Global Market Analysis: Tesla

Tesla, Inc. is an automotive company based in California, USA. The company specializes in the manufacture of solar products, electric cars, and battery energy storage. Currently, Tesla sells its vehicles in more than forty countries (Tesla, n.d.). However, it has not managed to penetrate the South African (SA) market, despite its suitability as a market for Tesla car sales. This summary reports the factors considered in selecting SA as a potential market for Tesla car sales, cultural considerations, and the economic and political risks associated with launching in the country. 

Factors Considered in Selecting SA 

Though “alternative fuel vehicles” (AFVs) only make up a small fraction of the entire vehicle sales in SA, there has been increased awareness regarding the adverse effects of car usage on the environment. In addition, according to Hamilton & Terblanche-Smit (2018), vehicle emission controls, and the availability of AFVs in the market have increased. SA is dedicated to enhancing environmental sustainability and protection by providing transport alternatives that mitigate the destruction of the environment. Ahjum et al. (2018) performed a study to determine the techno-economic drivers that influence the adoption of electric vehicles in SA. The study estimated the investment cost for the distribution of fuels. It determined that residential and commercial electric charging had the lowest infrastructure costs at 10 and 19 Rands per petajoule than gas, hydrogen, diesel, and petrol. Lower infrastructure costs encourage the adoption of electric vehicles. 

The South African TIMES predicted that electric vehicles would account for 80% of new vehicles in 2045. Additionally, efficiency improvements and mode switching efforts in the country favor the adoption of electric vehicles for public transport, which is estimated to account for 5% of new vehicles in 2045. The rate and level of penetration of electric vehicles in SA are influenced by uncertainty in vehicle purchase costs (Ahjum et al., 2018). Ensuring vehicle cost parity in the country would increase the share of electric vehicles in the country. 

Cultural Sensitivities 

Culture affects the after-sales business. It also influences a wide range of factors, such as the perception of service quality, customer satisfaction, and brand and workshop loyalty. Tesla needs to consider that African culture differs from western culture. Consumer behavior is also culture-bound (Albors Garrigós et al., 2017). Therefore, Tesla will have to develop new marketing campaigns that conform to SA culture if it were to sell its cars in the country. 

Economic and Political Risk Factors 

One of the chief economic risk factors to consider in SA is the high level of poverty and inequality. Economic inequalities pose social risks that might have dire economic consequences for international businesses. For instance, social risks, such as crimes and strikes, result from poverty. These might affect the business environment and lead to a reduction in sales. Another economic risk factor to consider is the unavailability of skilled labor, which is mainly caused by low levels of education (Dodman et al., 2017). There are disparities in education levels in SA. Consequently, Tesla would have to engage expatriates to offer expert services, thus increasing costs. Additionally, high levels of corruption might lead to ballooning market entry costs. 

One of the chief political risks in SA is political instability, which might occur after an electioneering period. Additionally, poverty in the country might lead to civil unrest and riots, which would adversely affect the business environment. According to Essel & Mostert (2013), 57% of developing economies face a political risk rating that ranges between medium and high. It is also important to consider the political instability that arises from the employment of expatriates. 

Conclusion 

SA is committed to reducing the carbon footprint associated with vehicle use. It plans on doing so by reducing its vehicle fleet and encouraging the purchase of electric vehicles. SA is a viable market for electric vehicles due to low infrastructure costs and increased awareness of the adverse effects of vehicle use on the environment. Major economic risks to consider in the country are poverty, economic inequalities, and a shortage of skilled labor. Political risk factors include political instability and unrest due to social inequalities. SA is a suitable potential market for Tesla car sales. 

References 

Ahjum, F., Merven, B., Stone, A., & Caetano, T. (2018). Road transport vehicles in South Africa towards 2050: Factors influencing technology choice and implications for fuel supply.  Journal of Energy in Southern Africa ,  29 (3), 33-50. 

Albors Garrigós, J., Frass, A., & Peiró Signes, A. (2017). Impact of national cultures on automotive sector after sales services perception.  Management Journal of Sustainable Business and Management Solutions in Emerging Economies ,  22 (2), 13-27. 

Dodman, D., Leck, H., Rusca, M., & Colenbrander, S. (2017). African urbanisation and urbanism: Implications for risk accumulation and reduction.  International journal of Disaster Risk Reduction ,  26 , 7-15. 

Essel, R., & Mostert, F. J. (2013). Political risk factors in South Africa: Sources, analysis and insurance flexibility.  Risk Governance & Control: Financial Markets and Institutions , 34. 

Hamilton, B., & Terblanche-Smit, M. (2018). Consumer intention to purchase green vehicles in the South African market: A theory of planned behaviour perspective.  South African Journal of Business Management ,  49 (1), 1-7. 

Tesla. (n.d.). https://www.tesla.com