Tesla Cars in the UAE

free essayThe situational analysis performed is intended to provide a framework for Tesla Motors’ future strategy in surviving in the highly competitive UAE environment. Tesla Motors is an established car company majoring in the manufacture of electric cars and battery (Becker & Sidhu, 2009). Moreover, the company provides powertrain components to major car producers on a global scale such as Toyota and Daimler. The company also designs and produces Model-S, which is the first premium zero-emission sedan and is the world third best-selling electric car in both Europe and the US (Becker & Sidhu, 2009). Tesla as a successful start-up company has become a leading edge in the automotive industry due to innovative ideas and good management.

Tesla Motors recognizes the significance of renewable energy and protection of the environment. Moreover, the company focuses on solving such issues with the utilization of technology development to ensure its expansion strategy is a success (Becker & Sidhu, 2009). On the one hand, the company continues to revolutionize the industry and provide a worthy alternative to the brands that use gasoline. The company is currently worth approximately $25 billion, which is roughly half the worth of General Motors. The company growth is impressive and it plans to exploit the Gulf region (Carlson, 2013). On the other hand, the automobile industry in the Gulf region remains highly cyclical and competitive.

The industry closely relates to economic cycles and oil prices and such factors determine the potential future of the company in the region, which are likely to affect the expansion strategy of the company. Moreover, such factors facilitate the coexistence of conditions for competitive growth in the automotive industry, making Tesla Motors one of the leading manufacturers with excellent products in the market (Carlson, 2013). Macro-environmental factors also assist the company with utilizing the best technologies in designing and manufacturing electric cars at a convenient cost. Nonetheless, Tesla targets upper-income level consumers through the provision of higher perfuming and creative cars, giving the company a competitive edge (Carlson, 2013).

Tesla Cars Role in Reducing Pollution

Tesla cars can assist in environmental conservation in the Gulf region by reducing air pollution. Tesla Motors cars do not use diesel and petrol, which pollutes environment. Moreover, Tesla vehicles are 100% eco-friendly since they run on electricity-powered engines (Shahan, 2012). Cars do not emit toxic gasses to the environment as it relies on the clean energy source; therefore, it will contribute to a healthy and green Gulf region climate. Tesla Motors’ expansion plan to the UAE is, therefore, an advantage to car users and the government of the region in the drive to ensure a safe environment. Tesla Motors’ vehicles, especially the SUVs that consumers prefer in the Gulf region, are a good choice for decreasing global warming emissions and cost-saving regarding fuel (Shahan, 2012).

Dubai Petrol Situation

The UAE, especially Dubai, has been experiencing significant shifts in fuel prices, giving users of petrol and diesel vehicles a hard time regarding cost. Petrol prices tend to increase due to the economic state of the region, discouraging people from using petrol cars (Badam, 2015). The government also uses increase in the fuel approach in ensuring the wellbeing of the environment as emissions reduce significantly due to the low use of diesel and petrol vehicles. Moreover, the petrol situation results in the consumer preference for electric cars and provides a market for Tesla Motors (Badam, 2015). Tesla Motors has been able to supply the Dubai market and the UAE in general with electric cars such as the Model S.

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Setting up of the First Electric Charger for Electric Cars in Dubai

The petrol situation in Dubai has paved the way for the introduction of eco-friendly electric cars in the market. Introduction of Tesla Motors’ cars and increasing consumer preference have facilitated the setting up of the fist electric charging stations. Launching of electric chargers was an initiative to establish a framework for consumers to purchase eco-friendly vehicles (Badam, 2015). The approach has pioneered the establishment of more charging stations in Dubai and across the UAE as a step towards achieving a sustainable and friendly environment. Additionally, setting up of electric charging stations is a motivation factor that has progressively driven consumer into purchasing the company’s cars (Badam, 2015). Most consumers’ reports are about the cost saving and environmentally friendly advantage that Tesla cars provide in the long run. Dubai electric car users value Tesla Motors’ vehicles as a vital choice in the process of reducing pollution, cutting fuel cost, and reducing oil consumption in the region.

Plans of the UAE Government on the Use of Electric Cars

The UAE government is planning to put an electric charger in every petrol station. The government intends to use the approach to improve the use of electric cars and encourage more purchases to ensure environmental protection. The choice of the geographical setting for electric charges will determine the rate of purchase and use of electric cars (Badam, 2015). Moreover, the government plan will ensure a larger network of electric chargers for consumers in the UAE region. The charger at every petrol station will also facilitate convenience for electric car users (Badam, 2015).

