Tesla SWOT Analysis: Is Debt the Company's Major Threat?

PESTLEanalysis Team
PESTLEanalysis Team
Tesla SWOT Analysis: Is Debt the Company's Major Threat?
Table of Contents
Table of Contents

This Tesla SWOT analysis delivers information about the strengths, weaknesses, opportunities, and threats this

When you think of electric, futuristic driving, does Tesla come to mind? Since 2003, the engineers behind the Tesla corporation have had one goal in mind: to show the world that electric cars are the future — and you don’t need to compromise to use it.

Have they succeeded? This SWOT analysis of Tesla delivers information regarding the strengths, weaknesses, opportunities, and threats this luxurious electric car company faces as of late.

Tesla SWOT Analysis [Strengths]: Perfect timing in a specific niche

Unlike other automotive companies, Tesla isn’t just focused on selling cars. The vision is much grander than that: Tesla wants to revolutionize the driving experience. They’ve started with offering electric vehicles. Even though they’re not the only company offering these types of vehicles, Tesla is often the first one you think about when electric cars are mentioned.

While other vehicle manufacturers focus on delivering affordable electric cars to the public, Tesla chose the opposite. Tesla targets a specific niche: the luxury electric automobile market. When the company started nearly 20 years ago, they had no competition in this space.

The founders were able to carve a name in this niche before anyone else. This has allowed them to continuously dominate this specific market time and time again. Now, the Tesla name holds an abundance of influence and brand power.

Over the last few years the Tesla company has witnessed rapid growth. Much of this trajectory is related to excited consumers who can’t wait to hear more about the future of electric vehicles and possibility (turned reality) of self-driving cars.

The US government supports Tesla’s growth; the company has obtained more than $365 million USD from the US Department of Energy. The funds helped Tesla with their energy management initiatives. A part of the firm’s success is based on timing; Tesla’s operations began during the clean tech initiative launched by former President Barack Obama. This made it easier for the company to obtain advantages from the government.

And now that Tesla has seen such fantastic success, other companies, like Toyota and Mercedes-Benz, have adopted the same cutting-edge technology that Tesla uses. This proves Tesla is a leader in the automobile space.


Tesla SWOT Analysis [Weaknesses]: A debt that just won’t quit

Despite the millions given to them by the government, Tesla has burned through a vast amount of cash over these last few years.

Why? Well, mostly because of investments. Tesla allots plenty of resources towards research and development. They’re looking to create something new in the world of vehicles, and the only way to achieve this is to create, especially when you’ve little references to look back on.

The other reason their cash evaporates is because of the company’s expansion. In only a handful of years, Tesla went from a $200 million revenue to more than $6.8 billion. That sounds impressive, however their profit was only $312 million. You can see, even as recently as 2018, that Tesla is still spending, spending, spending when they can.

Then there’s the debt. In 2016, Tesla was $2.5 billion in debt. Much of this is capital leases. This number has decreased to $920 million. Despite the decrease, if stock prices don’t improve and Tesla isn’t able to pay this off, it could threaten the livelihood of a third of the company’s workforce.

Tesla has a much smaller manufacturing force than other companies. At one point, they only had one plant, located in California. Clearly, this means Tesla could only make a certain amount of vehicles which made hitting higher target volumes more difficult.

Read: PESTLE Analysis of Tesla

Tesla SWOT Analysis [Opportunities]: The development of new gigafactories

To improve profits, Tesla needs to decrease their costs first. They’re currently achieving this by building gigafactories. With the gigafactories they can fulfill targets and increase automobile production. With the ability to built in large quantities, the company may be able to take advantage of discounts on bulk buying materials.

For years, Tesla relied primarily on their one factory in Fremont, California for the development of most vehicles. Luckily, the company finally completed their first two Gigafactories. The third is scheduled for completion in May of this year. which can build more models in a sitting.

Tesla is heavily focused on the future of driving. The cars they’re developing ease stress off the environment. What more could eco-friendly drivers love? And while this is admirable and one of the main reasons customers support the company, it also makes Tesla’s vision… ambiguous.

When will their promises of self-driving cars come into fruition? Can consumers trust the company to achieve these ambitious goals? Is it better to invest now despite how expensive it is? Only Tesla can answer these questions.

The company is backed by the power of its name, brand reputation, and influence. If any automotive company has the ability to further develop on eco-friendly and sustainable driving, it’s Tesla.


Tesla SWOT Analysis [Threats]: A growing number of big-name competition

Although the company builds vehicles for a specific niche of vehicle owners, it does still face competition from other companies like Toyota, Ford, and Google. Most other vehicle companies focus on inexpensive electric and hybrid vehicles for the public. However, that doesn’t mean they won’t make a switch into higher-end, luxury vehicles. On the flip side, should Tesla start offering lower-cost models, they’ll be directly competing with other famous car brands.

The other major threat to the company is debt. It’s significantly decreased as of late, but it still a shadow looming over the future of Tesla. With it around, branching into new technologies and building larger manufacturing factories may need to be put on the back burner until further notice. And doing this will likely reduce Tesla’s profits going forward.

SWOT analysis of Tesla: Conclusion

Tesla is the revolutionary automobile company hellbent on changing the future of driving. Not only do they focus on building luxurious, eco-friendly cars for the wealthy, but they’re also making strides in autonomous driving.

A few things stand in the company’s way. Tesla spends millions in research and development. This is the cost of being a leader in a technological field. Unfortunately, it’s led to hundreds of millions of debt. Nearly 20 years later, Tesla is still trying to pay it off. They’ve also only recently built new factories to build high volumes of cars. This is also costly but necessary for Tesla’s growth. Still, regardless of the hardships Tesla slows no sign of slowing down. Even with competitors like Ford and Google breathing down their neck.

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