FINALIPWRITEUP

Tesla-RWJ
Vis Major Consulting: Sophia Caltabiano, Feridun Fangaj, Blake Ferris,
Jay Leong, Hua Liu, and Kathryn Teaney
Addressing Tesla’s Long-Term Debt
Table of Contents

© 2016 VisMajor Consulting: Caltabiano, Fangaj, Ferris, Leong, Liu, Teaney 1
Content Pages
Executive Summary 2-3
Market & Firm Overview 4-11
Financial Analysis of the Firm 12-13
Identified Business Challenge 14-15
Recommended Response 16-20
Conclusion 21-22
Citations and Sources 23-24
Appendix & Supplemental Material 25-29
EXECUTIVE SUMMARY
Tesla’s strengths are what have kept them alive despite their continuously surmounting
debt. They have gone against all odds, and kept a high stock value and held hope in the public
eye, despite their repeated failures in integral business practices such as deliveries and
manufacturing. In terms of the actual product, their technology is incredibly innovative. Tesla

vehicles are unlike any other EV; they have the highest safety rating possible, get better mileage
than any other brand of EV, and have access to the fastest chargers in the world (Publishing). In
terms of business strategy, the market Tesla is in is growing at an exponential rate, due to the
growing importance of sustainability to Millennials and Generation Z. (“Green Generation”)
They have also been branching into other markets with their creation of the battery Powerwall
and Powerpacks, and the introduction of their affordable electric vehicle, the Model 3. Finally,
they hold a D-2-C distribution channel, meaning they save money by not operating through a
dealership, and instead sell directly to their consumers. (Publishing)
Each of Tesla’s weaknesses contributes to their biggest challenge: their immense long-
term debt (Pulliam). First, they are continuously investing in R&D for new technologies, their
Supercharging network, and their new factory in Nevada. All of these projects are draining them
of the little capital they have. Tesla also continuously misses production deadlines and quotas.
Quarter after quarter, CEO Elon Musk sets overambitious goals for the company, which they
inevitably miss and from which fall deeper into debt. Musk is also involved in several different
companies, which splits his time and focus, depleting his competency in being an executive of
Tesla. Overall, Tesla’s $3 billion debt is their biggest weakness. This debt is continuously cutting
into their earnings because they are constantly paying it off, and is forcing the company to sell
more shares, halting their growth. (Publishing)
Vis Major’s proposed solution addresses Tesla’s biggest weakness: their $3 billion debt.
What we propose is to create adaptors for their Supercharging stations, so that any electric
vehicle can charge at the Superchargers, not just Tesla vehicles. This would benefit Tesla
because it would generate revenue by charging non-Tesla EVs for this service. Users would
purchase credits through the Tesla website in packages, where charging would be 40 cents per

minute, and $12 for a thirty minute charge, or 170 miles of power. Our cost and profit analyses
state that in the first year our revenue will equal the $250 million Tesla has already invested in
the Supercharging network, and a our profit will be at least $20 million. This would also benefit
Tesla because it serves their overall mission as a company: “To accelerate the world’s transition
to sustainable energy”. By opening up the world’s fastest and most extensive charging network
to all EVs, people will be more likely to purchase an Electric Vehicle because of the increased
accessibility, thereby widening the market. This solution also increases brand reputability and
awareness for Tesla, because all EVs will be using the service but Tesla’s name will always be
viewed as the best in the market.
MARKETING AND FIRM OVERVIEW
How the Firm Makes Money:
Martin Eberhard, engineer and entrepreneur, created Tesla Motors with Elon Musk
because they recognized the market need for a zero-emissions luxury car. Tesla’s goal was to
bring electric vehicles to the mainstream market by starting with a sportscar, to draw in interest,
then move immediately to sedans and other affordable, mass-market appeal cars (“Tesla Motors,
Inc.”). In June of 2010, Tesla became the first American car maker to go public since the Ford
Motor Company in 1956. Tesla produced solely Roadsters until 2009, when the Model S was

