Tesla Motors is planning to expand internationally by entering the UK market. They will establish a joint venture with Lotus to assemble vehicles in England. This will provide proximity to suppliers and competitors, as well as economic advantages from UK policies promoting electric vehicles. Tesla projects sales of 250 cars in the UK in 2010 growing to 1100 annually by 2014. Financing of $30 million will come from the JV with Lotus and bank loans. The international expansion furthers Tesla's strategic goals of promoting electric vehicles and their brand. In the medium term, Tesla aims to establish a solid UK presence and maximize synergies with Lotus.

1. Tesla Motors
International Expansion
Mike Cavinder
Ivan Minkin
Kush Patel
Prashant Wagle
Josh Webb

2. Agenda
• Company
• Product Line
• Demand
• Competitors
• Target Market
• International Expansion
• Entry Mode
• Financing
• International Impact on Firm Strategy

3. Company
• Tesla Motors, Inc. is a small, privately-owned Silicon
Valley automobile company
• Named after electrical engineer and physicist Nikola
Tesla
• Incorporated in July 2003 and began production in
March 2008
• Developed two high performance electric sports cars

4. Product
Tesla Roadster
• Range: 221 miles
• Acceleration: 0 to 60 mph in 3.9 seconds
• Top speed: 125 mph (limited for safety)
• Power train: Lithium Ion batteries
• Cost of powering the vehicle: estimated at $0.02 per mile
• Price: $109,000
– much cheaper than similar performance conventional cars – Porsche,
Ferrari, Lamborghini, etc.

5. Product
Tesla Roadster Sport
• 15% more peak power than the Roadster
• Accelerates from 0 to 60 mph in 3.7 seconds
• Price: $128,500

6. Demand
Green car market is growing at a high rate
•Hybrid sales represented 1.2% of the market in 2005, 3% in 2008
•Forecasts estimate 5% of car sales will be hybrids by 2013
Source: AT Kearney

7. Demand
• When production began in March 2008, all 650 Roadsters
planned for 2008 had been reserved
• Due to current economic situation, Tesla’s orders have slowed
• But, Tesla still have 1500 units on order (as of 1/15/09)

8. Competition
Lightning GT
• UK-based company
• 4 Electric wheel motors
• Top Speed – 130 mph
• 0-60 mph – 4 sec
• Range 250 miles
• Price - $200,000
Fisker Karma
• California-based company
• JV with Valmet Automotive of Finland
• 2 ltr Petrol + 2 Electric Motors
• Electric Range - 50 miles
• Top Speed – 125 mph
• 0-60 mph – 5.8 sec
• Price - $80,000

9. Target Market
• High income, eco-conscious consumers
• Weekend drivers
• Media personalities
• Car clubs – track days
Petrol Diesel Hybrid Electric Hydrogen
Super-Mini Fiat 500 G-Wiz
Mini Mini Ford Focus Honda Insight Nice Ze-O
Lower Middle Renault Megan Honda Jazz Toyota Prius Mitsubishi i MiEV
Upper Middle Honda Accord Ford Mondeo Honda FCX Clarity
Executive Jaguar X Type Mercedes Blue
Luxury BMW 7 Series Audi A8
Sport Porsche Audi TT Quattro
Audi A1 Quattro
hybrid
Utility & Other Land Rover BMW X5 Lexus RX 450h

10. Why Go International?
• To expand sales
• To acquire resources
• To diversify sources of sales & supplies
• To minimize competitive risk
So, where do we go?

11. Expansion into the United Kingdom
1. Similar Target Market
- Culture
- Metrics
o GDP per capita (PPP)
• US: $48,000
• UK: $37,400
o Top 20% make above
• US: $92,000
• UK: $60,000

12. Expansion into the United Kingdom
2. Location Advantages
– Closer proximity to suppliers
• Assembly (Lotus plant)
– England
• Component parts
– Norway - England
– Germany - France
– Taiwan - California

13. Expansion into the United Kingdom
2. Location Advantages
– Proximity to competitors
First-mover advantage
No existing electric sport car company
Establish Tesla as the premier electric sports car company
Lightning GT planned to be introduced in 2010

14. Expansion into the United Kingdom
2. Location Advantages
- Existing Infrastructure (Chasm)
- Work on increasing this infrastructure already in
progress throughout the UK

15. Expansion into the United Kingdom
3. Economic Advantages
• The lower a vehicle's emissions, the lower the car taxes
• Free parking in certain parts of London
• Free charging
• Electricity is cheaper than fuel
• Avoid congestion charge – £8 per day ($4200/Yr)

16. Expansion into the United Kingdom
3. Economic Advantages
• Gordon Brown has set out Labour's intention to drive a shift
to low-carbon and electric cars in the UK (Green Car Plan)
• Ireland has set a goal of 250,000 Electric Vehicles on the Road
by 2020
• Renewables Directive
Incentives for both owners and manufacturer

17. Tesla & The Veblen Effect

18. Mode of Entry
Joint Venture with Lotus:
• Economies of Scope
• Veblen Good (Price = Quality = Exclusive Utility)
• Umbrella Branding, vis-à-vis Production
• Lotus has strong brand equity in UK

