Introduction
The amphibious car project by Tesla Motors offers several advantages to investors and the general public. Firstly, investors might capitalize on the expansion to the new branch of the market. Tesla has already established an image as a market pioneer, and another ambitious undertaking would further reinforce it. Secondly, the project has a significant potential for satisfying the customers and attracting a new audience. The amphibious car would significantly reduce the traffic congestion problem, as the customers would be able to bypass annoying traffic jams via rivers and lakes. In addition, the customers will be able to save money during the long car trips since the Tesla amphibious vehicle will be using rechargeable lithium-ion batteries instead of more expensive petrol or gas. Lastly, the project will have a beneficial impact on the environment since Tesla’s amphibious cars will not be emitting CO2. In contrast, traditional ships and boats emit harmful greenhouse gases after burning fossil fuels (Moneyshake, 2020). As such, Tesla’s amphibious vehicle will be eco-friendly, thus contributing to the protection of the environment. Overall, the project can be summarized in four words:
- Opportunity for investors;
- Value for customers and the world;
- Innovation for the automaking industry;
- Success for all stakeholders.
New Car Logistics Costs
As a technological pioneer and financial powerhouse, Tesla will be able to make significant contributions during the development of the amphibious car’s logistics. According to the 2021 financial report, Tesla made a $5,5 billion profit through automaking, and the total revenues reached $53,8 billion (Boudette, 2022). Therefore, Tesla can be considered a reliable partner, wholeheartedly interested in the project’s success. Tesla’s experience and technological knowledge would increase the overall quality of the end product, making it lucrative for potential customers.
A contribution of approximately $10 billion would be required to start the logistics of a new amphibious car. Rivian, the smaller-scale U.S. electric pickup and crossover manufacturer, raised $4 billion to start a less technological project (Westbrook, 2019). As a major player in the automaking and technological industries, Tesla could cover a significant portion of the logistics costs. However, investments from other companies would speed up and streamline the process. In return, investors will receive a share of profits depending on the scope of investments and an opportunity to venture into new markets and make history in automaking.
Fixed and Variable Costs
The potential costs associated with the Tesla amphibious car project are detailed and clear. Investors have a right to know for which needs their funding will be allocated; transparency is the key to trust and successful collaboration. In general, all costs can be divided into two major categories — fixed and variable. The fixed costs are associated with the infrastructure necessary for launching the project, whereas the variable costs cover materials, utility in facilities, and labor. Fixed costs are constant; the size of the variable costs may fluctuate.
Three-Year Fixed Costs
The project’s three-year fixed costs are justified by the fact that none of the automakers have attempted to launch mass production of the amphibious car. As such, Tesla will have to create a full manufacturing cycle, starting from the research and development stage and finishing with prototype testing at the company’s facility. In particular, the R&D of the car will require an investment of $0,25 billion in order to ensure compatibility between Tesla electronics and driveability on the water surface. In addition, approximately $0,25 billion will be required to build the infrastructure and assemble additional amphibious vehicle prototypes. Furthermore, an investment of $0,5 billion will be directed to constructing a factory facility with a waterfront for onsite test drives on water. Lastly, the scope of the R&D and technological complexity of the project will require hiring additional staff. The estimated investment in new workers comes up to $100 million.
Three-Year Variable Costs
Variable costs cover the expenses during the serial production of a new product. This category of costs includes expenses on raw materials, product packaging, and facility maintenance. In regard to the amphibious car, materials will be the largest state of three-year variable costs since the customers will be expecting high comfort and quality, comparable to the road version of Tesla. As such, an estimated investment of $0,5 billion will be required to purchase raw materials for a new production line. In addition, about $10 million will be necessary for the safe and fast shipment of parts from suppliers to the Tesla factory. Finally, expenses for maintenance and utility needs, such as water, electricity, and fuel, will come up to at least $5 million. Overall, the variable costs are smaller than the fixed ones; however, they may change throughout the three-year span, which might create a need for adjustments.
Strengths and Projected Profit
Tesla has a strong starting position for the successful launch of the amphibious car. Most importantly, the company firmly holds a leading position in the electric vehicle segment. According to Kane (2022), Tesla’s market share in 2021 consisted of 21% of total electric vehicle sales. With the launch of the amphibious car, the company has an excellent opportunity to reinforce an already solid foothold in the industry. Additionally, the project has a synergy with the well-known strengths of Tesla — innovation and publicity. Tesla was the first automaker that launched electric cars in mass production, thus contributing to their increasing popularity. In this regard, Tesla’s reputation would attract customers to the novel, almost futuristic concept of the amphibious vehicle. Lastly, the project aligns with the trend of growing legal and social support for eco-friendly vehicles. The amphibious car would become a new milestone on the road to global carbon footprint reduction, thus improving the public image of investors.
In terms of potential profit, the amphibious car project would reach the break-even threshold in the fifth year of production. The first year would be spent on R&D of the car and infrastructure development. Expected annual sales of amphibious vehicles in the second year would reach the 20,000-unit mark. Starting from the third year, Tesla would be selling 50,000 amphibious cars worldwide. With a $200,000 price tag and a total production cost of $170,000 per vehicle, the project would yield a 15% annual profit margin for Tesla and associated investors.
Conclusion
In addition to financial gains, the Tesla amphibious car would overhaul the concept of traveling and transportation. People worldwide would get an opportunity to save money and precious time by avoiding the traffic jams via rivers and seas. The project will open new markets and opportunities not only for Tesla and investors but also for customers around the world. Overall, the idea behind the project can be summarized in the following words: amphibious car —new world, exciting market. The amphibious vehicle will be remembered as an embodiment of human engineering thought and adventurous spirit.
References
Boudette, N. (2022). Tesla reports record yearly profit but warns that supply problems persist. The New York Times. Web.
Kane, M. (2022). World’s top 5 EV automotive groups ranked by sales: 2021. InsideEVs.
Moneyshake. (2020). Diesel vs electric cars – Which is better?
Westbrook, J. (2019). This is how much it costs to start a car company. Lifehacker Australia.