will it dramatically reduce the carbon emissions that are released to the atmosphere, it will also eliminate the issues that are brought about by the processing of electricity that is coming from natural resources.

Tesla Motors and the Competitive Industry

Of course, Tesla Motors is not the only company that has entered the green car market. Even though the industry for green cars is not that big compared to the conventional automobile market, it can be said that competition is not too lax. In fact, Toyota, Ford, Nissan, and Honda are considered as the biggest competitors for Tesla. Audi, Volkswagen, and BMW are looking to join the green car industry soon. And these are pretty huge companies. Can Tesla keep its place in the industry without being squeezed out by giant car manufacturers? What is its competitive advantage?

Unlike the rest of the automobile manufacturers, Tesla is 100% in the green car industry. Thus, their focus is only within that market. Research and development is solely dedicated for this purpose, allowing the company to create better innovations. Also, Tesla has about 5-year head start over the other companies. While other companies are still building their green car designs, Tesla is already polishing its own.

The future of the automotive industry is leaning towards the utilization of renewable sources of energy. This basically means that other companies who are on the other side of the industry are at a huge disadvantage. Oil is about to run out; but solar power is unlimited. Sooner or later, they will have to shift to a more sustainable source of energy.

Tesla Motors and the Future of Green Car Technology

At the moment, Tesla’s priority is to maximize its production in order to meet the demands for the Model S and Model X in the market. They are having troubles in meeting customer demands with their very limited production. But the public can rest assured that Tesla will not stop creating better innovations for their products. Once the gigafactory has been installed, Tesla’s next focus will be on the development and improvement of automated driving technology. As a matter of fact, the company’s CEO, Mr. Elon Musk has announced the release of their partially self-driving vehicle by 2017 (Boyadjis, Rassweiler, & Brinley, n.d.).

As the technology for zero-emission cars progress, the issues regarding the automobile companies’ impact on the environment is being addressed gradually. Someday, there will come a time when vehicles will solely depend on solar power – among other renewable energy sources. It may not totally solve Global warming, but it will help the world get there one step at a time.

References

Boyadjis,M., Rassweiler,A., & Brinley,S. (n.d.). Object moved. Retrieved from https://www.ihs.com/articles/features/tesla-motors.html

Hill,R. (2012, September). Attention Required! | CloudFlare. Retrieved from http://www.mindtools.com/pages/article/newTED_08.htm

Oremus,W. (2013, September 9). How green is a Tesla? Electric cars’ environmental impact depends on where you live. Retrieved from http://www.slate.com/articles/technology/technology/2013/09/how_green_is_a_tesla_electric_cars_environmental_impact_depends_on_where.html

Tesla Motors. (n.d.). About Tesla | Tesla Motors. Retrieved from http://www.teslamotors.com/about

Walsh,T. (2014, November 1). Investing in Socially Responsible Companies: Tesla Motors Inc. Retrieved from http://www.fool.com/investing/general/2014/11/01/investing-in-socially-responsible-companies-tesl-2.aspx

Watkins,T. (n.d.). An Introduction to Cost Benefit Analysis. Retrieved from http://www.sjsu.edu/faculty/watkins/cba.htm