Microeconomics For Business Decisions Paper

Tesla Inc.

Sercan Ergungor

Brooklyn College

Microeconomics for Business Decisions

Spring 2017

Tesla Motors

Tesla Motors Inc.is an American auto firm that was established in the year 2003 by a small group of innovative brilliant Engineers in Silicon Valley. The group proved that electric automobiles could be viable substitutes for the traditional gasoline driven vehicles. The company not only comes up with, produces as well as markets electric automobiles, but it also offers high tech electric powertrain components to other car makers that include Toyota and Daimler. Tesla’s headquarters is found in California’s Palo Alto and the company has fully owned subsidiaries located in Asia, Northern America as well as the European continent.

The company only started producing a product in their Tesla Roadster in 2008 and as at the end of 2011 the firm had only managed to sell 2,150 roadsters. The company then started to diversify its line of products through the introduction of the Model S as well plans and concepts of the model X vehicles (Howe, 2014). The car company was largely operating at a loss while relying on government subsidies that are targeted at zero emission vehicles as well as deals with Toyota motor corporation and Daimler AG for compensation related to research and development work on full electric powertrains. Tesla’s diversification of its product line as well as subsidies will in the long run assist it move out of its early life-cycle stages and into a more stable phase of its

Its present cost stands at almost $500 per single kilowatt hour. This therefore means that close to $31,000 of the model S is its 60Kwh battery pack that is capable of delivering 208 miles in terms of range. Elon Musk has stated in the past that his goal is to cut down the kilowatt-hour cost by close to 40% which would knock almost $12,000 off the vehicle’s price. However, such a cost saving alone will not be sufficient to offer a $35,000 to $40,000 model 3 with at least 210 miles in terms of range by 2017 (Kiermasch, 2010). To top this kind of range, the Tesla model will have to be smaller as well as lighter than the previous Model S. The car will also be required to carry a smaller but lighter battery pack. Tesla may also reduce its production costs through removing some of the features that it has made available on the model S. However, the company will be required to manufacture a battery pack that is capable of powering a smaller and lighter model 3 for at least two hundred miles in range while still providing the numerous features that Tesla fans have over the years grown to