19. Mode of Entry
Risk allocation:
• Sunk/Fixed Costs
• Learning Curve
• Entrepreneurial Marketing
• Exit Barriers

20. Financing
Expansion Costs into England
Descriptions Costs Assumptions
Phyiscal Plant $15,000,000.00 Labour and materials to build factory, warehouse,
and support facilities
Equipment/Tools $10,000,000.00 Machinery, tools, and related equipment to being
manufacture
Working Capital $3,000,000.00 Start-up capital required to pay employees and
operate factory
Support Assets $1,000,000.00 Auxiliary purchases
Contingencies/Permiting $1,000,000.00 Extras/Problems
Total $30,000,000.00
Projected costs to expand existing Tesla Assembly Plant in England
estimated to be $30 million

21. Financing
Several planned methods to reach $30 million
• $15 million raised from Lotus for a 40-60 JV
• Tesla USA going to fund $5 million
• Extra $10 million + raised from bank loans
Means of Finance
Lotus Capital $15,000,000.00
Tesla USA $5,000,000.00
Bank Loans $10,000,000.00
Total $30,000,000.00

22. Raw
Materials
and Supplied
Parts
51%
Salaries
13%
Utilities
13%
Admin.
Salaries
5%
R & D
9%
Selling
5%
Repairs
4%
Cost Assumptions (% of GP)
Financing
Production and Sales Estimate
Years 2010 2011 2012 2013 2014
Capacity UK 1100 1100 1100 1100 1100
Projected Sales Uk (Units) 250 500 700 900 1100
% of Capacity Utilized 22.73% 45.45% 63.64% 81.82% 100.00%
Projected Sales ($) $27,250,000.00 $54,500,000.00 $76,300,000.00 $98,100,000.00 $119,900,000.00
• Projected sales numbers difficult to compute
• Private company/do not release much about sales
• Current US sales are 1500 on the order books
• Based on benefits of electric car in England, sales
are projected to be proportionally higher than US
• Capacity will grow – if numbers correct, will
approach maximum capacity by 5th year
• Will reassess factory needs in 3rd and 4th year

23. Financing
Year 2010 2011 2012 2013 2014
Sales $27,250,000.00 $54,500,000.00 $76,300,000.00 $98,100,000.00 $119,900,000.00
Cost of Sales (69% of Sales)) $18,802,500.00 $37,605,000.00 $52,647,000.00 $67,689,000.00 $82,731,000.00
Gross Profit $8,447,500.00 $16,895,000.00 $23,653,000.00 $30,411,000.00 $37,169,000.00
Gross Margin $0.31 $0.31 $0.31 $0.31 $0.31
Total Operating Expenses (20% of Sales) $5,450,000.00 $10,900,000.00 $15,260,000.00 $19,620,000.00 $23,980,000.00
NIBIT $2,997,500.00 $5,995,000.00 $8,393,000.00 $10,791,000.00 $13,189,000.00
NIBIT Margin $0.11 $0.11 $0.11 $0.11 $0.11
Depreciation (Straight Line) (15 Years) $1,660,000.00 $1,600,000.00 $1,600,000.00 $1,600,000.00 $1,600,000.00
Loan Repayment (15 Years) $660,000.00 $660,000.00 $660,000.00 $660,000.00 $660,000.00
Interest (8%) $52,800.00 $48,576.00 $44,689.92 $41,114.73 $37,825.55
Profit Sharing/Payback (5% of sales) $1,362,500.00 $2,725,000.00 $3,815,000.00 $4,905,000.00 $5,995,000.00
IBT $(737,800.00) $961,424.00 $2,273,310.08 $3,584,885.27 $4,896,174.45
Taxes (35%) $- $- $795,658.53 $1,254,709.85 $1,713,661.06
Rebates $- $- $- $- $-
Net Income $(737,800.00) $961,424.00 $1,477,651.55 $2,330,175.43 $3,182,513.39
Profit/unit $(2,951.20) $1,922.85 $2,110.93 $2,589.08 $2,893.19

24. International Firm Strategy
• Not a mainstream automotive company
• Yet to cross the chasm.
• Strategic objectives:
• Promoting the electric transportation technology as a mainstream
alternative
• Promoting the companies’ specific products.
• Success depends on
• New products
• Rapid innovation in the technology

25. International Impact
• Medium term strategy
• Establish solid presence in the UK.
• Maximize synergies with Lotus.
• Launch an advertising campaign increasing awareness and benefits of electric
transportation and capture popular imagination. Use popular figures like
Lewis Hamilton the reigning F1 champion as brand ambassadors.
• Make Tesla synonymous with high performance electric vehicle technology
• Create favorable conditions for the successful launch of the mass market
Model S
• Invest retained earnings into technical development and R&D effort.

26. Conclusion
• Long term strategy
• Build a manufacturing location for the Tesla in the UK with an
objective to cater to the entire European market.
• Continuously invest in EV technology focussing on innovation
• Adopt a focus strategy to achieve cost leadership.
• Invest in infrastructure to support adoption of EV and facilitate any
bandwagon effect that would be anticipated

27. Questions?