A strategic analysis of potential value chain configuration of Tesla Motors for a successful entrance in the Brazilian market. This study was done as part of my MBA studies as I am an enthusiastic Tesla Motors fan, and a strong supporter of electric vehicle industry. Feedback and comments are welcome.

1. Antonio Addario
“VALUE CHAIN CONFIGURATION
FOR TESLA MOTORS IN BRAZIL”

2. TESLA MOTORS IS ARGUABLY THE MOST
INNOVATIVE ELECTRIC AUTO MAKER
1. en.wikipedia.org/wiki/Tesla_Motors
 Tesla Motors, Inc. is an American
company that designs,
manufactures, and sells electric
cars and electric vehicle powertrain
components1.
 Tesla Motors gained widespread
attention following their production
of the Tesla Roadster, the first fully
electric sports car. The company's
second vehicle is the Model S, a
fully electric luxury sedan.
 Tesla also markets electric
powertrain components, including
lithium-ion battery packs to
automakers including Daimler and
Toyota
Revenue US$2.013 (2013)
Operating income US$61 million (2013)
Net income US$74 million (2013)
Total assets US$2,417 million (2014)
Total equity US$667 million (2013)

3. THE ELECTRIC VEHICLES INDUSTRY IS STILL
EMERGING BUT VERY COMPETITIVE
• High entry costs
• Breakthrough is a must
• Tacit knowledge required in
high tech
New Entrants : Low
• All major brands are
competing
• Emerging market
competition in low cost
segment
EV Industry : High
• Battery Suppliers: High for
Industry but Low for Tesla is
building it’s own factory
• For other components
varies: Medium
Suppliers : Medium
• Large number of substitutes
• Hybrids, Bio-diesel
• Other emerging tech like
Hydrogen Fuel Cell
• Conventional combustion
engines
Substitutes : High
• Price sensitive, demanding
consumers: High
• Options available but not
many “viable”, all lack either
$ or performance: Low
Consumers: Medium

4. THE INDUSTRY HAS CLEAR BUT CHALLENGING
SUCCESS FACTORS
Electric Vehicles
Industry - Key
Success Factors
Quality & Design
Cost
Vehicle Autonomy
Government Policy, Incentives & Compliance
Vehicle Commercialization
Target Audience
Battery Commercialization
Recharge Pricing & Payments
Charging and Service Stations
Need to match non-EV to
attract masses
Regulation can make a
big difference
Sale, renting, leasing
option.
Different income have
different preferences
Sale, renting, leasing
options
Free vs. Per Usage
Prepaid vs. Postpaid
Infrastructure, availability
and density of stations
To be competitive with
non-EV. TCO attractiveness
Low at 50km, Med 51-
150km, High >150km

5. Note: this is not Tesla Motor’s official
strategy. We have reverse engineered
their strategy based on their market
moves and investor presentations.
REGARDLESS OF THE CHALLENGES TESLA HAS
AN AMBITIOUS PLAY-TO-WIN STRATEGY
Increase Market Share
Vision
Strategic
Goals
Objectives
Supporting
Practices
To drive the world’s transition
to electric mobility by bringing a full range
of increasingly affordable electric cars to market.
Move Fast Do the Impossible Constantly Innovate
Reason from “First Principles” Think Like Owners We are ALL IN
Expand Production Grow customer support
• Increase market share
(500k vehicles by 2017)
• Launch 3rd gen price (30-
35$k price range)
• Increase battery supply
• Augment production
capacity
• Increase by 75% stores
& service centers (2014)
• Grow supercharger
network 200% (2014)

6. Design Engineering Mfg
Sales &
Distribution
Service Charging
Value Chain (owned by Tesla)
TESLA HAS RECONFIGURED AND TAKEN FULL
OWNERSHIP OF ITS VALUE CHAIN WITH A SERIES OF
DISRUPTIVE STRATEGIC INITIATIVES
Component
Suppliers
Financing
Electricity
Suppliers
Customer
Value System
Re-thinking Sales: Apple
inspired owned flag ships
stores - NO DEALERS , NO
CMO, NO AD AGENCY
Re-thinking
Charging & Service:
FREE CHARGING at
Tesla Supercharging
Stations 90 SECS
BATTERY SWAPS,
NO OIL CHANGES
Re-thinking Battery
Supply: building a solar
powered GIGAFACTORY
capable of the today’s
world capacity production
Re-thinking Business Model:
SELL EMISSION CREDITS ,
LICENSING OWN
TECHNOLOGY, IN CAR
ADVERTISING, OPEN
SOURCED PATENTS
PORTFOLIO

