Highlights in Business, Economics and Management FTMM 2024

Volume 40 (2024)

Overcoming Obstacles of Tesla: Strategies for Problem-

Solving
Sitao Lu*
Department of Mathematics, Kings College London, London, The United Kingdom
* Corresponding Author Email: [email protected]
Abstract. This study aims to explore the key issues currently faced by Tesla Inc. and its potential
solutions, further proposing recommendations that have significant impacts on business operations
and sustainable development. As a leading electric vehicle and clean energy company, Tesla's
innovative models and challenges reflect the major trends in today's automotive industry and new
energy sector. It also plays a pivotal role in advancing electric vehicles and renewable energy
solutions as the global demand for reducing carbon emissions and improving energy are
continuously growing. However, the company faces a series of challenges in production process,
market competition and the safety concerns. By thoroughly analyzing these problems and challenges
this study aims to provide solutions to help it overcome existing obstacles. By using a comprehensive
research methodology to examining Tesla's practices and challenges in various aspects, this paper
could identify core issues and provide strategic recommendations to help it mitigate the problems.
Keywords: Tesla, business operations, sustainable development.

1. Introduction
Tesla, Inc. is a leading figure in the electric vehicle (EV) and clean energy movement, marking a
significant shift within the worldwide automotive and energy industries. Since its establishment in
2003, Tesla has evolved from a startup company into a global leader in the fields of electric vehicles.
Through continuous technological innovation and market strategy adjustments, Tesla has
successfully transitioned electric vehicles from a niche market to the mainstream, significantly
advancing the global automotive industry's green transformation. Tesla's uniqueness is not only
evident in its products and technology but also in its commitment to corporate social responsibility.
Tesla is dedicated to promoting electric vehicles to reduce greenhouse gas emissions and actively
participates in social responsibility projects, including investing in renewable energy projects and
improving supply chain transparency and sustainability. However, with rapid growth and an elevated
industry position, Tesla has encountered a series of challenges. This company has faced production
bottlenecks, regulatory challenges, and intense competition from established automotive
manufacturers entering the EV market. These issues highlight the complex environment in which
Tesla operates, necessitating a closer examination of the strategies employed by the company to
navigate these obstacles.

