Since the invention of the car 133 years ago, people ’s lives have never been the same again. The impact on both man and machine was unprecedented. Every aspect of human life was affected in one way or the other (Dant, 2013). From transport and logistics to personal mobility, to war, there i s very little in the world that has not b een affected by the emergence of the motor vehicle. M otor vehicles created the need to develop national road networks in most countries around the world. Overall, however, the motor vehicle is one of the most important catalysts of human development. The motor vehicle changed ho w people transport goods and people. It was also seen as a tool of personal freedom by those who had an adventurous spirit (Timothy, 2010). Germany is one of the most notable countries with regard to the development and advancement of the motor vehicle . Karl Benz developed the first modern car in Germany in 1886. The early to mid-1920s was a crucial time for the German car industry with as many as 86 manufacturers being involved in the making of cars in one way or the other. The economic collapse in the late 1920s and the subsequent rise of the Nazi party into power in the early 1930s led to a radical reorganization of the auto industry. Some of the new Nazi regime ’s policie s favor ed and some way spur red the growth of the motor vehicle industry. For instance, Hitler’s policy of m otorization emphasized the role of the vehicle industry in reviving Germany’s industrial might which had been significantly curtailed in the aftermath of the First World War ( König, 2004 ). Against this background, this paper is aimed at convincing the Tesla Corporation to move to Germany .
Tesla and the Emergence of the Electric Car
What was initially considered as an impossibility or even a novelty in some cases has risen to prominence in the recent past. The levels of pollution caused by over a century of us ing internal combustion engine as the primary source of propulsion of the motor vehicle have had a detrimental impact on the entire world ( Høyer, 2008 ). The search for cleaner, more efficient means of vehicle propulsion led to the emergence of the electric car (Maxcy & Silberston, 2017). Advancement in battery technology, as well as electrics and artificial intelligence (AI), have also contributed to the growing popularity of electric vehicles. The need to lower emissions across the world has forced g overnments to support electric cars through subsidies and other incentives meant to encourage adoption of this emerging technology. While sales still lag behind those of gasoline - powered vehicles, the future seems to hold a lot of promise for the adoption of the electric vehicle. A number of manufacturers across the world are investing heavily in electric car research with the aim of capitalizing on the growing demand across the world for electric cars (Dijk et al., 2013).
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Tesla is a front runner in the race to wards mak ing an electric car with real mass appeal. One of the biggest challenges for electric and hybrid car maker s has been the lack of excitement in both design and approach as far as the electric vehicle is concerned. However, Tesla has since overcome this problem by implementing a unique marketing approach and leveraging on the attention-grabbing nature of Elon Musk , its chief executive officer ( CEO ) . Musk has managed to portray a larger-than-life character in the media which has in many ways helped improve the company’s image. Tesla has also adopted a unique approach in its sales strategy by selling directly to customers and not through the traditional dealership network model that most motor vehicle manufacturers rely on.
As part of its growth strategy, Tesla has identified markets in Europe and China as a critical component of its plans for the next few years (Mangram, 2012). Nevertheless, t here is a lot to be gained if the company chose to shift its entire production and operations to Europe, more specifically, Germany. Tesla has already stated that it views Germany as its most important market in Europe. The company is likely to experience a number of advantages and disadvantages if it decided to move its operations to Germany.
Advantages
One of the key advantages of moving Tesla’s operations to Germany would be the large pool of talent ed workforce , networks , and structures that already exist in a nation that produces 6 million cars annually. The expertise coupled with the fact that the n ation boasts a strong manufacturing base would offer Tesla important advantages. Another strength that Tesla would gain is the advantage that proximity to its markets would bring. Countries like Norway are a huge market for Tesla vehicles (Mangram, 2012). Being closer to important markets could help reduce the cost of operations and boost returns for the company. Tesla would also be better shielded from adverse political risks in Europe when compared to the United States (U.S) . The ongoing trade war between the U.S and China has highlighted the obvious need for businesses to seek business environments that promote trade as a means of boosting economic growth. F or the last 50 years , Europe has offered stable micro and macro-economic environments while safeguarding the rule of law . Germany has been at the center of this, especially after the reunification of the country.
