Submit the final draft of your research paper. It should be a complete, polished artifact containing all of the critical elements listed in the Final Project Document. It should reflect the incorporation of feedback gained throughout the course.

Tesla Motor Company 1 2-2 Tesla Motor Company Brendon Cronin 7/12/18 Tesla Motor Company 2 Milestone 1-Tesla Motor Company Introduction Tesla is a known automotive manufacturer whose motor products have exhibited a high level of innovation since its inception. Tesla Company is known globally as one of the biggest companies to engage in the manufacture of electric motors thus providing a good example for a case study analysis. Therefore, in this research paper, my main focus shall be directed towards reviewing the demand and supply aspects of the Tesla Company based the level of sales for both model X and model S. Additionally; the research paper shall identify the cost incurred in manufacturing the two models and the general effect the price has on the consumer. The final analysis shall be an evaluation of the general marketplace, company’s production costs and other trends in the market. History of Company Tesla Company is an American automotive designer, manufacturer and distributor of electric motors and electric power rain parts. The company was formed in the year 2003 and it was named after Nikola Tesla the scientist. Tesla was formed by a group of Silicon Valley engineers whose vision was to come up with an automotive design whose performance would match that of Porsche and in fact be environmentally friendly compared to the Toyota models. The lack of funds acted as an impediment to the founders of the company and therefore they had to seek help from Elon Musk who agreed to invest in their new venture (DeBord, M. (2016). A Tesla motor was formed with a focus on creating electric motor vehicles since the founders believed that most car models depended so much on peak oil. Peak oil is considered to be a finite resource whose extraction is anticipated to deplete the coffers by the year 2020 thus causing the price of Tesla Motor Company 3 oil to escalate by a great margin. The founders saw an opportunity in this vision since the high prices of oil will force consumers to stop using oil propelled motor vehicles and adopt electric vehicles since they are cheaper to maintain. The company headquarter is strategically positioned in Palo Alto California with the key vision being to enable a faster transition from Gasoline propelled vehicles to electric models. The company has over two thousand employees whose activities involve enabling the company create and distribute high performance and most efficient sports cars with minimal compromises. Tesla Company has developed the ability to integrate style, acceleration and handling its products with advanced technology making the company’s products one of the fastest and energy efficient models in the market (Tesla Motors (n.d). In the past decade, Tesla Company has changed the landscape of the motor vehicle industry. Since 1956 when ford managed to be listed as a traded company, it was until the year 2010 when Tesla Company managed to be a listed company making it the first publicly traded company U.S automotive company after Ford brand. Since then, the company has experienced tremendous growth in its stock value (Gonzalez et al.2010). Additionally, successful reimaging and development of new features has resulted to a buzz in the automotive industry especially for the Tesla brand. Tesla Motor Company 4 References DeBord, M. (2016). Elon Musk just made a totally mind-blowing change to Tesla’s strategy. Retrieved from http://www.businessinsider.com/tesla-mind-blowing-change-strategy-2016-5 Tesla Motors (n.d). webpage. About Tesla. Retrieved from: https://www.teslamotors.com/about Gonzalez, Catherine; Parker, Crystal (2010). Tesla Motors Global Business Plan. Retrieved from: https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me Running head: SUPPLY AND DEMAND CONDITIONS AND PRICE ELASTICITY OF DEMAND Supply and Demand Conditions and Price Elasticity of Demand Brendon Cronin 7/26/18 Supply and Demand Conditions and Price Elasticity of Demand 1 SUPPLY AND DEMAND CONDITIONS AND PRICE ELASTICITY OF DEMAND Demand Trend and Impact on the Firm and the Industry Tesla Motors is a major player in the electric car industry as stated in the company’s mission of ensuring sustainability regarding energy through the elimination of fuels. The forecasts in the automotive sector indicate that the electric cars will take 40-50%% share of the automobile market by 2040. Tesla motors estimate to produce one million cars in 2020. These estimated are pegged on the increasing demand for the company’s products. In the