2. Challenges
2.1. Production Bottleneck
Tesla has faced significant production bottlenecks, most notably during the initial ramp-up of
Model 3 production. The company struggled to meet the high demand for its vehicles due to
limitations in manufacturing capacity and complexity in automating production processes. As
reported by Elon Musk Admits to 'Production Hell' for Model 3 by Tom Randle. Elon Musk described
the process of production as production hell [1-2]. Tesla faced significant challenges in scaling up
production of the Model 3:
Automation Complexity: Tesla aimed to revolutionize auto manufacturing through extensive
automation. However, the company encountered issues with the robots and assembly lines not
performing as expected, which led to significant delays and rework.
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Supply Chain Issues: The rapid scale-up required a smooth flow of parts from suppliers. Tesla
faced bottlenecks with suppliers not being able to meet the demand or quality standards required for
the Model 3, affecting the overall production timeline.
Quality Control: As production ramped up, maintaining high-quality standards became
increasingly challenging. Tesla had to balance the speed of production with the need to ensure that
each vehicle met its high-quality benchmarks.
Employee Burnout: The pressure to increase production rates led to long hours and challenging
working conditions for Tesla's workforce. Reports of worker burnout and high turnover rates during
this period highlighted the human toll of "Production Hell."
In conclusion, Tesla faced significant challenge in production process. And Tesla’s product
bottleneck, particular with the Model 3 lead to several significant consequences. It strained Tesla's
financial resources and put immense pressure on its workforce. The delay in production also impacts
Tesla’s public image.
2.2. Mark Competition
Tesla, founded by Elon Musk, has been a leader in the electric vehicle industry, pioneering several
advancements in electric powertrain technology, battery efficiency, and autonomous driving features.
However, as the market grows, Tesla faces increasing competition from both traditional automakers
and new entrants in the EV space. In accordance with the research of Electric Vehicle Market
Dynamics and Competitive Strategies, the competitive landscape for Tesla in the electric vehicle
market is intense. In 2022, Tesla was one of the top three players in the EV market but was surpassed
by BYD [3]. Meanwhile, Tesla’s market share has been eroding. Here's a breakdown of Tesla's market
competition problem:
Traditional Automakers: Companies like Volkswagen, Ford, and General Motors have
significantly increased their investment in electric vehicles. These companies have the advantage of
established manufacturing capabilities, extensive dealer networks, and significant capital to invest in
EV development [4].
New Entrants: Startups like Rivian, Lucid Motors, and Nio are focusing exclusively on electric
vehicles, bringing innovative designs and technologies to the market. Their fresh approach to EVs
attracts customers looking for alternatives to Tesla.
Battery Technology: Tesla has been a leader in battery technology, but competitors are catching
up. Innovations in battery density, charging speed, and cost reduction by other companies could erode
Tesla's competitive edge. Also, even though, Tesla’s battery has certain advantages over other electric
vehicles, it is still far from public standards [5].
Autonomous Driving: While Tesla has made significant strides in autonomous driving technology,
competitors like Waymo, Cruise (GM), and traditional automakers investing in driver-assistance
technologies could challenge Tesla's dominance in this area.
Price Sensitivity: As more affordable EVs enter the market, Tesla's premium pricing strategy could
limit its market share growth, especially in price-sensitive markets.
Segment Saturation: Tesla's early focus on the luxury and performance segments of the EV market
faces increased saturation as more competitors introduce vehicles in these categories, necessitating
diversification into more segments.
In conclusion, Tesla's market competition problem is multi-faceted, involving increased
competition from traditional and new automakers, technological innovations, price competition and
market saturation.
2.3. Regulatory and Safety Concerns
Tesla's regulatory and safety concerns involves examining a range of issues that have surfaced
over the years, related to both the company's electric vehicles (EVs) and its semi-autonomous driving
technology. As reported by NHTSA raises more concerns about Tesla’s Autopilot safety from
techtrunch, Tesla has encountered various regulatory and safety concerns, particularly regarding its

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Autopilot and Full Self-Driving (FSD) features [6]. Meanwhile, U.S. safety authorities have asked
Tesla to recall almost 363,000 vehicles with its "Full Self-Driving" system due to issues with its
performance at intersections and occasional non-compliance with speed limits [7]. Here's some main
problems:
Vehicle Recalls and Safety Issues: Tesla has faced multiple recalls over the years, affecting various
vehicle models. These recalls have been due to a variety of issues, including problems with the
touchscreen display, rearview camera failures, steering complications, and more. While recalls are
common in the auto industry, each incident raises concerns about quality control and safety standards
at Tesla. Also, Tesla’s Research and Development may have mainly focused on launching new
products instead of safety issue as Tesla launched the new Model X and Model 3 in 2016 and Model
Y in 2019 [8].
NHTSA Investigations: In the United States, the National Highway Traffic Safety Administration
(NHTSA) has launched multiple inquiries into Tesla for a range of concerns. These have included
inquiries into battery fires, sudden unintended acceleration, and crashes involving Autopilot. The
outcomes and findings of these investigations have significant implications for Tesla's regulatory
compliance and its approach to safety.
International Regulatory Challenges: Tesla’s global expansion has brought it under the purview of
multiple international regulatory bodies. Compliance with different countries' safety standards and
automotive regulations can be complex and varies significantly. This global footprint requires Tesla
to navigate a patchwork of regulations, affecting everything from vehicle design to software
functionality.
Software Updates and Safety Enhancements: One unique aspect of Tesla's approach to addressing
safety concerns is its use of over-the-air (OTA) software updates. These updates allow Tesla to make
significant improvements to vehicle safety and functionality without needing to physically recall
vehicles. However, this approach has also raised questions about the testing and validation of these
updates before they are rolled out to customers. Since 2020, Tesla has experienced over 10 traffic
incidents in China attributed to loss of vehicle control. These accidents frequently involved issues
like unexpected acceleration and braking malfunctions [9].