Germany would also be a great springboard to pivot towards emerging markets in Asia, Africa , and the Middle East. At least two-thirds of the world’s population lives in Asia, Africa and the Middle East. For example, Africa h as a huge young population that is open to new ideas . The continent also characterized by a b urgeoning middle class. Asia has many emerging economies and an ever-increasing middle class with significant disposable income. Thus, Germany offers the opportunity to be the center of operations for Tesla’s entry into these new promising markets. It’s quite clear that even in Germany, Tesla would still find a viable market for its products. Being in the European Union (EU) would give Tesla access to a market of over 500 million potential customers for its products. Together with the tax incentives and low barriers that companies in the E.U enjoy, there is no question that Tesla's potential to grow as a company would grow significantly.
The Nature of Competition In Germany
Germany is home to t he Volkswagen group which owns Porsche, Audi and a host of other car manufacturers . It is also home to the Daimler group which owns Mercedes Benz and BMW . The two are Germany’s leading vehicle manufacturers and control a significant share of the global motor vehicle market. They also account for the most significant percentage of the vehicles exported from Germany. These large vehicle manufacturers deploy a considerable proportion of resources in marketing their products. F or example, BM W boasts a marketing budget of hundreds of millions w here as Tesla only spends about 50 million dollars on marketing and mainly depends on word of mouth and referrals to grow its business (Mangram, 2012).
Tesla is a vertically integrated company that manufacturers most of its parts and components in-house whereas most German car companies outsource around 80% of the manufacturing components choosing to focus instead on final assembly and engine development. It is also worth noting that car makers in Germany dedicate different plants to the manufacture of specific models whereas Tesla tends to concentrate its manufacturing to very few facilities. German carmakers are also large companies with significantly higher market capitalization than Tesla. F or example , in 2017 , BMW had revenues f close to 100 billion dollars whereas Tesla ’s revenue was about 30 billion dollars. The sheer size of some German car makers means that they could potentially make a bid for Tesla just as they have done in the past to other European competitors. This could especially prove lucrative for any potential Tesla competitor since Tesla holds a strong lead in the development of electric vehicle technologies and seems to be miles ahead of any competition.
The Challenges
Tesla would experience a number of issues if it were to move its operations to Germany . Firs tly , the cost of moving operations especially with the significant investments it has already made in California and Nevada would be a key concern . The cost of moving all its existing infrastructure from its current bases in the U.S would be extremely prohibitive from the onset.
Another significant issue would be the process of compliance with German and E.U regulations. E.U standards are known to be rigorous. Thus, t he process of complying with these new sets of laws and standards could be considered quite costly in both time and resources. C ompetition is also an issue cannot be ignored. Audi, Volkswagen and BMW have all invested heavily in the development of their electric vehicles. The level of investment being made in BMW’s I series and Audi’s e-tron divisions means that Tesla would encounter immense competition in Germany, continental Europe and beyond ( Ashton et al. , 2012).
Cultural differences between the U.S and Germany could also be a barrier to the move. Germans and Americans have distinct differences in their culture . This is from language , to work ethic , to the general worldview. The fact that Tesla is already viewed as a distinctly American company would create confusion for its customers . This is because the company is intrinsically associated with the American vehicle i ndustry. The company is also viewed as a pioneer in the new age of American manufacturing.
Tesla’s move to Germany would be advantageous despite having several shortcomings. In an increasingly globalized world , and with the advent of efficient logistics, companies are not limited by borders anymore. Therefore, a strong case can be made for moving Tesla’s operations from the U.S to Germany .
References
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Høyer, K. G. (2008). The history of alternative fuels in transportation: The case of electric and hybrid cars. Utilities Policy , 16 (2), 63-71.
König, W. (2004). Adolf Hitler vs. Henry Ford: the Volkswagen, the role of America as a model, and the failure of a Nazi consumer society. German Studies Review , 249-268.
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