revealed. Since then, Tesla has designed two more cars, the Model X and the Model 3, and plans
to produce 500,000 units by 2018. Tesla’s major income comes from the sales of the vehicles
and other products such as the Tesla power pack. (Tesla 10K)
Major SBUs
Tesla has a narrow array of available vehicles for its niche consumer market. Starting
with the roadster in 2008, Tesla began its portfolio with an innovative but expensive mainstream
electric car. Now, in 2016, Tesla's portfolio has grown to include the Model S, X, and soon the
Model 3. While the Model S and Model X have done well for Tesla as luxury vehicles for their
target market, middle-class America will soon have access to the Model 3 as we move into 2017.
With the Gigafactory almost complete, Tesla will soon have the ability to meet production
quotas efficiently, and deliver their products to the newer and broader market to which it is about
to be open. All three Tesla vehicles serve a specific purpose, and in order to understand what
each car's role is within a consumer market, they must be evaluated individually (Tesla.com).
Tesla’s two biggest products, the Model S and Model X, while selling 50,000 units in
2015 alone, are far dwarfed by forecasts for the Model 3. So far, 325,000 Model 3 units have
been reserved, and at $35,000 each, these reservations add up to about $13.78 billion in implied
future sales. This record high launch means that presumably, the Model 3 will prevail as the star
of Tesla’s SBU as the most affordable and versatile EV in their portfolio. (Tesla 10K)
Buyers & Suppliers of Tesla:
Buyers: Tesla’s customer base is largely consistent of Generation Xers, whose age
ranges from 36 to 54. The reason for this is very simple: people aged 36 to 54 have the highest
discretionary income out of all generations, and therefore are the most capable of affording a

Tesla, but also young enough to enjoy a Tesla. According to Los Angeles Times, 11% of Tesla
owners also own a Mercedes-Benz and 10% also own a BMW. These two companies also have a
target market of Generation Xers. Aside from that, 25.3% of Tesla owners owned a Toyota
vehicle at the time of purchase. This percentage includes Toyota’s higher brands such as the
Lexus luxury division. This means the demographic typical of choosing high end, reputable, and
luxury vehicles, also views Tesla as on par with these household names. (“Who buys Tesla?”)
Suppliers: Tesla obtains their materials and parts from over 300 differernt
manufacturers; the main companies supplying these parts are AGC Automotive, Brembo, Fisher
Dynamics, ABC group and Panasonic. These are all very reliable manufacturing sources. Tesla
requires so many different suppliers because their vehicles call for a vast array of parts. Many of
these parts are so specific and particular to Tesla, that they are only made by one company,
making it difficult to streamline production or cut down on their supplier count.
(Investopedia.com)
Changes to Worry About: P.E.S.T.L.E. Analysis
In order to systematically recognize the changes that will affect Tesla, we performed the
P.E.S.T.E.L. Analysis on Tesla Motors.
Political sphere: Tesla has much to worry about in terms of the political environment of
the countries in which they operate. According to a Los Angeles Times article written in this
August 2015, Tesla receives about $4.9 billion in subsidies from government bodies under which
it operates (Hirsch 2015). Much of these subsidies are issued by governments in order to
encourage and enable the production of clean emission vehicles, which directly meets Tesla’s
mission. Another way politics can affect Tesla in directly is by overseeing the general
automotive industry and dealing fiscal blows to companies that break clean emission laws. In

2015, Volkswagen, who is a competitor in the EV industry, was found guilty of falsifying
emission reports in order to hide the horrendous negligence of pollution standards. As a result,
VW paid out 4.2 billion euro which lead to a net loss for that quarter for the first time in 15
years. This upset in the market will indirectly benefit Tesla by veering VW buyers away from
this market power and possibly towards Tesla.
Economic sphere: As we have seen in the past, oil prices are incredibly volatile. Even
now, some analysts speculate that by the year 2018 oil prices could reach triple digits once again.
Due to these speculations, it may be possible that the release of the model 3 coincides with a
boom in the price of oil. If this is the case, Tesla's cars may be used to substitute I.C.E. (internal
combustion engine) vehicles. Consumers are likely to see electric vehicles as cost effective
alternatives to a gasoline powered car. Another major economic factor is the increasing buying
power of consumers as global economies grow stronger. More and more people are able to
purchase luxury or higher priced goods as time goes on, with median household income
constantly on the rise in developed countries, more consumers will enter the market for Teslas.
Social sphere: The 21st century has brought about a huge focus on environmental
footprint - people are judged by the level of emissions they produce and by the efficiency of their
household - so Tesla’s emission-free cars are held in high standing. Another social aspect is the
fact that Baby Boomers are becoming increasingly more willing to spend money on quality
luxury, and electric vehicles. Teslas are expensive, but they cater to a specific, Silicon Valley-
central market of people who want to surround themselves with cutting edge technology.
Technological sphere: Tesla relies on technology. Electric Vehicles are not tried and
true; they are relatively new and still struggle with effectiveness. Tesla vehicles are fully electric
and have features such as automotive car driving and accident avoidance. Supercharging stations

