Tesla - to Accelerate the Advent of Sustainable Transport

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To Accelerate the Advent of Sustainable Transport

By: Team 4

Sebastian Correa

Flavia De Carvalho Horta

Tyler Ferro

Jalyn Howard

Matt Iacovino

Global Strategy and Policy

Dr. Mingxiang Li

Man 4720

December 3, 2016

Table of Contents

Executive Summary………………………………………………………………...        Page 3

Industry Description………………………………………………………………...        Page 4

Porter’s Five Forces Analysis of the Industry………………………………………        Page 4

PESTEL Model……………………………………………………………………..        Page 5

SWOT Analysis…………………………………………………………………….        Page 6

VRINE………………………….……………………………………………….….        Page 9

Business Level Strategy…………………………………………………………….        Page 9

Corporate Level Strategy…………………………………………………………...        Page 10

Recommendations…………………………………………………………………..        Page 10

Appendix……………………………………………………………………………        Page 11

Executive Summary

Tesla was founded in 2003 by a group of engineers in Silicon Valley who wanted to showcase that Battery Electric Vehicles (BEV) can be a better alternative to gasoline powered vehicles. Tesla’s engineers designed the powertrain for a sports car based on Alternating Current (AC) based on inventor Nikola Tesla’s patent from 1888. Tesla roadster, which is Tesla’s first production model, can accelerate from 0-60 mph in 3.7 seconds and has a range of 245 miles per charge using lithium ion battery technology. Tesla would go on to sell 2,400 roadsters that are now on the road in more than 30 countries.

In 2012, Tesla launched the Model S, the world’s first luxury electric sedan. This vehicle was built to be 100% electric. Tesla’s model S has truly changed the normal image of a four-door car. It provides space capacity for seven people and over 64 cubic feet of space. The Model S was designed to provide the comfort and utility of a typical family vehicle but also achieve the performance and acceleration of a sports car. The design integrates the battery pack into the chassis and below the cabin achieving a low center of gravity that allow for superior handling and 265 mile range on a single charge. The Model S was awarded motor trend’s 2013 model of the year and a 5-star rating from the National Highway Traffic Safety Administration.

In 2014, Elon Musk, CEO and founder of Tesla debuted new all wheel drive configurations for the Model S which further improved handling  (Figure 1). Both the 85D and the P85D are high efficiency motors making the Model S “the fastest four-door production car ever made”. Accelerations times have reached up from 0 to 60 mph in 3.2 seconds. As a Tesla car owner, you benefit from not having to visit a gas station or spend money on gasoline. The convenience of charging your car at home is even more efficient with Tesla’s Supercharger providing over half a charge in less than 20 minutes. Supercharger can now be found in North America, Europe and the Asia Pacific.

Tesla’s automobiles are manufactured in Fremont, CA where their plant is located and has helped create thousands of jobs in the area, producing over a thousand cars per week. Tesla has now expanded its facilities across the world with an assembly factory in Tilburg, Netherlands and a production plant in Lathrop, California. With hopes of reducing costs of the lithium batteries used in the car, Tesla has partnered with Panasonic to produce a mass-market affordable called Model 3 in Nevada. By 2018, Tesla predicts that this production factory will produce more lithium ion cells than all other manufacturers combined. This factory also has plans to produce battery packs for stationary storage to reduce energy costs for business and residences.  “Tesla is not just an automaker, but also a technology and design company with a focus on energy innovation” (Tesla, 2013).

Industry Description

Tesla competes in the automobile manufacturing and selling industry. However they have positioned their product in the Electric Vehicle (EV) segment. Tesla’s classification is SIC code 5012: Automobiles and Other Vehicles. Even though Tesla is smaller in comparison to industry Incumbents like Volkswagen, Toyota, and General Motors. Although, Tesla has been able to gain sustainable market share in the last 10 years and been able to generate a positive revenue growth, the company has not yet been able to break even from a cash flow perspective.  Around 60% of the industry’s main buyers are Maroone and AutoNation. Other businesses qualify as retailers such as dealerships or car rental companies.

The automobile industry has the following value chain: Original Equipment Manufacturer (OEM), Raw Materials (Nucor Steel) Companies and Aftermarket part suppliers and service.

As far as the electric vehicle segment, overall sales in the United States for the year 2016 has increased 30.7%, with the segment reporting over 120,000 vehicles sold (Hoium, 2016). Tesla’s model S leads the segment in terms of sales reporting just on this model itself, 22,171 vehicles sold in the U.S. throughout the year. Second leader in terms of sales is GM’s Chevy Volt, which sold 18,517 vehicles this year. Tesla’s SUV model comes in third place in the segment, selling 13,448 models during the year. In fourth place, Ford Fusion Energy sold 13,022 vehicles, while Nissan Leaf, in fifth place, accounted for 10,650. BMW’s model I3 comes in sixth place, reporting 6,205 vehicles sold during the year (Figure 2).