Teslas Company Low Supply Due to Production Constraints
Currently, all these businesses are modest. But even if one zero on the most extensive business of Tesla Company, which is cars, one do not see a single company. One sees two. In 2017, Tesla automotive Company sold over 100, 000 electric vehicles, that is, XSUV and S sedan models. This was not just a record, but also a representation of the high number of vehicles that the company can produce and deliver comfortably in one year, using the current design of its present system of production for the assembling line where both X and D are manufactured (Axsen et al. The $ 350,000 base car will not be manufactured until may be some point in 2019, thus, making prospective buyers wait longer. Buyers of Model 3 have been patient for a very long time.
This can change since no one in need of a vehicle that is not a Ferrari model is willing and able to wait for long before getting his/ her vehicle. But for the current moment, Tesla Company has been able to build positive equity in their brand that an individual can say it has a kind of extreme privilege especially when the troubled roll-out of model 3 is considered. The trade of model 3 is entirely distinct from the business of X and S. There have been arguments that Tesla is demand constrained but not production constrained. These arguments are in various forms, alternating from finished goods inventories being much high and shrinking waiting periods. It is of great importance to evaluate all these claims since they are contrary to what the management of the Company has been claiming in shareholders' letters and conference calls.
In the real sense, to argue that the company is demand constrained is to suggest that the management has been committing fraud. High finished arguments Supporters of this argument claim that the company has about 3000 cars in transit or stocked in inventory on the basis that the company had $ 225 million in “final products’ inventory in the last quarter, which triggered a question into the chief executive officer's statement on the quarterly call. E. O. perhaps did overstate this statement because the company did not wipe all stores since that would make them completely unfunctional. Moreover, this argument does not prove that the company is experiencing demand constraints since every quarter the company has been accumulating the number of cars in transit.
This is the primary reason why there are about 3000 vehicles in final products inventory, some of which are store cars and service center. 873 million dollars. This is a representation of 53. 9% increase in quarter over quarter for the raw materials, and 56. 2% rise for the work under process. This displays how the company is raising its production at a very high rate during Q3/Q4. at the end of a quarter, which clarifies the jump of the conveyance time from August to December. The company has been allocating its deliveries this way for a long period, but it is now clearer. This also shows that the company is not experiencing demand constraints since a company that is demand constrained cannot enjoy the benefit of deciding which orders to ship, when and where.
Moreover, a company experiencing demand constraints has to ship vehicles when it has the orders (Keith et al. Research Objectives The primary goal of this particular research is to study how Tesla Automotive Company has been experiencing problems of meeting the high demand for its products due to production constraints. The primary method of collecting data is the use of secondary data. However, the sources of data do not show all statistics of demand and supply of Tesla's automotive company vehicles in a given period. Most of the secondary sources provide samples of the data in a given period. Findings Tesla Company has a significant number of prospective buyers who are ready to purchase model 3, which has a beginning price of $ 350,000.
However, the company has been badly missing the production targets. Furthermore, the management of the Company has been continuously repeating that the Company is production constrained (Axsen et al. Production and Deliveries of Tesla’s Company Vehicles for the first Quarter of 2018 Model 3 Model S Model X Company’s target 10000 15000 15500 Actual Production 9766 12331 12397 Number of Deliveries 8180 11730 10070 Conclusion and Recommendations As Tesla automotive company evolves and assuming that model 3 do not bankrupt Tesla, people are going to be used to looking at the company's various businesses with various lenses. Although the company claims that it has been experiencing production constraints as opposed to demand constraints, the company has to be keen about keeping the production of both model X and S and demand aligned.
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