charge Tesla vehicles at a highly accelerated speed, but their only downfall is their spread. The
stations are not evenly spread, so the Supercharging stations are not as efficient as they could be.
Environmental sphere: Climate change has been in the spotlight of media and
consumers mind for some time now, as new research suggests cataclysmic changes may come in
the near future. With the environment changing, temperatures rising, and carbon emissions
becoming a serious threat, Tesla is a great answer to many of these problems. Since Tesla
produces zero emission EV’s, consumers will see their products as the most efficient answer to
clean energy transportation. Moreover, with the Model 3 coming out, there will be a massive
amount of new consumers in the market for a Tesla vehicle as they become more affordable.
Overall, environmental shifts for the worst will in turn help perpetuate Tesla’s goals, and
ultimately drive their sales.
Legal Sphere: Tesla has legal advantages and disadvantages. Their main disadvantage is
the franchise law that does not allow manufacturers to sell directly to their consumers in certain
states. A large advantage for Tesla are the various tax credits for electric vehicles. There is a
$7,500 income tax credit nationally, and different, smaller tax credits vary from state to state.
From these, we can see that Tesla is challenged in many ways, at the same time affecting
both its customers and suppliers.
Analysis of the market:
The challenge VisMajor has decided to hone in on is Tesla’s immediate need for cash.
Since Tesla has evidently shown poor financial performances over the past few years, this
steamroller of the electric vehicle market may soon slow it’s innovation. Tesla’s long term debt
is exponentially increasing, therefore it’s ability to invest in new technologies and services is
becoming less viable. In turn, the electric vehicle market will likely see less innovation, and

stagnant growth if Tesla’s cash problem continues to grow. In terms of negative impacts on the
company's financials, Tesla would likely see a decrease of market share since they are less able
to meet consumer demand over companies like BMW, who now produce luxury electric
vehicles, and General Motors, who clinch the lower end E.V. market. Subsequently, with lower
share and sales volume, there would be no way for Tesla to roll profits over into research and
development for new cars. There seems to be a vicious cycle here. Tesla’s long term debt is
perpetuated by their undying dedication to bring affordable electric vehicles into the mainstream,
but with high costs and low profit margins, they continue to draw capital for R&D and other
expenses from the continued accrual of debt. If Tesla, the company that created and is
revolutionizing the electric vehicle market dies, so will innovation within that market.
Knowing how the challenge may affect the market as a whole, it’s import to know the
role Tesla plays in that market. In terms of market share, Tesla sold 25% of all luxury sedans in
the united states in 2015, which was a 51% increase in its overall sales volume from the previous
year. In general, it is estimated that Tesla retains between 25-30% of the luxury electric vehicle
market, however the overall electric vehicle market is a different story. Tesla’s market share is
difficult to find, but simple calculations can give an estimate as to their total U.S. Market share.
As of currently, Tesla’s U.S. market accounts for about 61% of its global auto sales.
(Statista.com) As of recently, Tesla has also accumulated over 125,000 deliveries (Young, 1)
which means that there are around 76,300 Tesla vehicles in the United states. Finally, dividing
the total number of electric plug in vehicles in the US by total Tesla’s delivered domestically, we
would come to the figure of 7.2% as Tesla’s U.S. market share. This figure may greatly change
as Tesla edges it’s way into the general electric plug in market with the more affordable model 3.

In order to market, a company must first have a product. Tesla’s product mix is rather
limited, with only three major models of electric vehicles available since it’s launch. However,
even with a limited product portfolio, Tesla still remains dominant in its niche market. Tesla
started with the Roadster in 2008, which launched the fully electric plug in market, then
progressed to the model S, and subsequently the less popular model X (Crossover model S).
While the model X and roadster were relatively popular compared to electric vehicles of other
companies, neither car has sold nearly as well as the model S. In fact, according to the Motley
Fool, in 2015, the model S contributed to 91% of total units sold by Tesla globally. However,
even though so many Model S cars have been sold year to date, the Tesla model 3 will likely far
exceed sales of the model S, due hundreds of thousands of reservations reportedly taken by Tesla
for the model 3 since it’s unveiling. Going forward, the world should expect great expansion in
Tesla’s product portfolio as they create more affordable products and more innovative
technology.
Currently, Tesla invests an impressively low amount of money into marketing. Musk has
discussed several times in the past why, and it says much about his confidence in, and drive to
build Tesla Motors from scratch. In an Adage interview, Musk stated “Right now, the stores are
our advertising. We’re very confident we can sell 20,000 cars a year-without paid advertising. It
may be something we do years down the road, but it’s certainly not something we feel is crucial
for sales right now.”. Since Tesla has no paid strategy, it’s informal marketing strategy is buzz
marketing. It lets the cars do the talking. It meets expectations with quality, and relies on
referrals to raise awareness for the brand. Over the past decade, Tesla has utilized several referral
programs that reward credit on vehicles for people who refer new customers. Newer programs
started rewarding discounts, credits, and tours of certain facilities owned by Tesla. Apparently

