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Tesla Strategy

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Business strategy review of Tesla Motors.

Business strategy review of Tesla Motors.

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  • Intensity of Competitive RivalryHighly competitiveTop 8 Global Auto Makers = >90% of global revenueTop 4 US Auto Makers= > 75% of US revenueIndustry ConsolidationThreat of EntryLowNew entry must spend large amount of $$Economies of ScaleStrong established brand equityExperienced manufacturing techniques = highly efficientAccess to raw materialsSubstitutesGrowing number of substitutes
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  • Intensity of Competitive RivalryHighly competitiveTop 8 Global Auto Makers = >90% of global revenueTop 4 US Auto Makers= > 75% of US revenueIndustry ConsolidationThreat of EntryLowNew entry must spend large amount of $$Economies of ScaleStrong established brand equityExperienced manufacturing techniques = highly efficientAccess to raw materialsSubstitutesGrowing number of substitutes
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Tesla Strategy Tesla Strategy Presentation Transcript

  • Joseph Baker Erica Long Jithu KrishnanAsaf Korkut Salomon Camhi Melody Tang
  • Tesla’s MissionStrategy ChallengeRecommendationsCompany ProfileIndustry ConditionsDetailed Recommendations
  • “We set out to prove that electric vehicles could be awesome.” Tesla Website “To create affordable mass market electric vehicles in order to have a material impact on oil consumption.” Elon Musk“…expedite the move from a mine-and-burnhydrocarbon economy towards a solar electriceconomy.” Elon Musk
  • Competing head tohead with mass marketauto makers hampersTesla’s mission and hasthe potential to exploitvulnerabilities in thecompany.
  • Luxury Auto Market Research, Development, Invention Maintain position as industryOnly target luxury market leader in battery and electric segment with Tesla EV engine technology Charging Stations Alliances Deliver technology to consumers Integrate Tesla into EV through strategic alliances with infrastructure established auto makers
  • Tesla Formed Roadster Model S Future…Two teams come together to form Tesla with the mission to commercialize T-Zero. Roadster is released. Achieves enormous publicity. First electric vehicle with sports car performance. Model S- First all electric luxury sports sedan. Lower price point than Roadster model. Tesla in the Future • Model X- est. release in 2013 • Est. price- $60K-$100K • Pursue $30K priced mass market electric sedan • Expanded product line across vehicle styles and prices • Continued R&D for future models • Proliferation of supercharger stations • Continue alliances
  • Relevant Financial Ratios 2009 2010 2011 2012 Q1-3 Auto COGS/ Sales 91.5% 82.4% 77.7% 101.8% Dev. COGS/ Sales N/A 30.7% 48.8% 49.8% R&D/ Sales 17.2% 79.7% 102.3% 191.9% SG&A/ Sales 37.7% 72.4% 50.9% 97.7% Debt/ Equity -0.26 0.86 2.18 -30.03 Asset Turnover 28.9% 16.4% 25.2% 13.2% Fixed Asset Turnover 74.5% 34.3% 38.9% 20.3%Car production is currently estimated to be 10K per year. Tesla forecasts aneed to achieve production levels of 20K per year.
  • Historic Net Income and Retained Earnings $20,000 2009 2010 2011 2012Q1-3 -$180,000 -$380,000Dollars -$580,000 Net Income Accumulated Deficit -$780,000 -$980,000 -$1,180,000 Years
  • 2009 2010 2011 2012 Q1-3 % sales Dev % sales Dev Serv. Serv. 16.8% 14.6% % sales Dev Serv. 27.3% % sales Auto % sales 72.7% % sales Auto % sales Auto 90% Auto 85.4% 83.2% 100% 70% Auto Sales GPM 69.3%Gross Profit Margin (%) Development Services GPM 50% 51.2% 50.2% 30% 22.3% 17.6% 10% 8.5% 0.0% -1.8% 2009 2010 2011 2012Q1-3 -10% Year
  • US Auto Sales To Date 2012 Internal Combustion 96.77% Cross Over All Hybrids 2.89% 22 Cars % Plug in EV 0.34% 9% 55SUV % Tesla S (est.) 3.3% 14 Others 7.6% % Trucks Prius PHV 25.0% Chevy Volt 45.8% Nissan Leaf 18.3%
  • Projected US Auto Sales 18 16Forecasted Auto Sales (millions) 14 12 10 2012 2013 2014 2015 2016 2017 Year
  • Threat of New Entry Intensity of Competitive Rivalry Auto IndustryPower of Customers Threat of Substitutes Power of Suppliers* Positive Neutral Negative
