Tesla PESTEL Analysis

Tesla PESTEL AnalysisPESTEL is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors. Tesla PESTEL analysis involves the analysis of potential impact of these factors on the long-term growth prospects of the alternative fuel vehicles manufacturer.

Political Factors in Tesla PESTEL Analysis

There is a wide range of political factors that can potentially affect automobile manufacturers. Specifically, political factors for Tesla include freedom of press, corruption and bureaucracy in local markets and trade unions activities. Moreover, home market lobbying practices by governments and trade controls also belong to the list of political factors that can affect Tesla.

Political stability can also be mentioned as one of the most important political factors affecting the company. Tesla uses cobalt extensively as a raw material to build its Model S, Model X, Model 3 vehicles. About 58% of the world’s cobalt production comes from the Democratic Republic of Congo (DCR).[1] According to a report by Amnesty International a recent cobalt rush has increased the cases of conflicts, corruption and child labour in Congo[2]. Accordingly, it can be argued that political instability and warfare in Congo can create supply chain risk for Tesla in relation to cobalt, an important component for electric vehicles.

 

Economic Factors in Tesla PESTEL Analysis

The range of economic factors that can affect Tesla is diverse. Changes in foreign currency exchange rates can be mentioned as one of the most noteworthy economic factors for Tesla. This is due to international scope of business operations of the alternative fuel vehicles manufacturer.  In 2017 and 2016 Tesla recorded foreign currency transaction gains of USD52.3 million and USD26.1 million respectively. In 2015, on the other hand, the company recorded foreign currency transaction losses of USD 45,6 million.[3] It has been estimated that a hypothetical 10% change in interest rates would have increased Tesla’s interest expense USD7.6 million in 2017.[4]

Tax rates and taxation policies are other factors directly affecting businesses. Tesla has been able to benefit from government tax incentives provided to electric car manufacturers to a certain extent.  California Alternative Energy and Advanced Transportation Financing Authority Tax Incentives and Nevada Tax Incentives can be mentioned to illustrate this point. Particularly, Nevada Tax Incentives provide Tesla with substantial tax advantages in a way that it provides abatements for sales and use taxes, real and personal property taxes, and employer excise taxes, discounts to the base tariff energy rates, and transferable tax credits until the year 2034.[5]

The availability of Zero Emission Vehicle (ZEV) credits in California can be mentioned as another external economic factor with direct implications for Tesla. Specifically, ZEV credits are tradable regulatory credits that provide financial benefits for the business. Additional external economic factors for Tesla include but not limited to the overall macroeconomic climate in the country, inflation and interest rates, cost of labour and rate of unemployment and others.

Tesla Inc. Report contains a full version of Tesla PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Tesla. Moreover, the report contains analyses of Tesla business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of Tesla marketing strategy, ecosystem and addresses issues of corporate social responsibility.

Tesla Inc. Report 2018

 

[1] Kay, A. (2018) “Top Cobalt Production by Country” Investing News, Available at: https://investingnews.com/daily/resource-investing/critical-metals-investing/cobalt-investing/top-cobalt-producing-countries-congo-china-canada-russia-australia/

[2] The Dark Side of Electric Cars: Exploitative labor practice (2017) Amnesty International, Available at:  https://www.amnesty.org/en/latest/news/2017/09/the-dark-side-of-electric-cars-exploitative-labor-practices/

[3] Annual Report (2017) Tesla Inc.

[4] Annual Report (2017) Tesla Inc.

[5] Annual Report (2017) Tesla Inc.

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