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The Rise of Tesla Motors and What it means for Economic Development

By Saurav Rajbhandari

This year, at the end of March, Tesla Motor Company launched the Model 3, an electric vehicle targeted for the masses. It gained orders of 198,000 in the first 24 hours of its launch, and orders escalated to about 400,000 as of April 21. The Model 3, which has a starting price of $35,000, makes it the cheapest model in Tesla’s portfolio.

In the first quarter of 2016, the company delivered 14,820 of its Model S and Model X vehicles. Tesla is expected to deliver 80,000 to 90,000 vehicles in 2016. The company plans to start delivery of the Model 3 by the end of 2017. It also has plans to build 500,000 cars by 2018. In the past, customers received the Model X SUV in late 2015 whereas delivery was planned in mid-2014. However, Elon Musk, the company’s CEO, believes Tesla will not have difficulties for the Model 3.

Here are the steps Tesla is taking to ensure deliveries are met on time:

Raising capital

In May, Tesla revealed its plan to sell 6.8 million shares of common stock. The company plans on using the $1.4 billion in proceeds for the production of the Model 3. This amount is more than double of the company’s financing of $500 million in 2015. Goldman Sachs’ analyst Patrick Archambault estimates that the company would need $7.5 billion to accelerate its 500,000-vehicle production plan to 2018. Most of that could be funded by earnings and available financing, but the company would likely need another $1 billion in capital, which is what Tesla will earn after the offering is completed.

Facilities & infrastructure

Tesla started construction on its Gigafactory in 2014, and it is scheduled for completion in 2017. The facility, which will be located in Nevada, is expected to produce 500,000 ion battery packs per year. The facility will cost around $5 billion. Besides the facility in Nevada, the company also has a 5.3 million square feet manufacturing and office space in Fremont, California, which the company purchased in 2010, and which is also considered as one of the most advanced automotive manufacturing facilities in the world.

Hiring spree

Tesla went from a staff of a mere 899 employees in 2010 to adding more than 13,000 staff by the start of 2016. In 2015, the company was looking to hire software engineers for developing its auto-pilot feature. Tesla has about 1,600 positions open, and filings reveal that they plan to hire at least 4,500 people in the next 4 years. In May, the company hosted a job fair in Fremont, California. It plans to add hundreds of production assembly jobs in the area. The company also said that it requires almost 3,000 construction workers for its gigafactory in Nevada. The factory is predicted to create 6,500 direct jobs, and over the next 20 years, 22,000 jobs will be created.

What it means for economic development?

Tesla is planning to increase its vehicle production capacity by ten folds. The company outsources parts necessary for its vehicles from multiple suppliers all over the world. Manufacturing 500,000 cars in two years’ time will create employment for all of these companies as well.

The sheer volume of employment opportunities created by a single company in such a short period of time is remarkable. Tesla is one of the leading companies in EV technologies and has influenced other companies to come up with similar products. Ford is planning on producing a long range electric vehicle to compete with Tesla. Ford is investing $4.5 billion in electric vehicles and will add thirteen electric cars and hybrid vehicles to its lineup by 2020. Similarly, General Motors planned on investing $160 million for a long range EV manufacturing facility in Michigan in 2015.

Competition in the automotive market is a boon for economic development. It brings projects and employment opportunities to communities. The trend in the automotive industry is highly influenced by technology, and Tesla is one of the companies leading the herd. Tesla has managed to attract people, and especially the competition, towards electric vehicles and renewable energy markets. This brings a ton of opportunities for economic developers in the automotive industry as well as the renewable energy markets.

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