these incentives were enough to build Tesla up from the ground to a leading power in electric
plug in vehicle innovation.
Since Tesla has no formal marketing strategy, there is a gray line between the
demographics they look for. Idealistically, Tesla would want all generations of age to drive their
cars. However the economic discrepancies between millennials, and all past Tesla model sticker
prices means that mainly generation X’ers and baby boomers can afford the vehicles. As of right
now, it is estimated that generation X’ers (ages 35-54) make up about 55% of Tesla’s drivers in
the United States.While logically, one would think millennials would show much more interest
in the new Model 3, data measured by Quantcast suggests that the number of millennials
interested in the Model 3 are incredibly similar to those already driving Tesla vehicles. However,
Generation X’ers interest in Tesla’s new vehicle compared to actual drivers of the same age
group showed a noticeable jump of about 10%. One may infer that this could be due to economic
capability of the still financially weak millennials, but there is no way to Tell who’s buying the
Model 3’s until Tesla releases the data on the reservations. From the information provided so far,
it seems that Tesla’s current demographic is Males, aged 35-54, of upper-middle, to upper class
income, possessing a median income of around $150,000. In terms of psychographics, it’s easy
to peg an electric vehicle driver as a first mover, and as having an eco-friendly mindset.
Current Financial Analysis of Tesla
An in-depth analysis of Tesla’s financial statements are crucial for understanding the
business of the company. To study Tesla’s business, we look into the big three financial
statements, namely the balance sheet, income statement, and cash flow statement. It is important
to understand where they stand in terms of money, because our challenge is addressing Tesla’s
long-term debt.

Tesla’s balance sheet shows the company growing in size every year since it was
founded. However, it’s cash and cash equivalents has decreased from 2014 to 2015. Inventory
has increased, but this might be bad news because it may be an indicator that Tesla is not selling
enough cars. Property and other assets have dramatically increased by two folds every year and
will continue to increase with the addition of the gigafactory. Total assets increases at least 50%
per year and in their 2015 10-K filing, it shows that the company holds total assets of $8.092
billion. Unfortunately, as Tesla’s assets increases, Tesla’s liabilities increase just as fast if not
faster. In 2015, they show total liabilities of $6.961 billion.Total liabilities and its percentage
relative to its assets has increased to 86% in 2015. Stockholder’s equity is leftover with just a
little over $1 billion, but after accounting for operating costs, we see that they their retained
earnings are actually in the negative. (SEC, 2016)
Looking into their 2015 income statement, Tesla’s revenue in 2015 was $4.04 billion.
Cost of revenue came out to $3.12 billion, leaving a gross profit of a $923 million. After
operating expenses from R&D, Sales, General and Admin., and income taxes, they are left with a
net income of negative $888 million. (SEC, 2016)
In summary, Tesla’s income statement shows a very similar story to its balance sheet.
Unfortunately, cost of goods sold or COGS has also increased and has sustained its percentage of
the sales, hovering at around 70%. With most companies, as they increase in size, their costs to
produce per unit become cheaper and cheaper due to economies of scale. Tesla has yet to see
their cost per unit decrease. Tesla’s products are not cheap to produce to begin with, but with no
economies of scale to speak of, Tesla is not a profitable company. Although gross profit is a
healthy 33%, after selling expenses and general administration costs, and research and
development, Tesla has a negative operating income of $716 million in 2015. Net income is