Market Summary

Tesla Motors targets upper-middle-class baby boomers and the government who are green friendly for its electrical car products. Tesla is targeting consumers interested in conserving the environment, as well as purchasing premium products (Becker & Sidhu, 2009). Moreover, the company is also targeting the Gulf region’s technologically savvy consumers.

Market Demographics

According to the table, the most significant market segment for Tesla Motors is consumers with an income over $100,000 who are in most cases aged between 44 to 65+ years of age (Becker & Sidhu, 2009). Moreover, the table indicates that most customers for its brand are males constituting up to 83.9% of the market share against female at 16.1%. The target market segment of the upper-middle class consumers constitutes of individual earning an income between $99,999 to over $100,000. The range is with a percentage of 77.3% in the market (Becker & Sidhu, 2009).

Market Needs

Tesla Motors enjoys a strategic positioning in the automotive market as one of the most established high-end manufacturers and dealers of electric cars (Carlson, 2013). Tesla-owned stores, service centers, high-performance cars, and technological innovations give the company a competitive advantage in the market. However, the company focuses on designing and manufacturing of electric cars for the Gulf region as new markets need high-powered expertise, effective distribution channels, suppliers, and capital investments to make the brand successful. Nonetheless, consumers prefer electric company cars with an understanding about the kind of expertise and technology Tesla invests in its designing and production processes (Carlson, 2013).

Market Trends

Tesla Motors will benefit from the following market trends when expanding to the Gulf region:

  • Globalization: The use of the internet continues to bring the global market into direct communication with the company. Expansion strategy for the Gulf region will focus on the aspect of globalization with a market already available to use the company brand due to increasing fuel cost and environmental concerns (Becker & Sidhu, 2009).
  • Technological advancement: The aspect of technology enables designing and manufacturing of cars with improved performance and safety measures (Becker & Sidhu, 2009). Tesla Motors will use technology to conquer the already competitive automotive market in the Gulf region.
  • Outsourcing: Outsourcing is a major trend in the automotive market (Becker & Sidhu, 2009). The trend will assist Tesla Motors in acquiring resources and saving cost.

Market Growth

Tesla’s performance in the automotive market has improved to beat the market by 101% annually since 2011. Moreover, the growth in share price is also vital with a remarkable 158% annual compound growth rate in the last three years (Carlson, 2013).

SWOT Analysis

The SWOT analysis highlights significant issues that will affect Tesla Motors in the Gulf region such as external environment and its strategic capabilities having an impact on strategy development (Carlson, 2013). Furthermore, the analysis will assist in the development of a strategic option for the company in the region in addition to courses of action.


In Tesla Motors, several strengths assist the company to remain competitive in the automobile industry (Carlson, 2013). First, the company relies on outsourcing of secondary resources to assist in keeping low cost and focuses on advancement in technology. The approach has in turn resulted in strong research and development, which ensures progress. This is seen in the creation of electric cars with higher performance and high productivity battery systems, which will overwhelm the rest of the competitors in the region. Such approach will ensure the company continues dominating the Gulf region market as the most efficient electric car designer and manufacturer (Carlson, 2013).

Tesla Motors uses lean management system (Carlson, 2013). The approach involves the company’s employees working together in simple offices, which allows simplification of the decision-making process and enhancement of trust and work relations between Tesla’s employees and the management team. Moreover, Tesla has also managed to acquire several investors with well-established backgrounds to assist in conquering the Gulf region market. Such companies include Toyota Motors, Google, and Panasonic, which facilitates mutual benefits for the parties (Carlson, 2013). Such benefits include sharing of expertise in technology and production processes to ensure there is trust for consumers of Tesla products in the region. The approach will also facilitate future investments to enhance Tesla brand recognition in the Gulf region.

Finally, the company has a good distribution network that involves own stores located in the high traffic global retail locations. The approach increases interactions with its potential consumers, as well as enables integration with digital marketing and e-commerce (Carlson, 2013). The case implies that the company eliminates franchise deals to save money and enhance efficiency in sales.


Tesla Motors’ lack of liquidity is its biggest problem. Despite significant sales the company enjoys in Model S, the company continues to suffer losses of over $70 million due to debts and low purchase rates of its products in the market (Carlson, 2013). The company also experiences failure to realize its planned cost reductions and control operational cost, which is likely to be a problem when Tesla ventures in the Gulf region. Moreover, Tesla has a limited manufacturing capacity, which may result in failure to cater for the increased future consumer demand. The case is likely to affect the company’s expansion strategy in the Gulf region (Carlson, 2013).

