Technology is defined as "the application of scientific knowledge, skills, experience, and techniques through which humans change, transform and use our environment to create tools, machines, products and services that meet our needs and desires." It is an increasingly necessary requirement in our today's world, and business needs tech no less. In our modern world, technology has had a significant impact on business operations, right from production through supply to consumer levels. This paper will refer to the car manufacturing giant, Tesla Inc., to show the effect of technology on business operations.
Tesla Inc. is located in San Carlos, California, and deals with the production of all-electric cars as well as other clean energy products. The company derives its name for the 19th-century scientist Nikola Tesla, and especially his contribution to science, the invention of alternating current (Reed 2020). The founders of the company, Martin Eberhard and Marc Tarpenning, drew their inspiration from GM's successful experimental project of building an electric car. The first GM's electric car, named EV1, was a success. General Motors never took this project to mass production, and so, it seems, Martin and Marc wanted to build on it (Reed 2020). And that is how and when Tesla was born. It was founded in 2003 and was initially known as Tesla Motors, a name the company changed in 2017 (Gregersen & Schreiber 2018). The company's motto is "to accelerate the world's transition to sustainable energy."
Currently, there are four Tesla car models: Model S, Model 3, Model X, and Model Y, all of which are powered by electricity only. These are high-end electric cars, with the Model S being the best of its kind. The vehicle has a record of a 0-60mph acceleration time of 2.28 seconds, according to information found on the company's website (Tesla, 2020). Apart from electric cars, Tesla Inc. also manufactures clean energy sources and storage, including high-tech batteries and solar panels. The company is committed to providing and utilizing renewable energy for a clean future. The company recorded its quarterly profit in 2013, and in 2014 announced its Gigafactory. Based in Nevada, the Gigafactory is the provision where the company's batteries are made (Reed, 2020). The facility is expected to be the world's biggest building once it is fully completed, covering over 15 million acres (Gregersen & Schreiber 2018). Currently, only about a third of this project is complete.
Tesla, Inc. is working on switching 100% renewable energy, which will help solve the environmental degradation associated with electric car production using fossil fuel as a source of energy. In 2019, the company generated a revenue of about $24.6 billion. This revenue did not, however, translate into an annual profit. On the contrary, the company suffered a yearly total loss of about $862 million in 2019. This was, however, an improvement compared to the $ 1 billion loss it recorded in 2018 (Reed 2020). Analyses and trends projected that the company would increase its revenue in 2020 by about $5.84billion (Govindan 2020) and increase global deliveries by around 0.5 million cars (O'Kane 2020). The same analysis predicts that this number will keep rising, increasing by up to 33% by 2025 (O'Kane 2020).
However, these projections did not take into account the effects of the unexpected virus outbreak since there was none. Now that the COVID-19 pandemic is on the verge of bringing the world to its knees, it is hard to tell what will happen to Tesla when the dust settles. For instance, the company's Gigafactory in China had to stop its operations for about a month, which affected production adversely. The company's main factory in California has tentatively suspended production till 4th May 2020. This measure applies to other production lines elsewhere through re USA (O'Kane 2020). It is hoped that the pandemic will continue to negatively affect production, and it remains unclear whether or not the company will meet its targets. There is, however, some ray of hope given that the Chinese Gigafactory has resumed production (O'Kane 2020).
The images below show some expected trends in Tesla car production and sales
Units of vehicles delivered annually since 2016 versus cash flow
Image courtesy: Govindan, Clean Technica
Image courtesy: Govindan, Clean Technica
How Lithium-Ion (Li-Ion) Cell Technology Has Shaped Tesla Inc.
According to Tesla, its mission is to accelerate the world's transition to sustainable energy (Tesla, 2020). One way to accomplish this mission is by minimizing the reliance on fossil fuel as much as possible. In fact, Tesla intends to transit to 100% clean energy in the foreseeable future. Production of electric EV using fossil fuel as a source of energy is deemed to cause more environmental degradation than producing efficient conventional cars (Gregersen, & Schreiber 2018). Therefore, keeping in line with its mission, the company started to build vehicles that operate on electricity rather than gasoline. However, one challenge that remains is that Tesla must rely on fossil fuels (mainly coal) for its production. The power used to recharge the cars is also generated using fossil fuels. Even though it is argued that coal is many times "greener than gasoline" (Reed 2020), it is also clear that a 100% transition to "clean energy' is almost a pipe dream
To help in keeping up with their mission, Tesla has come up with several innovations and developments over the years. In 2016, it acquired SolarCity, a company the manufactures solar panels and related technology (Reed 2020). They did this in a bid to increase their product range, from only cars to other products. As a consequence, they changed their name from Tesla Motors to Tesla Inc., in 2017.