  • Threat of New Entry Intensity of Competitive Rivalry EV Auto IndustryPower of Customers Threat of Substitutes Power of Suppliers Positive Neutral Negative
  • Threat of New Entry Intensity of Competitive Rivalry Battery IndustryPower of Customers Threat of Substitutes Power of Suppliers Positive Neutral Negative
  • Strength Opportunity: - Innovative Technology - Growing Market - Brand Image - Increasing Oil & Gas Prices+ - Time Compression - Rising Consumer Sentiment Advantage - Government Support - Positive Strategic - Young Industry with No Set Partnership Track Record Standards Weakness Threat - Scale of Operations - Increasing IC Engine - Dependent on Continuing Efficiency Innovation - Limited EV Support- - Financial Profile Infrastructure - Deep Pocket Competition - Concentrated Industry - Auto Buying Dynamics Internal External
  • Tesla Tesla Auto Service & Distribution Brand Technology Manufacturing Support Model Valuable Rare Costly to ImitateOrganizedto Capture Value Positive Neutral Negative
  • Luxury Auto Market Research, Development, InventionOnly target luxury market Maintain position as industrysegment with Tesla EV leader in battery and electric engine technology• Leverage manufacturing • Continue R&D to maximize volume constraints technology capabilities• Maintain market leadership in • Patent new technologies the premium segment Charging Stations AlliancesIntegrate Tesla into EV Deliver technology to consumersinfrastructure through strategic alliances with established auto makers• Goal is to make Tesla technology and platform the • Leverage alliances to establish de facto industry standard efficient supply chain • Achieve economies of scale
  • TeslaLuxury Auto Tesla AutosSegment Newest EV Technology and Design- Include in Tesla Brand vehicles and push industry standards. As Tesla’s technology advances the innovation included in Tesla made vehicles will fall through to Mass Market partners to utilize.Standard Auto Mass Market AutosSegment Pervious Tesla EV Technology- Partner with mass market auto manufactures to provide battery, powertrain, and electric motors for mass market EV manufacturing
  • TeslaLuxury Auto Tesla AutosSegmentStandard Auto Mass Market AutosSegment - Sets industry standards - Creates single charging systemElectric Vehicle Tesla Charging Station - Provides incentive for mass market Systems auto manufacturers to sell EVSupport - Brand DevelopmentInfrastructure - Highly effective method of advancing company’s mission
  • Strategic Alliances To DateDaimler: 2007 – Present • Supplies Batteries and Charging Systems • February 2012- New Expanded Partnership ‒ Mercedes A-Class ‒ Entire electric powertrain ‒ Smart For TwoToyota: 2010 – Present • Strategic Partnership • Supplies Batteries and Power Components • Rav4 EVPanasonic: 2010 - Present • Battery Cell Research and Development Partner ‒ Goal is to develop the next generation of EV battery cell Forward Strategy Partner with Traditional Look for New Complete Expansion Auto Makers Applications of Tech • Achieve 20K Model S • Continue Current • Battery technology and Production Goal Relationships electric motors have broad • Expand to all auto application potential makers • Actively search for new ⁻ “Tesla Inside” areas of technology • Standardize EV Parts for deployement efficient manufacturing ⁻ “Honda”
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  • Economical Tesla EV Effect of pursuing low cost EV: • Existing Competition Tesla & Industry Econ EV ‒ Competitors currently exist withinEffect of partnering with established the Economical EV segmentauto makers: • Capital Deployment• Leverage Individual Firms’ ‒ Additional need for capital to build Strengths: new, required infrastructure ‒ Tesla: Technology and Innovation • R&D Pull Backs ‒ Auto Industry: Economies of Scale ‒ High Potential:• Focus on Core of Tesla • Reduce innovation as a company • Affect premium segment sales ‒ Majority of workforce developing • Dilute Tesla brand core product rather than focusing efforts on vehicle manufacturing efficiencies• Increased Cash Flow
  • Joseph Baker Erica Long Jithu KrishnanAsaf Korkut Salomon Camhi Melody Tang