Additionally, the company is struggling with the shortage of lithium battery cell and over-reliance on industry suppliers that may harm its brand image, following delay cases faced in the delivery of vehicles to consumers. Finally, the company has a limited operating history, brand recognition, and reliable expertise in the automotive manufacturing industry as compared to already established brands such as Toyota in the region (Carlson, 2013). The approach is an added problem as the company prepares to expand to the Gulf region, especially about how it will manage problems arising and affecting the venture.


Tesla Motors is experiencing many opportunities created through the availability of external factors in the market (Carlson, 2013). One of the vital changes the company will enjoy in the Gulf region is consumer awareness about electric cars benefits, especially during the rise of oil price and concerns about environmental pollution. Additionally, this also relates to the aspect of global warming that has created a perfect opportunity for Tesla to generate demand for electric cars. The government’s subsidy programs and loans in the region targeting green-energy companies will assist with additional investments for overall growth. Furthermore, there are government incentives in support of electric cars as a part of the ‘green car’ adoption program to encourage consumers to acquire the brand (Carlson, 2013).

Finally, Tesla Motors operates in a largely untouched market segment, which is undergoing rapid growth regarding consumer demand (Carlson, 2013). The factors above, therefore, give the company an opportunity to expand in the Gulf region and produce more cars to acquire the market share and earn profits.

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The possible threat Tesla Motors faces is the entry of established manufacturers in the market. Such entry is accompanied with greater economies of scale and higher expertise in the industry that positions their brand within lower price limits (Carlson, 2013). Such cases take away Tesla’s potential consumers to end up surpassing the company’s development projects and expansion strategies in the Gulf region. Moreover, attractiveness of the automobile market enables competitors to invest more into alternative energy technological advancements and breakthrough, including hydrogen-powered cars. Such a case is likely to weaken the current technology advantage of Tesla (Carlson, 2013).

Finally, problems associated with the use of electrical cars such as fire and short-term oil price decrease raise major concerns about the company’s success in the Gulf region market (Carlson, 2013). Moreover, safety issues discourage buyers from adopting electrical cars.


Competition in the automotive industry is very tense. However, competition in the electrical vehicles market in which Tesla Motors is one of major players, which is modest due to the number of brands (Galas, 2014). Some of the major competitors the company faces include Toyota Prius, Chevrolet Volt, Toyota Rav4 Hybrid, and Honda Civic Hybrid. The market remains very attractive with a significant expansion rate, creating a framework for more companies such as Audi and BMW to enter it with plug-in models. Additionally, every competitor in the market is striving to establish a niche by developing alternatives such as environmentally friendly brands, including hybrids (Galas, 2014). Nonetheless, rivalry in the Gulf region market is likely to be intensive with companies, ensuring they remain innovative in making better vehicles to remain competitive.


Tesla Motors is an automotive company that focuses on designing, manufacturing, and selling luxury electric vehicles and powertrain components for electrical cars (Galas, 2014). The company also produces battery products and sells lithium-ion battery packs, especially to automakers such as Toyota. Tesla Motors uses energy management manufacturing processes and technology in developing electric vehicles and stationery products for energy storage used for home purposes, commercial site application, and other utilities (Galas, 2014). The company’s technology that makes it unique in the market includes safety systems, battery engineering for durability, vibration, cooling, charge balancing systems, and customized car design. Other technologies include software and electronics management systems used in managing battery and improving electric vehicle performance. Major products of the company include Tesla Roadster and Model S, but the company will focus more on SUVs when expanding to the UAE region due to consumer preference for such cars (Galas, 2014).

Keys to Success

Tesla Motors focuses on vital elements to ensure its success in the already competitive automotive market. The following are significant keys to the success of Tesla Motors:


The Company adopts an efficient flat organizational structure with decision-making left for the CEO at the top (Carlson, 2013). Tesla then delegates authority to the lower ranks. The company succeeds with the flat organization structure as a result of quick and effective decision-making and efficient communication process that eliminates delays. Elon Musk as the leader with reliable qualities leads the management team in establishing a strong corporate culture for an effective execution of Tesla’s strategic vision (Carlson, 2013).