The primary utilization of technology in Tesla is the mode of energy storage for powering an all EV. Specifically, the use of Lithium-Ion (Li-Ion) batteries as opposed to the most common Nickel-Metal Hydride (NiMH) cells and lead-acid cells used in other EVs. The other technological distinction is the use of electricity as the sole source of energy to power cars. All the other EVs are hybrid models, meaning they use both gasoline and electricity (they use the gasoline to generate electricity, which is then used to run the cars. Excellent examples would be the Toyota Prius and Honda Insight). Though much of the electricity used for driving the Tesla cars still comes from the national grid (Reed 2020), the company is working on utilizing other sources of electric energy, notably the wind and solar options (Tesla 2020). The Li-Ion batteries are, therefore, the major technological milestone used by Tesla cars.
The introduction of Li-Ion cells brought a significant impact on the company's operations. Due to their compactness, these cells brought about the effect of "increasing energy density while also maximizing battery life span" (Weaver et al., 2017), which is one of the most challenging hurdles in battery design. Even though there still exists a trade-off between lifespan and energy, it is clear that Li-Ion technology achieves a better combination of these crucial variables than any other technology, at least not any that came before.
Li-Ion technology, combined with all-electricity use make Tesla an out-standing company. Currently, it is the only company that makes such vehicles---all others are hybrids. Being an all-electricity car producer sets Tesla aside as "one of its kind" company. The major problem that existed with electric cars, at least before Tesla, was the reliability of the batteries (or energy storage mechanism). The other problem was the energy output from electrical sources as compared to gasoline. However, using Li-Ion technology has changed this status, giving Tesla a place in the "Big Car arena." Specifically, Tesla's Model S has proved to be a formidable brand, owing to its power, fast acceleration, and maximum speed (Reed 2020). All these considerations have made a competitive brand, even amongst renowned luxury automobile giants such as Porsche, BMW and Ford. The Model S's acceleration (0-60Mph in around 3 seconds) beats even most Ferrari, and Lamborghini's (Gregersen & Schreiber 2018). This gives Tesla the right image among luxury car producers, which can be associated with its increasing sales. The better performance provides any brand with a good name, which, theoretically speaking, can lead to an increase in sales, which would increase the demand, leading to more production (or, at east, the need for more output).
However, the production of Li-Ion batteries is not easy. It involves packing thousands of cells together to make just one battery. This means that production is both labor and capital-intensive. A report notes that the making of the batteries is arguably the most involving part of all Tesla production activities (Reed 2020). The work involved here also makes the batteries the costliest parts to make. This increases the overall production cost, and lead to the inevitable high cost of the cars. An increase in the production cost of a crucial part of the whole assembly generally affects the price of the commodity (Del, 2016).
Overall, Tesla is headed in the right direction. The CEO recently announced a patent for a new and improved Li-Ion technology, which promises to outperform all existing Li-Ion cells (Tesla 2020). This is a good step towards the future.
Recommendation and Conclusions
If I were the CEO of Tesla Inc, I would recommend a few additions. Given the mission of transforming the world into a green-powered world, I would find ways to increase the company's reliance on wind and solar energy. Secondly, I would consider a model that uses inbuilt generators for recharging the vehicles. Here, I am proposing an equivalent of the infamous hybrids; only this one will not rely on gasoline to generate electricity. Instead, I would suggest that we find ways of using electricity to generate electricity. That is, smaller batteries should power the inbuilt generators. To achieve this, it would take a massive leap into the world of miniaturization and nanotechnology. It would require smaller batteries, but more powerful ones. Once we have achieved the small-sized batteries, it would be possible to use them to generate electricity and charge the primary batteries used to power the vehicles. This would, in effect, eliminate the charging time making the car even more convenient to use and also more reliable. It is important to note that Tesla has so far done an excellent vis-a-vis improving the charging time. Currently, users need only about an hour or so, compared to some years back when one would require up to a day to recharge the vehicle (Tesla 2020). Supercharging stations, coupled with the fast-charge capabilities of Li-Ion batteries, have made things a lot easier (and, of course, a lot faster). Indeed, the future looks bright and greener with electric cars.
Adekola, A., & Sergi, B. S. (2016). Global business management: A cross-cultural perspective. Routledge
BBC News (March 2020), Coronavirus: Elon Musk's US Tesla factory suspends production accessed from BBC URL https://www.bbc.com/news/technology-51943962 on April 22, 2020
Del Giudice, M. (Ed.). (2016). Discovering the Internet of Things (IoT): technology and business process management, inside and outside the innovative firms. Emerald.
Govindan, Vijay (January 2020) Tesla Earnings In 2019 & 2020 - What Can We Learn? Plus, Happy New Year! Retrieved from Clean Technica at https://cleantechnica.com/2020/01/01/tesla-earnings-in-2019-2020-what-can-we-learn-plus-happy-new-year/ on April 22, 2020
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