The document analyzes Tesla's strategic business plan and charging infrastructure strategy. It argues that Tesla's proprietary charging infrastructure puts its investments at risk if a universal charging standard is adopted. The document recommends that Tesla seek partnerships with large charging station networks to expand its geographic coverage and gain greater market share by moving towards a standardized charging system. This would fulfill Tesla's mission to accelerate electric vehicle adoption.

1. 4/17/2015
Professor Brad Poulos | Karthikeyan Govindasamy - 500443276
BUS800–
CASE ANALYSIS THE AUTOMOTIVE INDUSTRY

2. Tesla Case Analysis
Introduction
Tesla's strategic business plan utilities patent rights. The strategy is currently non-
relationship oriented and is focused on averting collaboration with competitors. Tesla has mad
electric car adoption more attractive and easier to own, yet they contribute to the some of the
problems associated with electric vehicle acceptance. The focus of Tesla is aimed at
differentiate itself with technological advancements in electric charging infrastructure and
vehicle efficiencies. A universal charging infrastructure would enable a wider available platform
for a variety of automobile brands to expand their charging coverage geographically; expedite
the adoption of electric vehicle. This places Tesla’s investments on research and development of
their proprietary charging infrastructure at risk. If there was a universal charging infrastructure,
Tesla would lose the opportunity to gain market share with strategies. This is due to the lack of
building rapport-oriented patent strategy, and the lack of close collaboration with other auto
manufacturers. In the current electric auto market, it is essentially a battle of who has greater
coverage geographically, and which customers are using their intended charging stations. All the
other auto manufacturers are trying to build their own networks; this slows down electric car
adoption. Moreover, this inhibits mass production of Tesla vehicles (Financial and strategic
objectives), along with driving revenues down from lack of adoption; decreasing Tesla’s market
share in the electric car industry.
Analysis
The electric auto manufacturing industry is driven by investments in research and
development in technology, and the product developments. Currently, the R&D of alternatives
to carbon based fuel, and fuel-efficient vehicles are vital to competitive purposes. As observed
in the key success factors, technology collaborations are needed for product innovation in niche
market, and development of new products become more cost effective. As charging stations are
expanded geographically, they become more convenient to access as a result; this increases the
value of the network/ product of the auto brand.
At this time, collaboration within the auto industry is suggested to plan, fund and build
the charging infrastructure that is needed to make electric car assumption more economical.
Tesla’s wants to license their patents to competitors to create a common, and rapidly evolving
technology platform, yet doesn’t prescribe the depth in which these patents would be
collaborated on (Strategic issues). Tesla’s mission statement is to “accelerate the advent of
sustainable transport by bringing compelling mass market electric cars to market as soon as
possible” (Musk, 2006) , this should be a stimulus to be more open for collaboration and working
closer with other manufactures.
Tesla announced that auto manufactures would be able to use their patents in the hopes to
increase electric car adoption. In order for automakers to use Tesla’s Supercharger

