Tesla Motors, Inc. PESTEL/PESTLE Analysis & Recommendations

Tesla Motors Inc. PESTEL PESTLE Analysis, Political Economic Sociocultural Technological Ecological Legal external automotive case study
A Tesla Model S at the 2013 Osaka Motor Show. A PESTEL/PESTLE analysis of Tesla Motors, Inc. shows that the external factors in the company’s remote or macro-environment present opportunities for global expansion. (Photo: Public Domain)

Tesla Motors, Inc. must overcome challenges linked to the external factors identified in this PESTEL/PESTLE analysis. The PESTEL/PESTLE Analysis is a strategic tool that determines the effects of the industry’s remote or macro-environment on the company. Tesla’s case involves the remote or macro-environment in the automotive industry. Such external factors influence other determinants of the business, such as customers and community-based organizations. With a strong brand image and improving profitability, Tesla can enhance its long-term success by including the results of its PESTEL/PESTLE analysis in strategic formulation.

Tesla Motors, Inc.’s electric automobile sales revenues are increasing, along with improving profitability. This condition indicates Tesla’s effectiveness in considering the external factors in the remote or macro-environment, as shown in this PESTEL/PESTLE analysis.

Political Factors Affecting Tesla’s Business

This part of the PESTEL/PESTLE Analysis identifies the governmental impacts on businesses and the remote or macro-environment. In the case of Tesla and the automotive industry, the following political external factors are significant:

  1. Governmental incentives for electric automobiles (opportunity)
  2. Expanding free trade agreements (opportunity)
  3. Political stability in the majority of major markets (opportunity)

Tesla Motors, Inc. has an opportunity to strengthen its financial performance through incentives from governments. This external factor directly relates with the insignificant carbon emissions of the company’s products. In addition, expanding free trade agreements open opportunities for Tesla to expand its operations internationally. On the other hand, the political stability of major markets makes the remote or macro-environment favorable to the company’s market penetration strategies. In this part of the PESTEL/PESTLE analysis of Tesla, political external factors present opportunities for growing the automotive business.

Economic Factors Important to Tesla Motors, Inc.

The effects of economic conditions on the remote or macro-environment are considered in this part of the PESTEL/PESTLE Analysis. Tesla needs to address the following economic external factors that influence the automotive market:

  1. Decreasing battery costs (opportunity)
  2. Decreasing renewable energy costs (opportunity)
  3. Economic stability issues (threat)

Tesla’s business performance benefits from lower battery costs. For example, this external factor translates to affordability of the company’s electric automobile products. In relation, the decreasing renewable energy costs make Tesla’s products more attractive, considering that the business improves as renewable energy solutions becomes more popular. However, economic stability issues threaten the company’s financial performance, especially in Europe and Asia. This part of the PESTEL/PESTLE analysis of Tesla Motors, Inc. highlights major opportunities for growth, despite the threat of economic instability in the remote or macro-environment of the automotive industry.

Social/Sociocultural Factors Influencing Tesla’s Business Environment

Social conditions and trends affect a firm’s remote or macro-environment, as shown in this part of the PESTEL/PESTLE Analysis. The sociocultural external factors important in Tesla’s business are as follows:

  1. Increasingly popularity of low-carbon lifestyles (opportunity)
  2. Increasing preference for renewable energy (opportunity)
  3. Improving wealth distribution in developing markets (opportunity)

Tesla has growth opportunities based on the rising popularity of low-carbon lifestyles and increasing preference for renewable energy. These external factors improve market demand for the company’s electric vehicles and related products. In addition, Tesla has an opportunity to boost its financial performance based on the increasing wealth distribution in developing markets. In this part of the PESTEL/PESTLE analysis, Tesla can internationally grow its business based on sociocultural opportunities in its remote or macro-environment.

Technological Factors in Tesla’s Business

This part of the PESTEL/PESTLE Analysis determines how technologies influence the company’s remote or macro-environment. The following technological external factors are significant in Tesla’s automotive business:

  1. High rate of technological change (opportunity & threat)
  2. Increasing automation in business (opportunity)
  3. Increasing popularity of online mobile systems (opportunity)

The high rate of technological change presents opportunity for Tesla to enhance its products’ technologies, accordingly. However, this external factor also threatens the company in terms of the potential rapid obsolescence of technologies used in its products. Nonetheless, Tesla also has growth opportunities through further automation of its business processes. In addition, the increasing popularity of online mobile systems should prompt the company to increasingly integrate these systems in its automobiles. The technological condition of the remote or macro-environment, as shown in this part of the PESTEL/PESTLE analysis of Tesla, emphasizes opportunities for growth based on technological enhancement.

Ecological/Environmental Factors

A firm’s remote or macro-environment is subject to the effects of ecological conditions covered in this part of the PESTEL/PESTLE Analysis. In Tesla’s case, the following ecological external factors affect the market:

  1. Climate change (opportunity)
  2. Expanding environmental programs (opportunity)
  3. Rising standards on waste disposal (opportunity)

Tesla Motors, Inc. has opportunities to promote its electric vehicles based on concerns on climate change, expanding environmental programs, and rising standards on waste disposal. For example, the company’s electric vehicles are considered suitable in directly addressing these external factors linked to business sustainability and environmentally friendly products. This part of the PESTEL/PESTLE analysis shows that Tesla has significant growth opportunities based on the nature of its products.

Legal Factors

In this part of the PESTEL/PESTLE Analysis, the effects of regulatory factors on the remote or macro-environment are determined. Tesla Motors, Inc.’s strategies must include the following legal external factors:

  1. Expanding international patent protection (opportunity)
  2. Energy consumption regulations (opportunity)
  3. Dealership sales regulation in the United States (opportunity & threat)

Tesla has opportunities to safely expand its business overseas, considering expanding international patent protection. In addition, the company has the opportunity to promote its electric vehicles, based on energy consumption regulations that client organizations must follow. Also, Tesla has an opportunity to grow through direct sales, which is allowed in many states in the U.S. However, this external factor is also a threat, considering that other states do not allow direct sales and, instead, require dealerships to transact with customers in the automotive market (Read: SWOT Analysis of Tesla Motors, Inc.). Based on the legal conditions of the remote or macro-environment shown in this part of the PESTEL/PESTLE analysis, Tesla can expect growth opportunities.

Tesla’s PESTEL/PESTLE Analysis – Recommendations

Tesla Motors, Inc.’s profitability improves over time. The company is also in a position to improve its operations in the global automotive market. As shown in this PESTEL/PESTLE analysis of Tesla, there are a variety of opportunities that facilitate further growth of the business. For example, free trade agreements make it easier to expand internationally. Thus, a recommendation is for Tesla to globally expand its operations. It is also recommended that the company should increase its marketing aggressiveness to increase its market share, especially in countries other than the United States. This move could reduce market-based risk, considering that Tesla has limited sales operations in overseas markets.