Elon Musk, owner of Tesla, recently faced analysts after it was discovered that Tesla earnings were higher than Wall Street’s expectations with a profit of $0.02. Musk was questioned on the possible decline of demand for Tesla cars and in response Musk simply said, “It’s not a question of demand, demand is not our issue, production is our issue. We have more demand than we can address and levers we can pull to increase demand, and we’re not doing it.” What Musk is trying to get across to the media is the fact that the decline of sales for the year is caused by the production time of Tesla vehicles, not a decrease in demand. Musk continued to talk about how if they wanted too they could sell way more units, but due to production limits, they could only manufacture an estimated total of 33,000 units for the year.
In my opinion it is imperative for Tesla to raise their production so that they could sell more products and in turn generate more profit, which is important especially with the $5 billion giga factory which is being built in Nevada. I feel that if Tesla is unable to keep up with the high demand, consumers will look to other alternatives rather than Tesla. Since there are cheaper alternatives to the Model S, consumers looking for a environmentally friendly car could easily sway towards getting another electric vehicle such as the Chevrolet Volt. Moving forward Tesla must find a cost effective way in which they can increase production to match the growing demand. One way they could possibly do this is by increasing work force or factory space which would be beneficial in the short run, but not necessarily in the long run because of the costs of capital and labour. If Tesla does not act soon, they may in fact end up facing a decline in demand very soon.