7. Quality & Design
Cost
Vehicle Autonomy
Government Policy, Incentives
& Compliance
Vehicle Commercialization
Battery Commercialization
Recharge Price & Payments
Charging & Svc Stations
IN DOING SO TESLA IS RAPIDLY BUILDING A
COMPETITIVE ADVANTAGE
VRIO Analysis
- $5b battery Gigafactory
- Free recharge at superchargers
- Full value-chain ownership
Costly to imitate
Target Audience
Key Success Factors
- Tesla cars have great design
- The only EV car reaching 300
miles on a single charge.
Rare
- The Powertrain components are
bought by Daimler and Toyota to
produce vehicles
Valuable
- Shared CEO and only ~24%
margins but…
- Economies of scale achieved by
Gigafactotry and no dealers
network
Organized to capture value
✓
✓
✓
✓
✓

8. TESLA IS RAPIDLY INCREASING ITS
INTERNATIONAL PRESENCE BUT BRAZIL IS
NOT ON THE MAP YET
- BRAZIL THOUGH IS AN INTERESTING MARKET
- TOTAL CAR SALES FORECAST OF 5.7 MILLION IN 2016 (68% INCREASE FROM 2011)
- MAJOR CAR MANUFACTURERS PLAN TO INVEST US $25 BN BY 2016
1. Erber 2010.
2. Rezend, Mota and Duarte 2010
3. http://www.forbes.com/sites/joannmuller/2012/10/05/why-the-worlds-automakers-are-loving-brazil
EV MARKET IS AT EARLY STAGES - SALES EXPECTED TO
DOUBLE WITHIN 15 YEARS (IN M UNITS)*. FIGURES BELOW
INCLUDE ALL TYPE OF VEHICLES, NOT RESTRICTED TO CARS1
Brazilian automotive industry on
the global scale ranks:
• 6th place for country in scale
• 5th place in consumer market
• 12th in terms of exports
• 13th in imports
• 1st in production of vehicles
using renewable fuels

9. BRAZIL THOUGH HAS A SERIES OF
INSTITUTIONAL VOIDS1
Product market
High taxes restrain from growth. Electric vehicles do not
receive government incentives and the vehicles are taxed
based on the higher excise tax rate about 120%2. A Model
S retailing around US$90, in Brazil would end up costing
about US$200k
1. https://economics.rabobank.com/publications/2014/january/how-to-tackle-the-custo-brasil/
2. Coutinho, Castro and Ferreira 2010 3. 2013 Talent Shortage Global Survey of the Manpower group,
Only 14% of Brazil’s roads are paved. No electric charging
network stations in isolated areas
Infrastructure
One of the worst red tape requires on average 152 days
to start a new venture.
Time to start a new venture
Low level of education leading to a local Talent shortage.
Brazil was the second worst scoring country among the
42 countries surveyed2
Human Capital
Taxes Fitter margins Production & distribution cost
Endemic corruption and likeliness of luxury vehicle theft
Lobbies, corruption and violent crime

10. TESLA’S COMPETITORS HAVE ALREADY ESTABLISHED
A PRESENCE AND ARE TRYING TO INFLUENCE THE
GOVERNMENT IN THEIR FAVOR
 June 2014 signed a memorandum
of intention to produce electric car
in Rio de Janeiro.
 The National Association of
Automobile Manufacturers In
Brazil –is proposing the Brazilian
government to exempt the import
of electric and hybrid vehicles,
expanding production to 20171.
1. http://electriccarsreport.com/2013/07/brazil-may-be-the-one-to-open-the-doors-to-electric-vehicles/#ixzz37jXSvmkB
 If approved, Brazilian automotive industry may invest less or not at
all in the efficiency of combustion engines. The importation of
electric/hybrid vehicles will allow manufacturer obtain government
incentives, because the calculation of the efficiency is done on the
average consumption of all products and not individually.
 If the proposal is accepted in full, the domestic industry will have a
good way to prevent competitors. There won’t be production
incentives until 2017, automakers with factory in Brazil (accounting
for 88% of sales) will be protected against new players like Tesla
Nissan Leaf operating as a taxi in Rio de Janeiro

