Should BMW expect Tesla to grow into a strong direct competitor like Audi, versus Tesla being limited a to a niche or being just a flash in the pan? Is Tesla at competitive advantage or disadvantage? How will that evolve?

A

Tesla is one of the leaders in the electric vehicles industry, but it has not achieved the same position in the overall automotive industry. However, this newcomer is often regarded as a significant competitor for such companies as BMW or Audi as the market for electric cars is expanding rapidly. It is possible to analyze the internal and external environment of these companies to identify the prospects of Tesla in this competition.

First, it is necessary to note that BMW and Audi are companies that have a long history in the car business. The companies have well-established brands that are recognizable worldwide. As far as the internal environment is concerned, the companies have considerable resources that can be used to develop new products and services as well as sell old models (see figure below).

Sales of the companies in billions

A quick analysis of the sales of 2017 shows that BMW is the unquestioned leader while Audi, which has long been regarded as a major competitor, took in only $1.5 billion during the same period. Tesla was ten times more successful, as sales for the year reached $11.78 billion. These data show that Tesla is becoming a more serious competitor than Audi.

Another important feature to consider is the proximity of facilities. The companies have facilities in different parts of the world, which makes their logistics more complex but more efficient compared to Tesla, which has its facilities in two cities in the USA. However, the use of US-based facilities can be regarded as an advantage for Tesla as its cars can be marketed as 100% American, which can be appealing to many customers worldwide.

As for brands, these are priorities for the companies in question. Not only BMW and Audi but also Tesla pay considerable attention to the development of their brands. BMW and Audi often engage in brand battles on billboards and in the media. The major focus of these battles is on quality, safety, efficiency, and style. Tesla also emphasizes these features when marketing its cars. The three carmakers all target their ads at the upper-middle class, which makes them serious competitors. The three manufacturers also have some environmentally-friendly models. Tesla offers fully electric cars, while BMW and Audi have come up with hybrid models. Therefore, carmakers can compete in the electric car industry as well.

As for the external environment, it may be favorable for Tesla, as there is a strong shift towards environmentally friendly and smart technologies. It is possible to implement a PESTLE analysis to identify major prospects for Tesla and the likelihood of its becoming BMW’s major competitor (see figure below). As for the political factors that may have an impact on the development of the companies in question, it should be noted that governments of western countries (as well as emerging economies as China) have started making considerable efforts aimed at addressing environmental issues. They have imposed laws and regulations that encourage companies to produce less hazardous emissions. Some areas have particular restrictions, and cars producing certain levels of gas emissions are not allowed. Therefore, electric and hybrid cars are likely to be more widely used in the near future. In addition, many countries, including the USA, subsidize the electric vehicle industry as well as owners of electric cars, which also makes these products more attractive as compared to conventional cars.

PESTLE analysis

Economic factors include the various financial issues many countries encounter. Recent economic crises still resonate, and many companies have not overcome the ensuing difficulties. People also face financial difficulties as many countries, including large-scale economies, experience a deceleration of economic development. Importantly, China is one of the most successful emerging economies and has announced its focus on environmental sustainability, which is associated with a boom in the electric car market in this region. However, the country has its own producers of electric vehicles who offer their models at affordable prices, making this market highly competitive.

Social factors include a focus on environmental sustainability. People try to use greener cars and make their environmental impact as small as possible. Various issues associated with fuel and maintenance prices have led many people to consider buying an electric vehicle, or at least a hybrid. These options are more efficient in terms of fuel consumption and maintenance. Today people have an increasing interest in innovation and the use of technology in different aspects of their lives. These trends create a favorable platform for the development of the electric car industry. At the same time, it poses certain threats to the market for conventional cars.

The technological factors affecting the development of the industry are diverse and quite powerful. Recent advances in the development of the Internet of things have enabled carmakers to use smart technologies. For instance, Tesla cars can open when an owner approaches. The Tesla Model S is equipped with an autopilot system that can help the driver park or even go to a chosen destination. Finally, battery packs are becoming more efficient, and the industry continues to develop at a high pace. Tesla contributes significantly to this development. Ellwood notes that battery efficiency has a direct effect on the development of the car market, and when the battery pack reaches 100kWh, conventional cars will be regarded as outdated. These trends also suggest that the electric car industry is likely to take over a significant share of the overall car market.

Legal factors are associated with barriers to the development of the industry. Safety is a major issue associated with new innovative models. As has been mentioned above, carmakers offer cars with autopilot systems. However, this area is not properly regulated yet. There are various controversies that are yet to be addressed. Moreover, a fatal accident that involved a Tesla equipped with an autopilot is still under investigation. The court’s decision may have a considerable impact on the development of the industry.

Finally, environmental factors can also facilitate the development of the electric car industry, which will make Tesla an important player in the overall car market. Climate change and associated extreme weather make people more environmentally conscious. People start paying more attention to the negative effects of emitting greenhouse gases and byproducts of the production process.

The brief analysis of internal and external environments shows that Tesla is likely to become a serious competitor of BMW in the near future. Tesla will soon become a more serious rival than Audi, which currently shows quite moderate financial achievement. Tesla is likely to overtake Audi due to the external factors that make electric cars more appealing to today’s drivers. Tesla models are characterized by efficiency, innovation, and environmental sustainability. These features will make the brand more popular as compared to Audi, which will bring Tesla into direct competition with BMW.

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Academic.Tips. 2021. "Should BMW expect Tesla to grow into a strong direct competitor like Audi, versus Tesla being limited a to a niche or being just a flash in the pan? Is Tesla at competitive advantage or disadvantage? How will that evolve?" November 20, 2021. https://academic.tips/question/should-bmw-expect-tesla-to-grow-into-a-strong-direct-competitor-like-audi-versus-tesla-being-limited-a-to-a-niche-or-being-just-a-flash-in-the-pan-is-tesla-at-competitive-advantage-or-disadvantage/.

1. Academic.Tips. "Should BMW expect Tesla to grow into a strong direct competitor like Audi, versus Tesla being limited a to a niche or being just a flash in the pan? Is Tesla at competitive advantage or disadvantage? How will that evolve?" November 20, 2021. https://academic.tips/question/should-bmw-expect-tesla-to-grow-into-a-strong-direct-competitor-like-audi-versus-tesla-being-limited-a-to-a-niche-or-being-just-a-flash-in-the-pan-is-tesla-at-competitive-advantage-or-disadvantage/.


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Academic.Tips. "Should BMW expect Tesla to grow into a strong direct competitor like Audi, versus Tesla being limited a to a niche or being just a flash in the pan? Is Tesla at competitive advantage or disadvantage? How will that evolve?" November 20, 2021. https://academic.tips/question/should-bmw-expect-tesla-to-grow-into-a-strong-direct-competitor-like-audi-versus-tesla-being-limited-a-to-a-niche-or-being-just-a-flash-in-the-pan-is-tesla-at-competitive-advantage-or-disadvantage/.

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"Should BMW expect Tesla to grow into a strong direct competitor like Audi, versus Tesla being limited a to a niche or being just a flash in the pan? Is Tesla at competitive advantage or disadvantage? How will that evolve?" Academic.Tips, 20 Nov. 2021, academic.tips/question/should-bmw-expect-tesla-to-grow-into-a-strong-direct-competitor-like-audi-versus-tesla-being-limited-a-to-a-niche-or-being-just-a-flash-in-the-pan-is-tesla-at-competitive-advantage-or-disadvantage/.

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