Ford is considering starting a new business unit focused on electric vehicles. They analyzed the electric vehicle industry and various company targets. Based on their analysis of companies like Tesla, Wheego, Fisker and Tango, Ford believes their best options are either starting a joint venture with Tesla, the current market leader, or acquiring Wheego to gain expertise in affordable electric vehicles and leverage Ford's global distribution.

1. FORD’S NEW
BUSINESS UNIT
Caterina HAUTH * Fuad KARIMOV * Peter
CHAMOUN * Souhila HADDAD
Mergers & Acquisitions
IUSE Madrid Business School

2. AGENDA
 Electric car industry overview and analysis
 Ford company
 Potential targets
 Fisker
 Tesla
 Wheego
 Tango
 Implementation strategy

3. Market Overview: Electric Cars
 US demand for electric motors is expected to
increase 4.5 percent annually until 2017
reaching $14.3 billion
 Product sales will climb 2.3 percent per year to
1.4 billion in 2017
 Electric motors are a key components in many
durable goods
 If manufacturing output rises, sales of electric
cars are expected to follow

4. SWOT Analysis of the industry
Strengths
• Low Fuel consumption
• Low CO2 Emissions
• Much cheaper running costs
• Green image
• Fun to drive (high torque, low
noise)
Weaknesses
• Higher production cost and retail
price than normal cars
• Maintenance expenses are
higher
• Battery replacement is expensive
• Low autonomy (between 100 and
300 km)
• Long time to charge
Opportunities
• Governmental incentive
• Rising fuel prices
• Legal regulations for low emissions
• Many (public and private ) investors
Threats
• Skepticism from some conservative
sectors
• Goes against the interests of oil
industry
• Cost reduction in traditional cars’
production

5. Porter’s Five Forces Analysis
 Threat of new entrants: Medium
 Government incentives result in an increase of
the industry margins
 Manufacturers of traditional cars may be moving
towards the electric car market
 “Going Green” image is good publicity
 High initial capital requirements
 Hard to get network of distribution channels

6. Porter’s Five Forces Analysis
 Bargaining power of customers: Low
 Not as many options as in the traditional car
industry
 Consumers have a larger knowledge of
alternative vehicles due to governmental
promotion
 Subsidies offered to purchase these vehicles
 Private consumers are to a large extent very
responsive to prices

7. Porter’s Five Forces Analysis
 Bargaining power of suppliers: Medium
 Automobile manufacturers face low switching cost
 They also control terms of supply and price
 However, they are more than ever dependent on
the suppliers industries
 Development and production stages of batteries
are an entirely new field for most manufacturers

8. Porter’s Five Forces Analysis
 Threat of substitute products: Medium
 Buyers are still reluctant to spend more money in
an electric car than a regular one
 Switching back to a regular car has a low initial
price, but incurs in higher running costs
 The tendency, however, is that the market share
of electric cars is growing
 Public transportation and other means of
transport cannot match the comfort offered by a
car  do not pose a serious threat

9. Porter’s Five Forces Analysis
 Intensity of competitive rivalry: High
 Many manufacturers of traditional cars will start a
line of electric cars to get a share of the growing
market
 Competition is centered in technology and
innovation
 In order to get access to technological know-how,
vertical integration, joint ventures and strategic
alliances are increasing.

10. Ford Motor Company
 American multinational car manufacturer
 Founded in 1903 and established worldwide
 Sells automobiles and commercial vehicles under
the Ford brand
 Sells luxury cars under the Lincoln brand
 Target middle class people
 Revenue of US$ 136.26 billion in 2011
 Introduced a sustainable energy strategy in 2011
 They don’t have the expertise or the technology to
start producing electric cars
 Ford wants to study the possibility of acquiring or
starting a joint venture with one electric car firm

11. The Targets

12. Fisker automotive: overview
 American company
 founded in 2007 by Hendrik Fisker and
Bernhard Koehler
 Mission: producing the world's first premium
hybrid electric vehicle
 Revenue of 2012 was around 200 Million USD
(about 2000 cars sold), starting price
100.000+USD

13. External Analysis
 Target: people with high economic position, high
class people (celebrities and rich people) males
and females from 25-60 years old
 Customers mostly from the USA (45 dealerships)
and Canada (3 dealerships)
 Hope to reach customers in China, England and
continental Europe