11. TO SUCCEED TESLA NEEDS TO RECONFIGURE IT’S
VALUE CHAIN TO ADAPT, COOPERATE, AND
FACILITATE A RAPID ENTRANCE INTO THE MARKET
Design Engineering Mfg
Sales &
Distribution Service Charging
Value Chain (owned by Tesla)
Component
Suppliers
Financing
Electricity
Suppliers
Customer
Value System
Open Local
Assembly
Facility
Partner with
local player
(e.g. JV to deploy
superchargers at
Petrobras stations)
Deploy &
connect highly
urbanized
centers
High import
taxes
Lack of
infrastructure
Mix international
and local talent
(both top managerial
and skilled labor
positions)
Time to launch new
venture
Internationalization
of Activities
Institutional
Voids
Red tape,
lobbies &
corruption
Note: the detailed
rationale of the
proposed changes is
in the appendix

12.  Tesla Motors is a very attractive, innovative, and fast growing
Electric Vehicle manufacturer. Currently they don’t have a
presence in Brazil
 Judging from the analysis performed, Brazil is an attractive but
very challenging market. This might explain the lack of Tesla
presence in the country
 To be able to make an accurate entry recommendation we
would need to perform a thorough market analysis
 Our study has instead highlighted a set of changes to the
existing value chain configuration, that Tesla should adopt to
successfully execute its strategy in Brazil
CONCLUSIONS & RECOMMENDATIONS

13.  http://en.wikipedia.org/wiki/Tesla_Motors
 http://ir.teslamotors.com/
 http://www.slideshare.net/lmaioli/strategic-marketing-for-tesla-motors-uc-
berkeley-extension
 http://www.slideshare.net/nkhattab/tesla-strategic-management-final-30084939
 http://www.slideshare.net/TheMotleyFool/5-disruptive-reasons-to-buy-tesla-motors
 http://prezi.com/pztxvxbtz3ct/business-strategy-tesla-motors/
 http://www.thunderbird.edu/blog/faculty/washburn/2011/04/17/tesla-toyota
 http://www.technologyreview.com/news/426909/can-tesla-survive/#comments
 https://www.youtube.com/watch?v=D9h1Kx-2bpM
 http://michael.schwanzer.info/uclan/BT3001/a1.pdf
 http://www.marketplace.org/topics/sustainability/teslas-secret-success-selling-
emissions-credits
 http://www.teslamotors.com/2014shareholdermeeting
 http://prezi.com/qlunzh5h7lug/?utm_campaign=share&utm_medium=copy&rc=ex0
share
 https://economics.rabobank.com/publications/2014/january/how-to-tackle-the-
custo-brasil/
REFERENCES

14. APPENDIX

15. RATIONALE FOR TESLA’S VALUE CHAIN
RECONFIGURATION IN BRAZIL
Open Local Assembly Facility
Partner with local player
(e.g. JV to deploy
superchargers at Petrobras
stations)
Deploy & connect highly
urbanized centers
High import taxes Lack of infrastructure
Mix international and local
talent
(both top managerial and
skilled labor positions)
Time to launch new
venture
Red tape, lobbies &
corruption
Large scale endeavors
require strong local
knowledge, network and
influence. Quite often foreign
multinationals have failed to
roll out businesses in Brazil
because of such reasons. The
locals refers to this as “Custo
Brazil” that would translate to
“the actual cost of doing
business in Brazil”.
http://en.wikipedia.org/wiki/Brazil
_cost
Effectively launching and
operating a business is
extremely hard due to various
and cultural and legislative
factors. Lobbies and
corruption go also hand in
hand, and the automotive
that sector has strong ties
with the oil industry. Forming
a strategic alliance with an
existing Industry juggernaut
of the likes of Petrobras is
paramount to obtain the right
level of political influence and
access to critical resources.
Brazil extends over a vast
area and only 16% of roads
are paved, on the other hand
population is concentrated
around key urbanized areas.
Just the state of Sao Paulo is
home to 40 million Brazilians,
about 1/5 of the country
population. Connecting the 8
major cities will allow access
to about 120 million people
Opening a local assembly
factory is a common practice
that has been adopted by
Ford, GM, Fiat, Volkswagen.
Main vehicle component can
still be manufactured
overseas but by assembling
the various parts in Brazil the
company can avoid the high
import taxes for finished
goods. The Brazilian
government enforces a strict
protectionist policy.