Tesla Motors enjoys success in the automotive industry as a producer of electric cars due to the good relationship it has developed with strategic partners, including Panasonic and Toyota (Carlson, 2013). Such relationships allow the company to access vital benefits through sharing of information and technology. Short-term agreements also assist Tesla in replacing other suppliers with alternative sources once they fail to provide vital components needed to ensure day-to-day business.

Research and Development

Success of Tesla Motors in the automotive market also focuses on research and development, which enables the company to be competitive (Carlson, 2013). Tesla Motors depends on plowing back cost incurred in research and development to reduce cost and remain innovative in the industry to sustain its brand image. Additionally, the company can add elegance to the product design to create an impression in the market as superior in quality and value. The company’s ideas are under patent protection to ensure a decrease in threat of exploitation on their inventions (Carlson, 2013).

Critical Issues

One of the most critical issues Tesla Motors is experiencing in the market and that is likely to affect its expansion strategy to the Gulf region includes human and resource management. The relative growth the company enjoys in the automotive industry involves the use of High Street Partners in hiring a workforce to ensure the company only acquires talented employees and preserves the current culture (Carlson, 2013). Another factor is provision of company shares to employees. The company also motivates its managers in the process to acquire strategies that enhance share price in the company and ensure a competitive edge. Besides, Tesla Motors focuses on market trends to ensure production of competitive products in the market (Carlson, 2013).

The company will ensure the manufacturing process for the Gulf region SUVs as consumer preference is highly innovative and automotive with the involvement of multi-function robots capable of producing up to 85 cars a day (Carlson, 2013). The approach involves easy reprogramming for production of different car models.

Historical Results

Tesla Motors has been a success in the automotive industry despite the ongoing challenges faced (Carlson, 2013). Tesla has a long-term liquidity risk, which reflects on the historical results in the table. In 2012, the company launched Model S and later revealed Model X. The company announced a series of positive events in 2013 such as the guidance of profitability in the first quarter of the year and share offering. In the first quarter of 2014, Tesla Motors delivered the first electric car to the Chinese market and has managed to deliver up to 6,457 models to date (Carlson, 2013). The company’s profit margin and success are driven by an increment in the factors of the income statement, including revenue, investment, product cost, as well as research and development.


The macro-environment focuses on PEST analysis framework in identifying overall opportunities and risks Tesla Motors is likely to face when venturing into the Gulf region automotive market. Changes in macro-environment factors result in the transformation of the industry in the long run (Marcovici, 2013).

Political Factors

Tesla Motors faces distinctive political aspects that influence its business operations globally. The major political factor that affects the industry and that Tesla is likely to face while expanding to the Gulf region includes environmental protection laws that allow manufacturing of environmental friendly cars that meet emission levels (Marcovici, 2013). Moreover, energy loan programs focusing on research and development of new technology-based cars will see many auto manufacturers venturing into the market (Marcovici, 2013).

Economic Factors

Economic factors include economic growth in alternative energy industries. Another factor is the cost of using such vehicles due to the increase in fuel prices (Marcovici, 2013). The demand for Tesla cars, therefore, goes higher. Inflation rate and GDP recovery are likely to affect Tesla Motors in the Gulf region, especially in terms of the power of customer purchase.


The major social factors the company faces include eco-friendly consumer attitude to products and increase in environmental concerns. The idea of Tesla Motors’ electric cars, therefore, enhances social status of individuals concerned about conserving the environment (Marcovici, 2013). Another vital social change is the increasing number of the aging population with funds to acquire Tesla’s premium electrical cars.

Technological Factors

Advances in technology and rapid globalization of internet use affect the automotive industry significantly (Marcovici, 2013). The manufacturing of electrical cars focuses on the aspect of technology, which facilitates improvements in convenience and safety. Tesla Motors, therefore, depends on technology to stay competitive in the market (Marcovici, 2013).

Environmental Factors

Tesla Motors faces environmental factors, including increased awareness of climate change that results in changes in operations since consumers now prefer owning environmentally friendly electric cars (Marcovici, 2013).

Legal Group Factors

Most legal regulations Tesla faces come from green movements championing for eco-friendly cars. Another legal concern concerns franchise laws protecting car dealers and creating challenges for Tesla that aims to sell cars directly to consumers (Marcovici, 2013).

Marketing Strategy

Tesla Motors’ strategy focuses on marketing its technology-based electric cars on a global scale. Moreover, in the UAE the company’s strategy will focus on its Model S and the newly designed SUV for the region consumer preference. Tesla Motors is an expert in designing and manufacturing electric cars and its related system based on customer specifications (Carlson, 2013). The company will, therefore, focus on the UAE market and limited electrical product segments such as high-performance vehicles. Consumers targeted in the region will specifically be upper-middle-class baby boomers and the government who are green project friendly for electrical car products (Carlson, 2013).


