Tesla's Growth Challenges: Market Saturation and Strategic Solutions

This report analyzes the growth challenges faced by Tesla, particularly the saturation of the market for the Model 3. The introduction highlights Tesla's position as a leading electric vehicle manufacturer and the revenue challenges it faces. The discussion section examines issues like market saturation, the impact of federal tax credits, and the need for new customer acquisition. The report further explores the implications of market saturation, competition, and the need for strategic shifts. It then discusses potential approaches, including price adjustments and market expansion into regions like China and Europe. Each approach's advantages and disadvantages are evaluated. The conclusion suggests that Tesla should focus on expanding its market to China and Europe, offering a strategic recommendation to ensure continued growth and dynamism. The report includes a comprehensive reference list.

RUNNING HEAD: COMPANY GROWTH PROBLEMS
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Introduction:
Tesla is a well Known American Electronic Vehicle producer company that is reputed for
revolutionising the concept of vehicle. The company is noted for its production of the electric
vehicles and their promotion of sustainable and environmental friendly luxury cars. The
company serves worldwide and according to a 2019 survey, it had a revenue of $24.57 Billion
(Andersen Dauner Lang and Palme, 2017.). The company strives for perfection and the revenue
growth by producing almost every year new and more up graded versions of their cars. The cars
that Tesla produces are targeted towards a niche market, mainly the affluent buyers. At present,
however, the company had been facing a few problems with their new product, the Tesla Model
3. The latest challenge for the company had been to find new customers for this model. It has
been identified, that the present market of Tesla has been saturated and thus, they need to shift
their focus for a sustainable market.
The present report will deal with the challenge that is being faced by the company in
dealing with the sale of new model and will discuss about the possible solution.
Discussion of the Issues:
The company of Tesla has reportedly been facing a year full of “production hell and the delivery
hell” since the end of last year. The question that has arised that how many customer will the
company get for selling the car. The industry analysts had been voicing their concerns regarding
the future of this model since they think that the company has tapped out the demand for the
higher price versions of cars in the United States. However, the CEO of the company, Elon Musk
has dismissed the issue claiming that there is no dearth in the demand of the new Model and that
there are a lot of scopes in their present market. However, customers do not have enough money

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to afford the model 3. He is positive about the fact that is the price of the car can be slashed to
some extent, there will be no dearth of customers in their present market. there are, still some
serious problems relating to the lowering of the price (Wu and Yang 2017). Since the Tesla cars
are no more eligible for the “7,500 dollar federal tax credit for electric vehicles,” Tesla cannot
afford to reduce the price of the model unless there is a price cut. The analysis of the industry
gives the verdict that though there had been a lot of focus on the part of the company in
expanding the supply chain, te pent up demand for the high priced variants have been
extinguished in the market of US.
The issues thus arrived is of great impact to the business of Tesla. Saturation in the
market means than if they produce more developed and up graded versions, the company will not
be able to get the customers. This will bring in the saturation within the company as well.
Moreover, since the trend for high price variants has exhausted, new entrants with low priced
products can take the market. Though, Tesla has a quite loyal base of customers, the lack of
variety in their favourite brand will definitely make them shift their focus (Dzamic and Kirby
2018). The reports of the low sales figure since the last month and the declined graph presented
by the delivery team have already been noted as a threat to the company.
The decision of shifting the market and focusing on a new economy is however, can be
thought as the best opportunity to explore new countries and new markets like China and Europe.
China at present, is considered as the largest EV markets and the market condition of Europe is
in par with that of US. Elon musk himself admitted that there are opportunities and chances of
having a more developed market in this area.
Approaches that can be used:

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1. Slashing of price- the first thing that the company can do is slashing the price of the product in
order to make it affordable to the customers. they can also think of giving lease on the Model 3.
The slashing however cannot be done whenever the company thinks. Since the company has a
large supply chain and uses the quality products, slashing of price can lead to compromise in the
quality that may be a backfire for the company.
Advantages:
1. can be made affordable in the present market.
2. the uncertainty about profit in the new market can be avoided.
3. can target new segments also in the present market.
Disadvantages:
1. slashing of price may lead to compromise with product quality.
2. giving lease on the model will make the financials of the company look worse.
3. if the company has to keep both quality and reduced price high chances are that they will end
up with huge loss.
Second Approach- shifting the market for the model:
As pointed out earlier, this is one of the best opportunity for the company to focus on new
markets like China and Europe. The company can use the crossover of Model Y and Model 3 in
these areas and can successfully find a market for the high priced car. Moreover, since these
markets, specially China, have never experienced such an exposure on part of Tesla, there is high
chance that the craze for the car will be more despite the high price.

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Advantages:
1. high demand in these new markets is good for the company.
2. though Tesla has ruled out the concept of reservation in US and promotes direct sales, such is
not the case in China or Europe. This may earn them benefit (Duong 2017.).
3. exploring new markets can increase their revenue streams.
Disadvantages:
1. the Giga factory in China is a great threat for Tesla.
2. there is always an uncertainty in moving the market focus (Strebel 2018).
Conclusion:
To conclude, it can be said that the company, in order to retain their dynamism can opt for
moving their market to China and Europe. Though there are risks, the opportunities are far
greater in this venture.

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Reference List:
Andersen, M., Dauner, T., Lang, N. and Palme, T., 2017. What Automakers Can Learn from the
Tesla Phenomenon. BCG Perspectives. URL: https://www. bcgperspectives.
com/content/articles/automotive-what-automakers-can-learnfrom-tesla-phenomenon/Accessed,
17(11).
Duong, V., 2017. Baidu SEO: Challenges and Intricacies of Marketing in China. John Wiley &
Sons.
Dzamic, L. and Kirby, J., 2018. The Definitive Guide to Strategic Content Marketing:
Perspectives, Issues, Challenges and Solutions. Kogan Page Publishers.
https://www.tesla.com/
Strebel, E., 2018. Challenges ahead for attorneys as vehicle technology develops. Wisconsin Law
Journal.
Wu, L. and Yang, W., 2017. Tackling supply chain challenges of tesla model 3.