3. Solution
3.1. Optimization of Manufacturing and Supply Chain
Solving Tesla's production bottleneck problem involves addressing challenges at various stages of
the manufacturing and supply chain process. These solutions could include optimizing manufacturing
processes, expanding production capacity, improving supplier relationships and logistics, and
leveraging data analytics for predictive maintenance and efficiency improvements. There are several
methods that how Tesla could address these issues:
Optimizing Manufacturing Processes: Tesla can continuously improve its manufacturing
processes through lean manufacturing techniques, minimizing waste and inefficiencies. This includes
streamlining the assembly line, improving the flow of materials, and optimizing the layout of
manufacturing plants.
Expanding Production Capacity: Building new factories or expanding existing ones in strategic
locations can help meet rising demand. This includes Gigafactories designed to scale up battery
production and vehicle assembly. In line with these developments, Tesla at Giga Nevada is set to
produce enough 4680 battery cells for 2 million light-duty electric vehicles every year, creating 6,500
full-time jobs [10].
Improving Supplier Relationships and Logistics: Strengthening partnerships with key suppliers
and developing a more robust logistics network can mitigate the risk of parts shortages. Diversifying
the supplier base and investing in local suppliers for critical components can reduce dependency on
distant suppliers and minimize logistics challenges.

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Workforce Training and Development: Investing in the workforce through training programs
ensures that employees are skilled in the latest manufacturing technologies and practices. A well-
trained workforce can adapt to new technologies and contribute to solving production challenges.
Sustainability Practices: Adopting sustainable practices not only benefits the environment but can
also lead to more efficient use of resources and energy in the production process. This includes
recycling materials, using renewable energy sources, and minimizing waste.
Customer and Product Feedback Loop: Integrating feedback from customers and real-world
vehicle data can help Tesla identify issues early and adjust production processes accordingly. This
continuous improvement loop can lead to higher quality products and more efficient manufacturing.
By addressing these areas, Tesla can effectively solve production bottlenecks, enabling the
company to meet its ambitious production targets and satisfy growing customer demand. These
solutions require a combination of technological innovation, strategic planning, and operational
excellence.
3.2. Expanding Market and Sustained Innovation
Addressing Tesla's market competition challenges involves a multifaceted approach that considers
the rapidly evolving automotive and technology landscapes. Here are several strategies that could be
part of the solution:
Continuity of Innovation: Continuing to invest in research and development to stay at the forefront
of electric vehicle (EV) technology, battery efficiency, and autonomous driving capabilities. This
includes improving battery life, reducing charging time, and enhancing vehicle performance to
outpace competitors.
Market Expansion: Entering new markets and strengthening presence in existing ones. This
includes adapting products to meet local regulations and consumer preferences, establishing local
manufacturing in key markets to reduce costs, and enhancing sales and after-sales networks.
Scaling Production: Increasing production capacity to meet rising demand and reduce wait times
for consumers. This involves expanding existing manufacturing facilities, building new ones, and
optimizing supply chain management to mitigate risks and costs.
Diversification: Expanding the product lineup to cater to a broader range of consumers. This might
involve introducing more affordable models to capture a larger market share, as well as venturing
into different segments like commercial vehicles or even other forms of transportation.
Partnerships and Collaborations: Forming strategic alliances with other companies for technology
sharing, co-development of new technologies, and expansion into new markets. This can also include
working with energy companies to expand the EV charging infrastructure, making electric vehicles
more accessible and practical for consumers.
Customer Experience and Brand Loyalty: Enhancing the customer experience through superior
service, user-friendly technology interfaces, and engaging Tesla owners through exclusive events or
programs. Building a strong brand community can lead to higher customer loyalty and word-of-mouth
marketing.
Regulatory Engagement: Actively engaging with governments and regulatory bodies worldwide
to influence policies favorable to electric vehicles and autonomous driving. This includes advocating
for incentives for EV buyers, investment in charging infrastructure, and regulations that support the
adoption of autonomous vehicles.
Tesla should consider the competitive pressures not only from other electric vehicle manufacturers
but also from traditional automakers entering the EV space. Success in addressing these challenges
will depend on Tesla's ability to innovate, scale, and adapt to an ever-changing market landscape.
3.3. Technological Innovation, Safety Compliance, and Active Monitoring
Solving these concerns involves a multifaceted approach, encompassing technological innovation,
compliance with international safety standards, active monitoring and response to issues, and

