Tesla Motors in Norway: PESTLE Analysis

Tesla Motors in Norway: PESTLE Analysis

Tesla Motors Norway

Tesla Motors specialises in designing, developing, manufacturing and selling electric vehicles and energy storage systems. The company has established market presence in different countries. One of the markets in which the firm operates includes Norway (MarketLine 2015).  Tesla has managed to attain an optimal market position within the Norwegian automobile market. The firm has developed a comprehensive product portfolio that is comprised of different product categories that include; powertrain development and sales, Model X, Model S, stationary energy storage applications, and Model 3 (Esther 2013). Tesla motors undertake continuous research and development in an effort to develop automobiles that enhance the company’s competitiveness.  Currently, Tesla is focusing on producing and selling the Model S sedan, a fully electric 4-door, 5-adult passenger car. Model X entails a sport utility car that is characterised by improved functionality because of the electric features. On the other hand, Model 3 entails a third-generation electric vehicle, which is projected to be launched in 2017. The firm has also targeted home, utilities and commercial sites through its stationary energy storage products, which provide backup power. Apart from developing its own automobiles, Tesla has also targeted other automobile companies by designing and developing electric powertrain systems on their behalf (MarketLine 2015).  

 Over the past few years, the company has been experienced significant fluctuation in its performance. In 2014, the company’s sales revenue amounted to $3, 198.4 million which represents a 58.8% increase over 2013. Nevertheless, the company’s net loss in 2014 amounted to $294 million compared to a net loss of $74 million in 2013 (MarketLine 2015). This indicates that the firm performed significantly poor over the past few years.  Despite the overall poor performance experienced by Tesla Motors in the global market, the company’s performance in the international market can vary from one foreign market to another. This arises from the fact that foreign markets are characterised by varying market dynamics as a result of the prevailing macro-environmental characteristics. This paper evaluates the impact of macro-environmental factors on Tesla in Norway. The analysis is done on the basis of the PESTLE model.

PESTLE Analysis

Political factors

The prevailing political environment in a country may affect businesses’ operations either directly or indirectly. This impact arises from the different policies made by the government (Detar 2016).   Tesla is likely to benefit from the supportive government policies on development of electric cars. The Norwegian government has formulated a policy that support issuance of subsidy to companies that invest in designing and manufacturers of electric cars. Moreover, Holtsmark and Skonhoft (2014) accentuate that ‘electric cars are treated much more leniently in Norway’ (p. 160). This aspect is underlined by the fact that the cost of purchasing electric vehicles is tax exempted.  Additionally, electric vehicles are exempted from paying parking fees within the country’s city centre, offered free charging for the vehicles’ batteries and provided with enormous driving privileges. For example, electric vehicles can use ferry connections and toll roads in Norway for free (Holtsmark & Skonhof 2014). As a result of this subsidy policy, the demand for electric vehicles in Norway has increased substantially as illustrated by table 1 and graph 1 below.

Table 1

Table 1

Graph 1

Source: (Trading Economics 2016)

Table 1 and graph 1 indicates that integration of the aforementioned government policies on purchase of electric vehicles has played a fundamental role in increasing the volume of sale for electric vehicles compared to conventional vehicles. This aspect presents a unique opportunity for Tesla to increase its sales due to growth in demand for electric vehicles within the Norwegian market.

Economic factors

Tesla’s success in Norway is also likely to be affected by economic factors. One of the factors likely to affect Tesla’s operation entails the rate of inflation. Norway has been characterised by significant fluctuation in the rate of inflation. For example, the rate of inflation with reference to transport increased by 2.6% in 2016 from 2.3% in 2015. The average rate of inflation in the country from 1950 to 2016 is estimated to be 4.67% (Trading Economics 2016). The graph below illustrates the trend in the country’s rate of inflation from January 2016 to October 2016.