3. infrastructure, manufactures would have to utilize Tesla’s design and patents. Manufacturers
need to use Tesla’s patented technology or develop vehicles that can accept 135kW output of
Tesla’s Superchargers. This is one of fastest charging stations on the market, and Tesla wants
other electric car manufactures to follow suit by following their charging standards. This would
enable other manufactures to use Tesla’s charging stations, and seems the collaborations would
not extend beyond that.
In turn, electric car manufacturers are not interested in collaborating with Tesla Motors.
This is evident, as they are investing heavily in their own charging infrastructure, instead of
using Tesla’s patents and designs, even though Tesla’s charging system is the fastest on the
market. BMW and Nissan Motors both declined the offer to use Tesla charging stations; instead
distributed their own charging stations. Manufacturers are selecting more economical
geographical coverage and networks with higher population density. The variation in charging
standards arise from manufacturers implementing different charging strategies: quick and cost
effective. This ultimately affects the advancement of a collective charging standard and the
objective of widespread electric car adoption.
The electric auto industry is amidst an ongoing battle to develop and build their own
charging station network. Whoever builds the most utilized and widespread network will
become the leader of the industry. The leader will have the largest market share; will result in
other charging networks being utilized less or worst, obsolete. Providing value to consumers is
one of the ways automakers are attracting customers, thus allowing for quicker expansion of
their charging networks. Having a larger charging network provides a strong influence to
electric car adoption; the ease of access to charging stations directly correlates with the firm’s
market share. Relatively, Tesla’s Supercharger infrastructure is smaller than BMW and Nissan’s
networks. This can place Tesla’s investments on R&D in the Supercharger network at potential
risk.
If Tesla and other industry players will not cooperate and collaborate with each other to
enable a universal charging system, or adapt their products to work on other charging systems,
they will lose access to the larger infrastructures presently available. BMW who has partnered
with ChargePoint, along with Nissan’s own charging stations are bigger than Tesla’s
Supercharger network. Tesla is losing the opportunity to capitalize on these large charging
infrastructures, and limiting it to their Superchargers, which have less coverage geographically;
makes using their vehicles less convenient to customers. Consumers may value a larger
geographic coverage more, thus deter sales from Tesla due to their lack of charging stations.
Decreasing sales would prevent Tesla from mass-production, further decreasing their profits and
reducing their influence on the electric car marketplace.
Alternatives

4. Tesla’s vision is to accelerate the world’s transition from carbon fueled economy towards
an electric economy; all three of the alternatives focus on increasing electric automobile adoption
in a variety of ways. To gain greater market share and have greater influence in the automotive
industry, Tesla must focus on the subject of creating a standard and expansive charging
infrastructure for electric car.
Alternative 1: Tesla should strive to expand and build a stronger relationship in the auto
manufacturing industry and be open to collaboration on developing charging systems/ systems
by adapting their patent strategies to be more relationship-oriented. Industry members should
cooperate and work closely with each other to find solutions and utilize economics of scale to
make a cost-effective car charging system. They should invest in R&D in electric car systems,
and strive to make it the best alternative standard to carbon emitting vehicles. Furthermore,
industry players should invest in the electric charging infrastructure as a whole, and put greater
efforts together. This will decrease the risks taken by Tesla to develop the Supercharger
network, while building an evolving and standard platform that eases the adoption of electric
automobiles. The issues of disagreement between manufactures make this alternative
challenging to implement.
Alternative 2: Tesla should re-examine their Supercharger infrastructure designs and make it
further cost-effective and attractive to other electric vehicle manufactures to use. It should
examine the cost at each level of the supply chain. Manufactures could possibly be discouraged
from utilizing Tesla’s patents due to licensing that are not cost-effective. This alternative is to
make licensing of their patents to make it easier to adopt in industry. This will encourage
industry players to use Tesla’s charging standards. A standard infrastructure will pivot around
Tesla’s standards and expedite electric car adoption.
Alternative 3: Tesla should expand their geographic coverage of charging stations. They can do
this rapidly by seeking partnership/ strategic alliance opportunities with larger transnational
charging station networks like ChargePoint and incorporate their technologies to reap additional
benefit from other networks. Tesla should review ‘combo charging’, which is a standardized
charging station that provides industry leading charging standard. Tesla, who already uses SAE
J1772 standard electric connectors, could effortlessly convert to using their standard to take
advantage of their geographic coverage and high charging standard. They should seek to have
their charge level alongside other manufactures in the combo-charger package. This will not
only create a unified infrastructure, it will promote electric car adoption, and give Tesla the
prospect to gain market share when compared directly on geographic coverage of stations.
Effectively translating to reduced wait times for customers to charge the cars at each location;
potential customers may switch to Tesla as a result.
Alternative Scoring Chart