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transparent communication with regulators and the public. Here’s a comprehensive strategy for
dealing with these concerns:
Enhance Autopilot and Full Self-Driving (FSD) Technologies: Regularly update the software
through over-the-air (OTA) updates to improve performance, safety, and reliability.
Advanced Driver-Assistance Systems (ADAS): Continuously improve and update safety features
like automatic emergency braking, lane keeping assist, and pedestrian detection to reduce the risk of
accidents.
Rigorous Testing and Validation: Conduct extensive testing of all vehicle systems, both in
simulation and real-world environments, to ensure they meet high safety standards. Use data collected
from the fleet to identify potential issues early and refine systems accordingly.
Collaboration with Industry and Regulators: Engage in collaborative efforts with industry partners
and regulatory bodies to develop standards and best practices for electric vehicles and autonomous
driving technologies. Participate in safety research initiatives and share data that could help improve
overall vehicle safety standards.
Compliance with Global Safety Standards: Ensure all vehicles comply with the safety regulations
and standards of every country they are sold in. Work closely with safety certification bodies to
guarantee that all vehicle models pass necessary safety tests and inspections.
Therefore, addressing safety and regulation concerns is an ongoing process that requires Tesla to
stay ahead of technological advancements, adapt to evolving regulations, and maintain a steadfast
commitment to safety. By implementing these strategies, Tesla can effectively address current
concerns and pave the way for safer, more reliable transportation solutions.

4. Conclusion
In conclusion, this paper discussed a series of challenges faced by Tesla, including production
bottlenecks, increased market competition, and safety concerns. Through a systematic analysis of
these issues, this paper proposed practical solutions, such as enhancing production efficiency,
intensifying technological research and development, improving marketing strategies. The analysis
agrees with the main issues outlined in the abstract and builds upon them by delving into their root
causes and potential solutions. This paper highlighted the importance of technological innovation and
market adaptability for Tesla to maintain its leading position in the industry. By continuously
innovating and responding sensitively to consumer demands, Tesla can not only address the
challenges it currently faces but also prevent potential future issues.
However, the rapid pace of technological innovation and market dynamics in the electric vehicle
industry means that information may quickly become outdated, which will make it more challenging
to provide a timely and accurate analysis. Additionally, Tesla's proprietary technology and business
strategies are often shrouded in secrecy, limiting access to detailed information. This could also
introduce bias, making it difficult to maintain objectivity.

References
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[2] Tom Randall. Hell for Elon Musk Is a Midsize Sedan. Bloomberg, 2018.
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P.V, Swati Kulkarni. Problems faced by automobile industries: Case study on Tesla. International Journal
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[5] Xinran Dai, Haoyang Zhang. The Opportunities and Challenges of Tesla’s Entry into Chinese Market.
2022 7th International Conference on Social Sciences and Economic Development, 2022: 825-825.
[6] Rebecca Bellan. NHTSA raises more concerns about Tesla’s Autopilot safety. TechCrunch, 2023.

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[7] Tom Krisher. Tesla recalls all 362,758 vehicles with Full Self-Driving Beta because it ‘may cause crashes.
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