How Winners Make Choices - Tesla: The Revolution
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Tesla has managed to revolutionize a mature auto-market. Tesla has achieved this through a carefully defined long-term strategy. In this slides, we show Tesla’s route to success.
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How Winners Make Choices - Tesla: The Revolution
- 1. 1 TESLA: THE REVOLUTION A source of inspiration for companies with ambition| www.howwinnersmakechoices.com
- 2. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION The importance of a long-term vision 2 If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. ” ” Jeff Bezos CEO, Amazon
- 3. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Many companies struggle with the realization of their long-term vision 3 Short-term survival Mission creep
- 4. KIEZEN VOOR WINST: EEN BRON VAN INSPIRATIE VOOR BEDRIJVEN MET AMBITIE 4 An excellent example of the realization of a long-term vision
- 5. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Clear long-term vision: Tesla wants to become a volume player 5 How does Tesla realize this vision
- 6. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Establishing a premium position with the Tesla Roadster 6 Made possible by:
- 7. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Own sales- and service centers 7
- 8. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Entering the premium segment of BMW and Audi with the Tesla Model S 8
- 9. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Long-term investments in production capacity 9 Own production capacity: California Largest battery factory of the world: Nevada
- 10. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Entering the volume market with the Tesla Model 3 (2017): 400,000 reservations 10
- 11. HOW WINNERS MAKE CHOICES: A SOURCE OF INSPIRATION FOR COMPANIES WITH AMBITION Wall Street values Tesla Motors at $31 billion| $620,000 per car 11
- 12. 12 TESLA: THE REVOLUTION A source of inspiration for companies with ambition| www.howwinnersmakechoices.com
Editor's Notes
- Welcome to one of the webinars of the book How Winners Make Choices. In this webinar we discuss how Tesla is revolutionizing the automotive industry.
- Having a clear long-term vision is important for companies that want to continue being successful in the future. Jeff Bezos, CEO of Amazon, is known as a very outspoken advocate of long-term thinking. In a famous quote, Bezos states that having a longer time horizon, reduces competition because there are only a few companies that dare to adopt a time horizon of seven years instead of the usual three years. ============== Jeff Bezos quote: It does fit into my view. Our first shareholder letter, in 1997, was entitled, “It’s all about the long term.” If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.
- The vast majority of companies have formulated a long-term vision, however, they often struggle with implementing this vision. This struggle is understandable given that companies have to survive the short-term in order to be able to realize their long-term vision. In addition, companies often deviate from their objectives, this phenomenon is call “mission creep”.
- In this webinar we will look at Tesla, an excellent example of a company that is realizing its long-term vision.
- Elon Musk founded, after founding a number of other companies which gave him valuable start-up experience, Tesla in 2003 (with JB Straubel, Martin Eberhard, Ian Wright and Marc Tarpenning). Musk has always had a clear goal with Tesla: becoming a volume player.
- In 2008, Tesla launches its first car, the Tesla Roadster. Tesla is at that point in time not capable of a long-term commitment such as own production capacity. Therefore they opted for a short-term contract with Lotus, who build the Tesla Roadster until 2012. The chassis was based on the Lotus Elite. For the battery Tesla started a long-term partnership with Panasonic, who delivered industrial lithium-ion batteries that allowed the Roadster a range of around 400 kilometers. With the Roadster, Tesla acquired the status of a premium brand, which could support future product launches. This premium position, with the associated high margins, was essential for Tesla to survive in the short term, without losing its focus on the long term goal they had in mind.
- Musk discovered a dilemma between short and long term for the car dealers. On the one hand car dealers see that their business model needs to change. After all, a car dealer earns more in service after the sale, then the sale of the car itself. But modern cars need less and less maintenance and electric cars virtually none. Therefore the main source of revenue for dealers will disappear on the long-term. In the short term, dealers need these service revenues and will therefore always push customers in the direction of vehicles that require more maintenance, which means that electric cars do not stand a chance with these myopic dealers. Tesla escaped this dilemma at dealer level by adopting a commitment in the long term through the development of its own sales and service centers.
- Then it's time to enter the premium segment of BMW and Audi. Tesla launched the all-electric Model S. The sedan was named the best car of the year in the US in 2013 and in 2014. The US Consumer Reports magazine gave the Tesla S P85D a score of 103 to 100 and called it the best car it had ever tested.
- After the arrival of the Model S and its experience with Lotus, Tesla was ready to start producing its own cars. It used the financial crisis in the car industry, to acquire an abandoned car factory in California, previously used by GM and Toyota, for only $ 42; a fraction of its replacement value. Tesla makes the plant operational by purchasing production equipment from car manufacturers who are in dire straits, at a third of the normal cost (average cost to build a car plant is a billion dollars in North America). To further strentghen its long-term commitment, Tesla is working with Panasonic to build the largest battery plant in the world in Nevada for a total investment of five billion dollars. This factory will double the battery production globally. It allows Tesla to significantly increase its production volume.
- In 2016 Tesla introduces the Model X: a midsize SUV. Over 27,000 customers have already reserved the model. At the end of September 2017 Tesla will start the delivery of its Model 3. With a price tag of $ 35,000, this car is targeting volume market, similar to the BMW i3. This is in line with what Musk had announced ten years earlier, in 2006 he stated that he would first build sports cars for the short term, in order to enable him to offer a more affordable model in the long term. A week after Tesla started selling the Model 3, Tesla had received no less than 325,000 bookings for a car that will be deliverd at least eighteen months later. These orders are good for a potential turnover of fourteen billion dollars. This makes it the most successful launch of a new product ever. Meanwhile, the number of bookings has risen to 400,000. ================= http://fortune.com/2016/04/15/tesla-model-3-reservations-400000/
- The rise of Tesla is impressive. It is the brand with the highest market share in electric vehicles. Tesla meanwhile, has a market value of $ 31 billion and the highest position on the Forbes list of the most innovative companies. Since August 2010 the stock price of Tesla rose by 1262%. BMW has a market value of $ 60 billion, slightly more than double the valuation of Tesla. In other words, shareholders strongly believe that Tesla will become an absolute success, even to the extent that it will be able to challenge established and well-managed carmakers like BMW. This is driving the increase in shareholder value, which is ahead of the accounting profit. ============= http://www.reuters.com/article/us-tesla-valuation-idUSKCN0XU20J
- Thank you for your attention. We hope that this webinar will help you make to start making choices like a winner.