further into the red with negative $888 million. Looking at the trends, it seems that Tesla is
costing more and more to operate, the bigger it grows. Although its gross profit has increased, it
is massacred by SG&A, income taxes, etc. Last, but not least, there are no dividends to speak of.
Tesla cannot afford to give its shareholders any dividends because it can not even be profitable.
Finally for their 2015 cash flow statement, we continue to see that Tesla is in the red with
net income at -$888 million. Total cash flow from operating activities are -$524 million. Total
cash flows from investing activities are -$1,673 million. Total cash flows from financing
activities are actually positive $1,523 million, but even this number might not be good news
because it comes from Tesla selling its own stock and from borrowing money. Change in cash
and cash equivalents are -$708 million. (SEC, 2016)
Despite bad results quarter after quarter in regards to meeting Musk’s goals, Elon Musk
is still bullish about the company’s future financial success. The Tesla Gigafactory in Nevada
will play a major role in pushing Tesla into large-scale operations. It will dramatically reduce the
cost of producing their cars and lithium-ion batteries, and it will help Tesla hit their goal of
delivering 500,000 cars by 2018. TSLA stock price has been hovering around $219-240 for most
of 2015.
Identified Business Challenge
Currently, Tesla Motors is facing many challenges that can harm their future success.
One major challenge that Tesla is facing, is their inability to meet their production quotas. Tesla
Motor’s acquires most of their revenue from selling their cars such as the Models S and the
Model X. In order for them to continue selling these cars at a sufficient production quantity, they
are dependent on several factors. These factors are both external and internal: maintaining their

desired quality levels while introducing new manufacturing levels, their suppliers ability to
deliver the required amount of quality parts in a timely manner, and being flexible in the
changing of design and production of products without sacrificing high quality (Tesla’s 10k).
Tesla cannot increase their vehicle production and deliveries if they have to constantly focus on
suppliers capabilities and constraints. Their desire is to increase their vehicle production to one-
million vehicles per year by 2020, but they cannot do so if they lack the necessary capabilities.
Missed production quotas of the Model S and Model X can harm Tesla’s brand, business, and
financial condition in the future. Additionally, Tesla has limited experience in delivering a high
volume of cars, therefore it is a challenge to increase the production tremendously due to not
having the resources and knowledge to do so.
Another challenge that Tesla is facing, is their dependency on their suppliers. Currently,
Tesla has hundreds of suppliers due to the fact that the Model S and Model X contain so many
parts. Additionally, for many parts of these cars, they have only one supplier that provides them.
This is a major issue because a single supplier could halt the production of both cars. Tesla has
the capabilities to produce these parts with single source suppliers, but it is too costly and timely
for them to do so. Additionally, external factors such as natural disasters, wars, labor issues, and
government changes can have an impact on the supplier's ability to provide Tesla the required
parts for their cars. Tesla has attempted to find other suppliers to provide them parts, but
ultimately failed to increase their supplier count. Furthermore, Tesla can not immediately
increase their vehicle production if they cannot find suppliers to sufficiently supply them the
necessary parts in a timely manner. In order for Tesla to continue to grow as a company, they
need to address this issue with suppliers in the near future.

Another challenge to address is Tesla’s Supercharger infrastructure. Tesla’s
Superchargers are charging stations that allow you to fully charge your car in 75 minutes. These
stations are free of charge for Model S users, but future models will have to pay for this feature.
Tesla is lacking in this Supercharging infrastructure, however they are planning on adding more
stations across the country in addition to the current 713 stations. Although Tesla is expanding
this network, the Superchargers are not used often by the owners of the Model S and Model X.
The Supercharging stations cost $270 thousand each, and there are running costs such as
maintenance and electricity. Tesla is getting no return on investment. This is a challenge for
Tesla because they invested $250 million in this infrastructure that is not being fully utilized.
The challenge that we have decided to pursue is Tesla’s lack of cash. As of Q3 of 2016,
Tesla’s Accounts Payable and Accrued Liabilities totaled up to $2.5 billion (Tesla 10K). Their
unrealistic production goals, dependency on suppliers, and lack of return on Supercharging
investment have driven Tesla deeper into debt. We understand that solving Tesla’s cash problem
is a huge feat to undertake, but we believe we have a solution that will prove viable for years to
come.
Recommended Response
The response that we recommend is simple, yet revolutionary. We suggest that Tesla
open up their Supercharger network to other electric vehicles by developing an adaptor for the
Tesla Supercharger plug. The suggested adaptor would convert the Tesla model plug, into a
Combined Charging System (CCS) model plug. The CCS model plug is used by major
carmakers such as Audi, BMW, Ford, General Motors, Porsche, Volvo, and Volkswagen
(Voelecker 2016). At this point in time, Tesla has invested about $250 million in their
Supercharger infrastructure. While Supercharging is free with the Tesla Model X, the Model S

