Why Tesla is considered a bad company

Why is Tesla listed as the "Worst" Corporate company? Briefly describe why this is a "worst" company, evaluate the business environments and practices, why it is not successful.

Tesla is essentially is widely regarded a clean energy and electric vehicle manufacturer. It is led by one of the most recognizable and charismatic CEO’s in the world and has largely been a Wall Street darling. As of this writing, the company has a market cap of over $1.21 Trillion. Unfortunately, Tesla is listed as one of the worst companies as much of this valuation is related to hype with little substance. For one, the company attributes much of it success to government subsidies as both the state and local level. For example, the government provides a $7,500 tax credit for each electric vehicle sold. In addition, the company receives additional credits for complying various emissions and fuel-efficiency standards that have been imposed by the government on the auto industry. These credits can then be sold between auto manufacturers that fail to meet these emission standards due to various reasons. Tesla, as a pure play electric company has amassed millions of these credits and have sold them to other auto manufactures, booking these gains as profit. According to recent financial filings, these credits amount to roughly $150 million to $200 million a year. This company is considered the worst corporate company as its profitability is being heavily subsidized by the tax payer, irrespective if they purchase an electric vehicle or not. This tax ultimately undermines the market viability of Tesla’s products. If the vehicle is demanded by the market, then conventional wisdom believes that it should not require a $7500 subsidy. The subsidies don’t end with the electric vehicle segment. Its battery segment also has received numerous breaks that many other companies have not had access to (Acemoglu, 2012).

For example, the state of Nevada provided Tesla with nearly $1.3 Billion in tax incentives over 20 years to building the Giga factory in its state. This again is public subsidy that may not impact a large amount of the people paying it. Although the benefits of increased business, employment, and economic activity are warranted, it should not come at the expense of $1.3 Billion of tax payer dollars. Here its appears that Tesla has averted the market system and instead generated wealth based on subsidies, handouts, and cronyism. This makes the company the “worst” corporate company as it is not subject to many of the more honorable market dynamics that allows businesses to succeed or fail (Acemoglu, 2013).

Identify a global environment for the company and discuss how the government regulations affect the global environment it must operate in.

The global environment is highly competitive, particularly as China continues to make inroads into the market. Both China and the United States are both competing for market dominance within the electric vehicle market. Government regulations have impacted the global market by making electric vehicle more accessible and affordable. China has accomplished this by manipulating their currency to make exports cheaper. Here, electric vehicle parts can then by exported much more cheaply than international counterparts, giving China a competitive advantage. In the United States, they too have provided subsidies to enable and encourage electric vehicle manufacturing. As of this writing ,the house of representatives based a $1 Trillion infrastructure package designed to build out electric vehicle charging station throughout the country.

Identify the hard and soft technology and interpret the characteristics the company should have/use to be successful in its domestic and global environment.

To be success in the domestic and global environment Tesla must generate a sustainable competitive advantage relative to peers. This requires creating proprietary technology that can be used to help give Tesla a long-term advantage in the auto market. Currently, the company does not posses a sustainable competitive advantage as it has historically relied on credits, subsidies and cronyism to generate a lot of buzz and hype around its products. Quietly competitors are catching up to Tesla, which could potentially lead to its downfall.

Identify the political-legal barriers for the company in both the domestic and global environments.

From a political standpoint, countries such as China favor their own domestic companies as compared to international companies. As a result, China, forces entrants to share their technological expertise with China in order to do business within the country. China has been known to outright steal intellectual property from American businesses creating both a political and legal disagreement between Tesla and the CCP. In addition, from a domestic perspective, Tesla is heavily subsidized by the government creating strong political incentive to maintain the operations of the business on a long-term basis.

Identify, compare, and contrast socio-cultural factors of the domestic and global environments of the company.

From a social- cultural perspective, consumers are now much more environmental savvy. Governments are also instituting new ESG standards designed to help protect the planet for future generations. This occurring both globally and domestically and bodes well for the future of Tesla and its battery and electric vehicle operations.