passenger vehicle industry, Tesla motors delivered 26,000 vehicles globally during the third quarter of 2017 while the deliveries recorded for 2016 amounted to a total of 76,000 units. The demand for the company’s model X and model S vehicles has continuously increased over time as indicated in the orders for the models in the 3rd and 4th quarter of 2017 as well, as the first quarter of 2018. For 2018, the company produced 24,718 model S and Model X vehicles and delivered 21,815 to customers within the same period. The increase in demand for the company’s products is exhibited by the rise in automotive revenue (Berdichevsky et al., 2006). Between March 2017 and December 2017, the company’s gross profits attributed to the automotive sector increased by 18% from 2,289,600 to $2,702,195.For the next first quarter of 2018, the revenue generated increased to $2,735,317 indicating a further 19.7% increase in the gross profit from the automotive sector. The increasing demand has pushed the company to establish production procedures to ensure that the production capacity meets the need for the company’s vehicle models. The industry is also striving to meet the growing demand through automation practices to push forward the production capacities. Demand and Supply and Company’s Actions 2 SUPPLY AND DEMAND CONDITIONS AND PRICE ELASTICITY OF DEMAND The increasing demand for the company’s products has pushed the company to rethink its production strategies to meet the rising demand. As such, the firm has stated the need to optimize the options mix to maximize the company’s net margins. The increased demand for models X and S has resulted in customer order backlog. Among the strategies adopted by the company to ensure that production meets claim is the company’s new projections of the output of over halfmillion vehicles by 2018. The firm has also opened new stores and service locations to take the company’s services closer to the customers. Price Elasticity of Demand The price elasticity of demand for Tesla motors refers to the change in the number of vehicles demanded as a result of changes in prices. The price of Tesla cars has increased significantly between the year 2012 and 2017 with the demand showing an upward trend (Azar, 2009). Comparing the patterns of demand and price, the unveiling of the X model at a retail price 3 SUPPLY AND DEMAND CONDITIONS AND PRICE ELASTICITY OF DEMAND of $80,000 attracted around 20,000 orders, the unveiling of model 3 on the other hand at a retail price of $35,000 drawn 400,000 orders. This, therefore, indicates the responsiveness of demand of the company’s product as a result of changes in prices and consequently shows that consumers are interested in the affordability of the electric vehicles. The volume of consumer demand for model 3 car surpasses the orders for model X. A reduction in the company’s price of model X vehicles say from $80,000 to $35,000 could increase the orders for the particular model. Factors Affecting the Responsiveness of Demand The responsiveness of the demand to the changes in price is associated with the availability of substitutes. Consumers have a wide variety of companies to choose from in the electric cars segment ranging from pure electric cars to gasoline-hybrids such as Porsche. Nearly all automobile companies produce electric vehicles. The classification of the Tesla motors vehicles into the luxury of necessity class also affects the company’s elasticity of demand. Since these vehicles are considered as a luxury by a majority of the consumers, the related price elasticity of demand is very high. Such consumers will opt for gasoline fueled-cars if the prices of the electric cars increase significantly (Hannan, Azidin, & Mohamed, 2014). Over time, the costs of Tesla Motor’s cars has increased substantially. From the introduction of the model S series in 2012 at $50,000, the price has kept on rising to $150,000 as a result of greater mileage range of the model. Within the time, more affordable electric options have come up at reduced prices and consumers have opted for such cheaper alternatives such as Toyota Prius and Tesla model 3. Price Elasticity, Pricing Strategy and Revenue Growth 4 SUPPLY AND DEMAND CONDITIONS AND PRICE ELASTICITY OF DEMAND Price elasticity of demand is an essential consideration in the pricing of a company’s products. Pricing of products calls for a clear understanding of the market as well as the competition enabling a firm to create prices that differentiates it from its competition. In the introduction of new models, the firm has taken into consideration the price sensitivity of its products in its pricing strategies. The elasticity of demand also has an impact on the revenue growth of Tesla motors.