and Model 3 will be coming with add-on Supercharging packets. Tesla gets zero return on
investment when it comes to Supercharging; the add-on Supercharging packet covers part of the
electricity fees paid by Tesla. If Tesla develops an adaptor and charges non-Tesla users’ fees,
they will effectively establish a new source of income. Because this adaptor would open up the
electric vehicle market and allow innovation and expansion to take hold, we are calling the
adaptor Tesla’s Boundless Adaptor.
Tesla already has a credit system established for their Supercharger network. When a
Tesla pulls into a Supercharger station and plugs into the charger, the software in the car and the
plug communicate, tracking how many minutes the car was charged, and how much to credit the
Supercharging account with. Installing software into other electric vehicles is a risky and
potentially dangerous step, so we are proposing the Tesla GO. The Tesla GO is a small device
that attaches to your window and operates similarly to an EZ Pass. When you pull into the
Supercharging station, the Tesla GO will begin communicating with the Supercharger and the
Supercharger will track the amount of minutes spent charging. When the charge is complete, the
Supercharger will send the final number of minutes to the Tesla GO, and the Tesla GO will log
and remove the corresponding amount of credits from your account automatically. In terms of
pricing- each credit will be equivalent to 1 minute of charging, with a cost of 40 cents per credit.
Therefore, a 30-minute charge of 170 miles of power will only be $12. We believe that electric
vehicle users will be willing to pay for access to Tesla’s Superchargers because they will be
willing to pay for convenience. Charging your car to 170 miles of power at home could take
anywhere between 5 to 6 hours. In order to assess the success of this suggested solution, Tesla
will need to gather information from the Supercharging stations including the number of Tesla
E.V.’s versus non-Tesla E.V.’s, the average charge time, and the average amount of daily traffic

at the stations. Tracking this information over time will reveal weak spots in the Supercharging
Network and will allow Tesla to react with new stations, more chargers at certain individual
stations, or more adaptors per station.
Pro’s and Con’s:
There are three major benefits to the implementation of the Boundless Adaptor. First, the
creation of a new revenue source for Tesla, second, opening up the electric vehicle market to a
wider range of customers, and finally, establishing Tesla’s superiority. Our conservative profit
forecast was calculated by anticipating a rate of 10,000 users each day, six months after the
installation. We are also anticipating an average spending amount of $10 each time for each user
(“Cost of charging an Electric Vehicle for 30 minutes”). So there will be an estimated revenue of
$100,000 each day which, in turn, generates a revenue of $36,500,000 each year. Tesla has the
opportunity to do for the electric vehicle market what Rockefeller did for oil. Rockefeller
streamlined the oil business, making it as efficient and reliable as possible, thus gaining trust and
investors, and driving innovation within oil itself and the products that ran on oil. Right now, the
electric vehicle market pales in comparison to the gas-powered vehicle market. With something
as simple as accessibility- that all could change. Especially with the Tesla Model 3 and the
Chevy Bolt being released in the next couple of years, more average Americans will be looking
toward the electric vehicles, and a system like the Supercharger network is a big enough
incentive to go electric over gas. This will widen the market as a whole and encourage
innovation to make electric vehicles operate at their peak ability, which lives in line with Tesla’s
mission to accelerate the world’s transition to sustainable energy. This newly opened market will
undoubtedly bring competition, but this is where the third benefit is key. Tesla as a brand already
stands for luxury and efficiency, and these Superchargers are perfectly representative of that

brand standing. The Tesla Boundless Adaptor will not only be the reason new consumers enter
the market- but it will also be the reason why new consumers will value Tesla over every other
brand. They know that they could purchase any electric vehicle, but Tesla will always provide
the ultimate vehicles in terms of efficiency, ability, and service.
Possible Competitor Reactions:
The natural competitor response would be to build a Supercharging network of their own,
offering free charging to their vehicles in an attempt to bring customers back and to promote the
sales of their own car. Audi, BMW, Nissan, and Volkswagen, cars that use the SAE J1772 plug,
have announced that they are going to support and fund the Combined Charging System’s
research into a quick-charging network. We do not expect any response from General Motors;
CEO Mary Barra has stated that General Motors is “not actively working on providing
infrastructure [for the Bolt EV]” (Voelecker, 2016).
The advantage Tesla has over this potential competitor response is the fact that Tesla
already has this highly technically intricate network. While the CCS system has some chargers
established, the numbers pale in comparison to Tesla’s. If production of new Superchargers goes
smoothly, Tesla will have 4,601 Superchargers in North America alone (Tesla.com). The
opportunity for competitor response could be completely demolished by the Boundless Adaptor.
Tesla has the most efficient and most strategic stations; there will always be a station within full
charge from you.
Cost Breakdown:
The start-up cost of this project will be $10 million, a miniscule investment compared to
what Tesla has already put into the Supercharging infrastructure. We break down that $10
million 50/30/20; $5 million goes into research and development, $3 million goes to installation,

