Electric Car and Tesla Motors

Tesla Motors remains in its primitive stages. Being a relatively young and emergent company, Tesla

Mangram, M. E. (2012). The globalization of Tesla Motors: a strategic marketing plan analysis. 20(4), 290-310. Retrieved April 1, 2017.

Problem Statement: Disruptors of domestic and international competitors are expanding upon the alternative fuel vehicle market and can offer a wider variety of products ranging from hybrid, plug-in hybrid, and fully electric vehicles due to the access to more resources available to them.

Environmental concerns have been raised from time to time because of the dependency on the gasoline-fueled engine as the chief auto powertrain technology. This has resulted in exposing many automobile users to unpredictable prices of fuel. These issues were, however, the reason for

However, as the case indicated that, Tesla Motors has been facing some serious problems. Since the infrastructure is not ready yet to provide convenience to the potential customers, they are unwilling to buy electric cars. Having limited number of charging stations and being compatible with only a particular model is one of the biggest issues for the company.

Stehan further summarizes that potential electrical vehicle drivers are most likely to buy (lease) the Tesla Model 3 (about 55%), which is also the car people are most excited about (about 56%), and current electrical vehicle drivers would most likely get as next car (almost 40%). This suggests that Tesla stands out in consumer intersest, even above Nissan and GM. The Tesla 3 will be discussed more in detail further in this paper.

Tesla Motors is a very forward thinking company that interests lay more in the future than the present. The entire basis of Tesla Motors is the realistic theory that sometime in the next couple decades, the world will be completely empty of petroleum, forcing those who choose to use automobiles to switch to non gas powered vehicles. Being a company based on electric vehicles, as long as this theory comes to fruition, they are set to be successful. According to Tesla Motors’ website, their mission statement is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible. On the same lines as Tesla Motor’s mission statement, their vision statement is to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles. According to Tesla Motors’ mission and vision statement, it is clear to see that electric power is the core of what the entire company was founded upon.

Tesla Motors target their vehicles towards the upper middle class, where not everyone would be able to afford. Tesla is currently the only manufacturer of a zero emission sports car. While the threat of substitutes within the electric car industry Tesla faces is currently low, but due to the price premium of the product causes Tesla to face other substitutes such as gas vehicles, hybrids, mass transportation, and hydrogen vehicles. As Tesla only targets the upper middle class, environmental conservatives and those who are looking for a high end luxury car, most consumers who are price conscious would most likely choose the alternatives because of Tesla’s high price on their electric cars. Tesla faces substitute competitions from General Motors, Toyota, BMW, and Daimler AG, Nissan and Honda as some of these companies are also starting to build their own electric cars to get into the electric car business, which will increase the number of substitutes in this industry. With each every coming year more manufacturers are beginning to go towards building their own electric motor technology to enter the electric car market.

Financially, Tesla has been moderate with a market capitalization of $30 billion and about 25,000 cars sold around the world over the last three years (Niedermeyer, 2014), however compared to its competitors like Toyota and General Motors, this growth is small. Their most recent annual report shows a negative net income due to their high cost of goods and operating expenses. This is because the lithium ion battery used for these electric cars is a highly expensive product in which Tesla currently buys from an outside supplier, Panasonic. Tesla’s is considering building their own “giga plant” to start producing their own batteries and becoming their own supplier so that they can have control over the market price and their operating expenses (Putros, 2014). Tesla’s current market price is at $241 and seems to be growing strong as

Tesla are competing with not only “green” vehicle market that consists of Electric vehicles (EV), plug in hybrid electric vehicles (PHEV) and hybrid vehicle, but with the overall vehicles industry.

11 4.2.1 Market Size.................................................................................................................. 11 4.2.2 Customers and Target Market..................................................................................... 11 Electric Vehicle Industry Forecast ........................................................................................... 14 4.3.1 Battery Pack Costs Projections ................................................................................... 16 4.3.2 Charging Infrastructure................................................................................................ 17 4.3.3 Cost of Ownership ....................................................................................................... 17 Challenges facing the industry ................................................................................................ 17 4.4.1 Component complexity ................................................................................................ 17

New Competition: Tesla Motors is not just competing with the regular car and automobile manufacture but needs to compete against a technology which has been in use for over hundred years i.e. the combustion engines. Further people are often resistant to change and it is a challenging task for the company to convince their potential customers on the use of electric cars over combustion cars which may take a lot of time and directly affect the sales and revenue of the company (Woodyard, Chris 2008).

Michael Porter’s Five Forces Model is a useful tool for analyzing a business. The model is used to analyze the competitive forces and determine a strategy to develop a competitive advantage for profitability of a business. With Porter’s Five Force Model, it is possible to combat the completive forces by identifying opportunities, competitive advantages, and competitive intelligence. If the forces are strong, they increase competition; if the forces are weak, they decrease competition. The Five Forces are:

Bhat, N. (n.d.). The Future: Our Planet in 2050 | Electric Cars. Retrieved November 05, 2013, from ThinkQuest: http://library.thinkquest.org/C008050/ecars4.html

Tesla Motors was incorporated in 2003. in 2016, it began production of the Roadster in 2009, Model S unveiled. in 2010, TSLA IPO launched; Announced partnership to develop powertrain system with Toyota RAV4. in 2012, it Started building Supercharger Network across America and Unveiled designs and plans for Model X. in 2013, Tesla got Extreme Tech “Best Selling Luxury Car. IN 2014, Gigafactory announcement 200th Tesla Charging Station opened, and Musk announces anyone can use their patent in good faith. In 2015, Consumers reported “Best Overall Car” 400th Tesla charging station - 1st solar powered charging station; Model 3 announcements. In 2016, Chinese Facility Construction begins. (Gregory Whitney, 2016)