Tesla Motors accelerates a sustainable transport system by introducing compelling electric cars into the automotive market. The mission of the company is, therefore, safety of consumers who trust the brand (Carlson, 2013). Additionally, this is to accelerate global transmission of electric mobility with the availability of affordable electric cars.

Marketing Objectives

  • To establish the most compelling electric car brand of the century in the region by driving global transition to environmentally friendly vehicles;
  • Establish a long-term brand awareness and manage the reputation.

Financial Objectives

  • Realize over $3.2 billion in revenue annually;
  • Increase the gross profit to over $800 million;
  • Decrease annual loss to lower than $72 million.

Target Markets

Tesla Motors currently targets consumers who are successful, technology-based, and green friendly. Such consumers are wealthy and early adopters with income levels ranking them in the upper-middle class.


Tesla Motors positions itself as a luxury brand with higher performance products with added benefits of being electric without sacrificing its style and performance (Galas, 2014).

Marketing Mix

Concerning Tesla Motors, it is a delivery intensive and repeat business. The company will focus on both selling and marketing to build lasting brand awareness in the region (Galas, 2014). Components of the marketing mix will include:

Services offered. The introduction of electric cars into the market is the key component of the marketing mix. The brand will serve as the best marketing concept for Tesla by specializing on marketing channels that will ensure contact with entities to serve as recommenders (Galas, 2014). The company will fulfill its marketing objectives as a focused deliverable.

Price. Tesla will offer competitive prices for its brand with a focus on consumers targeting its premium electric cars.

Promotion. Tesla will focus on high-end consulting for the promotion of the brand. Promotion will involve public relations, referrals, and the internet (Galas, 2014).

Marketing Research

In marketing research, the major focus will be on secondary research based on media such as the internet and trade press (Marcovici, 2013). Tesla Motors will focus on two major elements, including:

Competitors. Tesla Motors needs to know about major players in the automotive market, including market trends and major developments (Assis, 2014).

Channel Marketing. The company also needs to know about the marketing channels trend in the industry, as well as emergence of new technologies and new channels (Assis, 2014).


The financial health of the company is questionable. The financial strength focuses exclusively on its stock offerings (Galas, 2014). Moreover, the company does not have preferred stock outstanding. Tesla’s current liquidity ratio is as follows:

December 31, 2014
Liquidity ratio Tesla Industry
Current ratio 1.88 1.51
Acid test ratio 1.43 1.12
Receivable turnover 54.03 3.36
Inventory turnover 5.13 9.56

Figure 3.

As of December 31, 2014, the company had a current ratio of 1.88 compared to the automotive industry standard of 1.51. The ratio is an indication that the company has enough cash to cover its short-term liabilities. In contrast with the ratios, the company posts an alarmingly receivable turnover ratio. Tesla’s inventory turnover ratio indicates that the company can produce electric cars as quickly as the intended market demand may want (Galas, 2014).

Solvency ratio measures whether the company will survive for long in the market. The following table indicates the solvency ratio of Tesla as of the end of December 2014.

December 31, 2014
Solvency ratio Tesla Industry
Debt to asset 0.71 1.42
Time interest earned (1.18) 11.05

The profitability ratios of Tesla measure the company’s success in the automotive market. The table shows its performance as of December 31, 2013.

December 31, 2014
Profitability ratio Tesla Industry
Profit margin -3.68% 4.5%
Asset turnover 1.14 11.05
Return on asset -4.18% 3.41%
Return on stockholder equity -18.65% NA
Earnings per share -0.65 31

As shown in the table, Tesla Motors has acquired most of the funding for a stock with the proceeds used in other business ventures.


Tesla Motors’ plan to venture in the Gulf region automotive market focuses on implementation, market change, and enhancements to ensure its competitiveness.


The company’s management will be in charge of the implementation of the plan with progress discussed in regularly scheduled marketing meetings (Marcovici, 2013). Revisions of the plan will ensure effectiveness and efficiency.

Marketing Organization

The marketing department will be in charge of maintaining integrity of the company by focusing on marketing goals and implementing the plan (Marcovici, 2013).

Contingency Planning

The major change expected is in the use of the internet in marketing (Marcovici, 2013). The approach will focus on the development of a website to oversee the marketing process.

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