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Another problem Tesla faces is Tesla has a limited product selection of only three highly priced electric vehicles to choose from until the more affordable Model 3 launches in 2017. The launch of the Model 3 is supposed to be the commercialization of electric cars for Tesla because they will target the average consumer with a price point of only $35,000, and Tesla’s master plan projects that Tesla will become profitable once the commercialization of the Model 3 is released. Another problem Tesla faces is the limited driving range of 265-300 miles per charge for the electric vehicles that Tesla is producing. Tesla has begun to combat this problem by building more than 2,000 supercharging stations globally that allow Tesla consumers to charge the electricvehicles free of charge. Once Tesla is able to expand the locations of the supercharging stations, the limited driving range will not be an issue because it will be much easier for Tesla’s consumers to recharge the cars. Tesla also offers customers an 8 year, infinite mile warranty on
TESLA MOTORS 10 both the battery pack and the drive unit of the Model S. This is a major advantage for Tesla’s customers because it helps take away the doubt of this new technology having any defects. Another problem Tesla faced were high manufacturing cost due to supply chain inefficiencies which resulted in profit losses, because more revenue could have been generated if the supply chain would have been efficiently aligned. Economies of scale were missed because of the supply chain inefficiencies which resulted in high production costs and prices for Tesla’s models. Tesla tried to obtain components from multiple suppliers when it was possible, but most of the time only one supplier emerged to be the only option and was able to dictate the price of the components. The supplier shortage drove Tesla to manufacture their own electric vehicle components to reduce the price of components for Tesla, and Tesla also became a supplier for electric powertrain components for the major companies in the car and automobile manufacturing industry. This allowed Tesla to form partnerships with other companies and allowed other car manufacturers to benefit from the expertise and technology of Tesla, which in return Tesla received money and an operating field to develop and expand Tesla’s skill, knowledge, and product portfolio. Tesla currently has a zero-dollar budget for advertising and marketing because they heavily rely on word of mouth, social media, and news coverage to promote Tesla. Although this has worked for Tesla in the past, Tesla should consider implementing a budget for advertising and marketing because Tesla will be launching the Model 3 soon which is supposed to appeal to the mass market. If the mass market knows nothing about the launch of the more affordable Model 3, Tesla will not see the revenue increase that Tesla is expecting from the Model 3 launch because Tesla’s target market has not been informed about the more affordable Model 3.