$2 million goes to marketing. Operating cost of this project will depend mostly on the level of
usage the Boundless Adaptors receive, with Tesla’s main cost being energy. In terms of research
and development, we know that the technology is well within Tesla’s reach. Tesla has already
developed an adaptor for the CHAdeMO plug, used primarily in Japan. Installation of these
adaptors is incredibly easy so most of the $3 million estimation accounts for the training and
wages of installer, and the cost of safe transportation. Our marketing plan is highly unique, and
representative of the fresh idea’s you will receive from VisMajor Consulting. Currently, Tesla
spends $6 on advertising per vehicle while the industry average is around $1,000 per car
(Duggan). With the addition of the Boundless Adaptor, the electric vehicle market will suddenly
become much more accessible to the average buyer, thus Tesla needs to reach outside of their
typical target markets.
Marketing Details:
The “Sustainability Beyond Limits” campaign will be launched through a press
conference held by Musk, and continued through online forums, and Google Words. Google
Words will push the articles written about the Boundless Adaptor straight to the top of Google
search results relating to key words of our choosing, such as “electric vehicle,” or “car charging.”
Another huge section of our Sustainability Beyond Limits campaign is the guerilla marketing
chargers. In order to convey the fact that Tesla Superchargers now connect to any CCS-using
electric vehicle, we suggest that Tesla invest in kiosks in luxury malls that offer free
“Supercharger” phone charging. The kiosks will have six mini Tesla Superchargers that offer
charging for iPhone and Samsung phones, the two most common phone plugs in the United
States. The table itself will have a map of the actual Supercharger stations in the United States,

as well as facts about the Boundless Adaptor, and a QR code that they can scan for more
information on the Sustainability Without Limits campaign.
Project Timeline:
Our plan is designed to be processed quickly, taking only one business year to fully
actualize. Implementation will begin in Q1 of 2017 with Research and Development. Because
we believe this technology is well within Tesla’s reach, we estimate that R&D will only take one
quarter to complete. Q2 will consist of installation of the Boundless Adaptor to the
Superchargers. Once all of the adaptors are installed and ready for use, Q3 will consist of our
Sustainability Without Limits marketing campaign. We estimate that Q4 of 2017 will begin to
show profits. We expect to break even and start profiting by the end of the 2017. On the
conservative side, we can still expect almost $20 million in gross profit. However, if everything
goes according to plan we can expect over $50 million in gross profit in just the first year.

Conclusion
The biggest challenge faced by Tesla is that they have no money. They spend the capital
they earn so quickly, which puts them in a state in which they will not survive the market. Their
$3 billion debt was caused by nothing other than poor executive decisions. Elon Musk is
undoubtedly a genius, but when it comes to running Tesla, his attempts at moving them forward
have always ended up pushing them back (Pulliam). The Tesla Supercharging network is a
perfect example of this ingenuity going haywire. Tesla has this incredible technology in their
Superchargers that makes them the fastest in the world, but their administration of it is hindering
its success. First, they have been investing in this network despite its vast under usage. Second,
they made this service free to Tesla drivers, meaning their investments of $270 thousand per
station, and $250 million total, provides no monetary return (Keeney). Lastly, they restricted this
service to only Tesla vehicles, which goes against their own mission of accelerating the world’s
transition to sustainable energy, because it restricts a major proponent of the choice to own an
electric vehicle to a small portion of the market.
Some questions regarding this solution center around its implementation, a possible
negative impact on Tesla’s own vehicle sales, and its actual usage rates. In regards to
implementation, there is question as to how Tesla will pay for the production and installation of
these adaptors, if they are truly in such a financial hole. Our plan accurately addresses that
question because we have devised a cost efficient product and marketing strategy. From R&D, to
installation, to marketing, our solution will cost only $10 million, which is well within the firm’s
financial ability. In regard to vehicles sales, the doubt has been raised that if any less expensive
EV can utilize the Tesla charging network, consumers would stop purchasing Tesla vehicles and
opt for the more affordable choice, such as the Nissan Leaf or Chevy Volt. However, we are not