14. External Analysis
 Suppliers: GP Supercars
(Merano, Italy), Nellemann
(Copenhagen, Denmark); the Emil Frey Group
(Zurich, Switzerland); BD Otomotive
(Istanbul, Turkey) and Al-Futtaim Group (Middle
East and North Africa)
 Investors: Fisker Automotive's investors include
Leonardo DiCaprio, Palo Alto Investors, Kleiner
Perkins Caufield & Byers, Qatar

15. Strategy
 Fisker is a niche brand which is focused on
using sustainable products to reach people
who are interested in environmentally friendly
cars
 Not a “mass” producer
 Fisker should make an alliance with another
electric motors company to be able to lower
their costs and cover a lower market segment
 If Fisker continues like this, they will not
survive very long because their total sale
volume is very low

16. Wheego: overview
• Small, 2 years old, Atlanta company
• Builds entirely electric cars
• Manufactured in Southern California
• Launched 1st car: April 22, 2011 (Wheego
LiFe)
• 160 km per charge
• MSRP: $32,995
• 25+ Dealerships across the United States

17. External analysis
 Target: Wheego targets lower-middle class
 They have managed to significantly reduce the
production costs and make their cars actually
affordable.
 Investors:
 Mike McQuary, CEO
 Suppliers:
 Flux Power for Lithium batteries
 Electric drivetrain produced and installed in
California

18. Strategy
 Wheego targets middle-class buyers
 They offer safe and reliable electric cars at
affordable prices
 Collaboration with other companies can be
beneficial and viewed as positive for both
parties

19. Tesla: overview
 Publicly traded company founded in 2003
 Founded by Elon Musk, Marc Tarpenning and
Martin Eberhard
 Produces a high-performance electric sports
car
 Backed by a number of high-profile investors
 Price of a car is around 100.000 USD
 Revenue: 413.3 Million USD

20. External Analysis
 Target: people looking for electric premium
and sports, luxury cars
 Rich and Affluent who are willing to spend
more
 Environmentally conscious customers

21. External Analysis
 Suppliers: positive and high quality
procurement process from Tesla through
multiple suppliers
 Car parts produced in France
 Powertrain built in California
 Battery cells from Japan

22. Strategy
 Looking to lower prices for different suppliers to
ensure savings overtime if prices were to be
raised
 Focus niche market (rich and affluent)
 Tesla tackles regions with higher gas prices, like
California, Hawaii, Alaska and New York
 Tesla Motor can merge with Toyota because they
already supply the company with control systems,
batteries, and motor for the new Rav4
 If Tesla did not succeed as an independent
automobile manufacturer, it will still have the
ability to produce the proper technologies for the
big car manufacturers

23. Commuter Cars: overview
 Founded by Bryan and Rick Woodbury
 Based in Spokane, Washington
 Produces ultra-narrow electric cars
 The first car produced was sold to George
Clooney in 2005
 Their flagship car, coined Tango, is sold for
108.000USD
 It’s delivered almost finished, but the buyer has to
finish assembling it (8 hours work)
 Annual revenue: 1.5 Million USD

24. External Analysis
 Target:
 Middle Class comprising (income group
10,000-20000 USD)
 Long term goal is to get the price to 10.000
USD
 For now, only rich people can afford the car

25. Strategy
 Commuter cars uses the differentiation market
strategy
 Security: Tango cars have a narrow body and
quick maneuverability, it can avoid trouble better
than any other car in existence
 Driving experience: Tango accelerates from 0-60
mph in 3.2 seconds, has finished the standing 1/4
mile in 12.255 seconds at 106.86 mph, and can
reach over 150 mph with no gear shifting

26. Implementation strategy
Which company is the right
choice?

27. TESLA
 Option 1: Starting a Joint-Venture with Tesla
 Reasons:
 Ford needs an expert in the electric motors section
and Tesla has the most experience in the electric
motors sector
 The high global distribution of Ford together with the
expertise of Tesla would make a perfect match
 Ford does not want to switch completely to the electric
motors section. However, they want to target a
growing market
 Tesla current holds the biggest market share in the
electric car market

28. WHEEGO
 Option 2: Ford acquires Wheego Electric
Cars
 Reasons:
 Wheego has already managed to lower
production costs of their cars enough to target
middle class, the segment aimed at by Ford
 Together with the Global distribution channels of
Ford, these cars could be commercialized all over
the world at a reasonable price
 Wheego seems to be affordable for Ford

29. THANK YOU FOR YOUR
ATTENTION!
Contact Information:
IUSE Madrid Business School
Course: Mergers&Acquisitions
Professor: Mr. Hubert Joo
E-Mail: hubert.joo@faculty.uibs.org