Tesla Case

1. Tesla Motors,
Inc. Joe Baviello, Peter Behan, Michelle
Pearlman, Morgan Quintana, Jake Zall

2. Agenda
● Timeline
● Product Line
● SWOT for Tesla
● Competitive Advantage
● SWOT for Competitors
● External Analysis/
Porter’s 5 Forces
● Recommendations
● Implementation
● Alternatives
● Questions

3. Company History
Founded
Tesla is founded by
Elon Musk and JB
Strarbel
2003
Roadster 2
Improved electric
powertrain
performance.
Lowered production
cost. By the end of
2012, they had
stopped production.
2008
IPO
Went public on
June 29th. Shares
closed at $23.89 and
generated $226.1
million
2010
Model S
Received 12,000
customer
reservations at
$5000 minimum
each. Range was
greater than 300
miles and sold 500
cars/week in 2013
for $52,400.
2012
Model X & Model 3
Model X- Seven
Seater and delivered
in 2015.
Model 3- Plan to
produce smaller
vehicle and sell for
$35,000 with range
of 200 miles.
2015
Roadster
Tesla released their
first electric car
which partnered
with Lotus. Base
price 109,000. By
2012, sold 2500.
2006

4. Product Line Through the Years
Roadster 2006
Roadster
Sport/ 2 2008
Model S 2009
Model S 2009 Model X 2012

5. Tesla SWOT
Strengths
➢ Brand Equity
➢ Product Quality
➢ Eco-Friendly
➢ Innovation
Weaknesses
➢ Low Demand
➢ Liquidity
➢ No Strong History
Opportunities
➢ Expansion
➢ Diversification
➢ Partnerships
Threats
➢ Technology
➢ Competition
➢ Replication
➢ Low Gas Prices

6. Competitive Advantage
□ Innovative Lithium Ion Battery
■ First mover advantage
■ Hold the implication of this battery
□ Large Network of Supercharger Stations
■ Shortens time of charging
■ Gives free option of switching batteries
□ Unique Selling Model
■ Gets rid of middle man, sells directly to end users
■ Customer service is not easily imitated

7. SWOT for Domestic Brands
Strengths
➢ Well known brand
➢ Brand loyalty
Weaknesses
➢ New entries bring down market
share/makes it hard to compete
➢ Detection and adaptation of
customer purchasing power is low
Opportunities
➢ Ability to enter new markets is
high
➢ Integration of technology
Threats
➢ Customer preference is constantly
changing
➢ Demand for new vehicles is low

8. SWOT for Foreign Brands
Strengths
➢ Strong Focus on R&D
➢ Offer higher quality, advanced
engineering and fuel efficiency
➢ Lower Prices
Weaknesses
➢ Product Recalls
➢ Dependence on North America to
generate most of the revenue
➢ Weak competence of autonomous
vehicles
Opportunities
➢ Improving US economy
➢ Timing and frequency of new
model releases
➢ Timing and frequency of new
model releases
Threats
➢ Fuel prices increasing
➢ The automotive industry is subject
to various governmental
regulations
➢ Increased competition

9. Market Analysis: HEV VS. PHEV
Battery Electric Vehicles
■ “Pure” electric, uses only
batteries to supply energy,
high torque for speeds,
environmentally friendly,
advancements in
technology
■ Disadvantages: battery
most expensive,
deteriorates over time,
heavy, long charging times,
limited energy to weight
ratio
Plug-in Hybrid Electric Vehicles
■ Combines electric motor with
internal combustion engine, all
advantages of BEV with addition
of avoiding range restriction
problem, smaller engine reducing
weight and share,
environmentally friendly
■ Disadvantages: HEV combine
disadvantages of both electric and
gasoline vehicles, negating the
positives, carrying an additional
drive train (more weight, cost, and
other parts to maintain/ repair)
engine is too small, too
technologically complex

10. Porter’s 5 Forces
Established firms in
industry
Slow growth industry
Exit barriers are high
Rivalry Among
Existing
Competitors- High Don’t NEED to buy a
car (can walk, public
transportation, less
expensive car)
Good price vs.
performance trade off
Threat of
Substitutes- High
Forward integration is not
a credible threat (a battery
company won’t make
cars)
Commodity products
Few large buyers that are
trying to do the same
thing
Power of Suppliers- Low
Zero threat of
backward integration
(consumers and
dealers won’t try to
make by themselves
Power of Buyers-
Low
Switching costs
high, capital
requirement high,
proprietary
technology and
established brands
are really important
in the automotive
industry
Threat of Entry-
Low

11. Production is the Biggest Problem

12. Problem Definition
1. Will Tesla be able to make the transition to higher
production volumes in a relatively short time frame?
2. Can Tesla compete with the largest carmakers in the US and
disrupt their dominance with an electric vehicle?
3. Will the gamble of making Tesla’s patents open source and
investing in lithium-ion batteries pay off?
4. How can Tesla hold off new competitors for high-price
electric cars as it simultaneously enters the market for
lower-price electric cars with other firms?