concerned with this either because Tesla is releasing its own option for an affordable EV with the
release of the Model 3. By the time our plan is fully implemented, the Model 3 will be well into
production and readily available to the public, diminishing any reason to not purchase a Tesla
vehicle (Sparks). Finally there is the question of whether or not EV users will actually utilize this
service. This is the most worrisome doubt because it has more grounding than the others. This
grounding being that Tesla vehicles use this service very little, so there is question as to whether
non-Tesla vehicles would use it at all. We combat this by again proving the point that other
electric vehicles simply have no better option other than to use this infrastructure. There is
nothing as vast, or as efficient, as Tesla’s supercharging network available to other brands of
EVs, making it undoubtedly the smartest choice (Voelcker).
Our proposed solution solves Tesla issue like no other, because it will provide them
revenue, while staying perfectly in line with the company’s mission. Adding adaptors to the
supercharging network will bolster their usage rates exponentially, and not only make up for
money already invested, but also generate a new revenue Tesla had never had before. This plan
turns Tesla’s least profitable product into a highly profitable infrastructure, subsequently helping
them relieve their debt and solving their biggest challenge.
Sources Cited:
"Tesla - 10K Annual Report." Tesla - Annual Report. United States Security and Exchange
Commision, Nov.-Dec. 2015. Web. 29 Nov. 2016.

"Tesla — Tesla." Tesla — Tesla. Tesla Motors, n.d. Web. 29 Nov. 2016. www.tesla.com
"Green Generation: Millennials Say Sustainability Is a Shopping Priority." Green Generation:
Millennials Say Sustainability Is a Shopping Priority. Nielson, 5 Nov. 2015. Web. 16
Sept. 2016.
Hirsch, Jerry. "Elon Musk's Growing Empire Is Fueled by $4.9 Billion in Government
Subsidies." Los Angeles Times. Los Angeles Times, 24 Aug. 2015. Web. 23 Nov. 2016.
Publishing, Value. "SWOT Analysis: Tesla Motors, Inc.". Valueline.com. N. p., 2016.
Web. 16 Sept. 2016.
Voelcker, John. "GM Won't Fund CCS Fast-Charging Sites For 2017 Chevy Bolt EV." Green
Car Reports. N.p., 13 Jan. 2016. Web. 28 Oct. 2016.
Maverick, J.B. "Who Are Tesla's (TSLA) Main Suppliers?" Investopedia. N.p., 28 May 2015.
Web. 28 Nov. 2016.
Hirsch, Jerry. "Who Buys Teslas? Prius Owners and Drivers of Exotic Cars." Los Angeles
Times. Los Angeles Times, n.d. Web. 28 Nov. 2016.
President, BCG Senior Vice. "Tesla's Revenue by Region 2012-2015 | Statistic." Statista.com.
Statista, n.d. Web. 29 Nov. 2016.

Sparks, Daniel. "Tesla Motors Inc.'s Model 3 Ambitions May Be More Realistic Than You
Think." The Motley Fool. N.p., 028 June 2015. Web. 29 Nov. 2016.
"Tesla Motors, Inc." International Directory of Company Histories. Ed. Drew D. Johnson. Vol.
124. Detroit: St. James Press, 2011. Business Insights: Essentials. Web. 11 Sept. 2016
Keeney, Tasha. "Supercharger: It Could Cost Half the Price of Gas | ARK." Ark-invest.com.
ARK Analyst, 07 Nov. 2016. Web. 29 Nov. 2016.
Pulliam, Susan, Mike Ramsey, and Jeanne Dugan. "Elon Musk Sets Ambitious Goals for Tesla-
Often Falls Short." The Wall Street Journal. WSJ, 15 Aug. 2016. Web
Young, Angelo. "Tesla Motors (TSLA) 1Q 2016 Sales: 14,820 Model S, Model X Cars Were
Delivered In First Three Months; Model S Sales Jumped 45%." International Business
Times. N.p., 04 Apr. 2016. Web. 29 Nov. 2016.
Prateepvanich, Art. "Tesla Model 3 ‒ An Electric Car for the Masses or Still the Select Few? |
Quantcast." Quantcast. Quantacast, 01 Sept. 2016. Web. 29 Nov. 2016.

Appendix and Supplemental Materials
Graphs Illustrating Tesla’s Production Faults and Long-Term Debt

Charts illustrating Tesla’s Balance sheet, Income Statement, and Cash Flows
Balance Sheet

Income Statement
Cash Flow
Examples of Online Advertising Campaigns

Examples of Guerrilla Advertising Campaign

Photo of Adaptor In-Use

Graph Illustrating Profit Forecast for Proposed Solution

FINALIPWRITEUP

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to FINALIPWRITEUP

Similar to FINALIPWRITEUP (20)

FINALIPWRITEUP