13. Problem 1
□ Will Tesla be able to make the transition to higher production
volumes in a relatively short time frame?
■ No
▣ Price cannot be low enough to compare to competitors
▣ Even if price was comparable, people are still having to
wait at least a year to get their car
▣ In terms of higher production volumes in shorter
amounts of time, the lithium ion battery cannot be
produced at the rate necessary

14. Problem 1 - Recommendations
□ Need to focus on battery production and make that their
core competency
■ Once this is complete the rest of production can move
rather quickly
■ Consumers will become more willing to purchase if
there is less of a wait time

15. Problem 2
□ Can Tesla compete with the largest carmakers in the US and
disrupt their dominance with an electric vehicle?
□ No
■ Tesla cannot be a cost leader and a differentiator at the same
time
■ This will cause them to get “stuck in the middle”

16. Problem 2 - Recommendations
□ Focus on the luxury vehicle market
■ Leading in this area is better than spending incredible
amounts to try and keep up with competitors in the
low-cost area
□ Follow this strategy until Tesla can create a cheap enough
lithium-ion battery that is produced in a more efficient way
■ Allow it to become their core competency

17. Problem 3
□ Will the gamble of making Tesla’s patents open source and
investing in lithium-ion batteries pay off?
□ Short Run
■ Yes, it will pay off because the battery will be more
efficiently made and Tesla will be able to use it the way
they want to
□ Long Run
■ Yes, it will pay off because of the added revenue from the
lithium-ion battery Tesla will be able to become a large
competitor within the automobile industry
■ See Appendix A

18. Problem 3 - Recommendations
□ Keep the lithium-ion battery open sourced until the point
in time where Tesla is profitable enough to make it
proprietary
□ Use the revenue from the lithium-ion battery to build the
brand and ensure differentiation from other automobile
companies

19. Problem 4
□ How can Tesla hold off new competitors for high-price
electric cars as it simultaneously enters the market for
lower-price electric cars with other firms?
□ In order for Tesla to hold off new competitors for high-
price electric cars they must keep differentiating their
features comparative to other high price electric cars
□ Simultaneously for Tesla to enter into the lower price
electric car market they must focus on one product at a
time before they can excel at mass production

20. Problem 4 - Recommendations
□ Focus on luxury market for the short term
□ Allow lithium-ion battery to become the standard in the EV
industry
□ Enter low-cost in the long term

21. Implementation
2015
Focus on Luxury Market
Differentiating itself as a
luxury brand will allow it
to have complete control
over that area of the
market
Production Standardized
While Maintaining
Differentiation
Invest in perfecting
production which then
allows for customers to
receive vehicles quickly.
2018
Industry-Standard Battery
Mass Produced
Create core competency
producing lithium-ion
batteries. Once this is
perfected, then different
models can be produced.
2020
Enter Low-Cost Market
Once production has been
perfected, Tesla can move
into a new market. Must
wait to do this until
successful at production.
2022

22. Alternatives & Challenges
1. Focus on low-cost market
2. End open-sourced patent
3. Partner with leading car
makers to help with
production.
1. Tesla does not have the
capability to mass-produce
at the moment
1. Lithium-ion battery needs to
be the standard before
closing patent
1. In order to have a
competitive advantage in
production, it must be kept
in-house

23. Risk Analysis
1. Lithium-ion battery performance is still being questioned
1. Postponing Model 3 allows the chance for competition to
successfully enter low-cost market
1. Return on investment is postponed for certain assets
(battery factory)

24. Risk Mitigation
1. Utilizing an open-sourced platform allows the lithium-ion
solution to be found faster
2. Tesla needs to avoid spreading itself too thin. Becoming
successful at producing luxury model will allow them to
easily transition to lower-cost.
3. Postponing returns from certain short-term assets allows
for larger returns in the long-run

25. Conclusion
□ We believe that Tesla Motors can remain a leader in the
electric vehicle industry by first, successfully improving on
its weak areas of business
■ Production, battery defects, differentiation
□ From there, we believe that Tesla must then work towards
making its battery the standard battery in all electric cars
■ By holding the patent on the most industry-leading
battery, Tesla will know that it maintains an advantage
over all competitors

26. Updates
□ Unveiled its Powerwall home and industrial battery packs,
US$800 million.The two models included a 7 kilowatt-hour
(kWh) wall-mounted unit and 10 kWh unit. (2016)
□ Production plans in 2019 for Tesla Semi, an all-electric class 8
semi-trailer truck (2017) and “Model Y” a SUV utility vehicle
designed for families during 2019 (2016)
□ Tesla unveiled the 2020 Roadster. The vehicle will have three
electric motors allowing for all-wheel drive. (2017)

27. Thank
You!

28. Appendix A FINANCIALS