5. The alternative score chart consists of the 3 alternatives analyzed above and they are
rated 1-3 (1 = least effective, 3 = most effective). Alternative 3 scored the highest among the
3 alternatives, thus is the recommended solution. Alternative 1 is the least effective and most
difficult to implement because each company in the industry has their own strategic plans.
E.g. Tesla is concerned with quality/ expediting electric car adoption, while BMW is more
concerned with cost/ effectiveness. Alternative 2 is a valid solution, however, dependence on
other manufactures utilizing Tesla patents and systems could be a slow process. There is a
possibility manufactures can adapt and implement systems quickly – it is very uncertain.
Recommendation
In conclusion, Tesla Motors should consider seeking partnerships/ strategic alliances with
large transnational charging station providers. This will strengthen their positon and expand
their charging infrastructure by moving towards a standardized charging system, ultimately
fulfilling their mission to expedite the transition to adoption of electric Automobiles. Thus,
reducing the risk of their investments – R&D; maximizing return on the Supercharger
charging network.

6. External Analysis
Automotive Manufacturing Industry
PESTEL Analysis
Political
 Political notion to improve car specifications such as MPG standards expected by 2016
(Ruiz, 2014).
 State level regulations in the USA prohibit direct-sale business model. These bylaws state
companies are only allowed to sell cars to customers via dealerships, and not retail
locations owned by the manufacturer. (Muller, 2014).
 Government encouragement of electric car purchase. The City of Vancouver promotes
condos to construct auto charging stations for residences (Electric Vehicles, 2014)
 The Obama administration is promoting clean energy jobs and technologies; funds to
green energy initiatives which attracts auto manufactures to develop green technology
(Keane, 2013).
Economic
 Cost of gasoline is decreasing, they are below the 10 year average, and are at a 4 year
low.
 U.S. has exited the 2008/2009 recession, and is on an expansionary phase of the
economic growth.
Socio-cultural
 Consumers increasingly concerned about increasing carbon foot print and gasoline prices.
 Consumers are critical of price, safety, appearance, performance, and longevity.
 Consumers are crucial about a sustainable future and protecting the environment.
Technological
 Lots of technological advancements in auto manufacturing in recent years. Mostly in
sedans and coupes for being lighter and more fuel efficient (Ruiz, 2014).
 Modern cars are designed using computer assisted design (CAD) software, which can
expedite the design process from several months to a few days (Ruiz, 2014).
 Wide engagement of green technologies (Ruiz, 2014).
Environmental
 Petroleum is a non-renewable natural resource, and depleting at an alarming rate.
Shortage of oil in the future will be significant.
Legal and Regulatory
 Increasing safety regulation on pollution control and fuel consumption (Ruiz,2014)
 Patents on hybrid electric technology and all electric automobiles.
 When emission regulations change, manufactures have to capitalize on new technology,
which affects their costs (Ruiz, 2014)
 Federal law requires manufactures to recall any part that may be defective, and that may
pose an unreasonable risk to safety (Ruiz, 2014).
Implications
 Since the global economy is coming out of a recession, and back to the economic growth.
Auto manufactures should take advantage of the growth phase and invest all their
resources to developing green technology. Sustainable fuel source in the future will have
more support and benefits than ever before. Consumers are gradually purchasing more
fuel efficient cars, along with lower carbon footprint producing vehicles.

7. Industry Economic Traits
Market Size
 The industry earned US $102.3billion in revenues, and growth is expected to total at
4.5%. There is a plateau in auto sales globally. (Ruiz, 2014)
Buyers
 Generally auto dealers and a moderate portion of sales are from bulk purchases.
Buyer’s requirements
 Increasing price of gasoline, have made consumers more price conscious. Consumes
demand for smaller, lighter, and more fuel efficient vehicles is growing (Ruiz, 2014)
Number of rivals
 The automotive industry is dominated by a very few large companies. The top four
automakers accounted for nearly 63% of the industry output in 2014 (Ruiz, 2014).
 There is a high barrier of entry for the auto manufacturing industry due to the high capital
requirements, rapidly changing technology, supply chain management, and the need for
advance manufacturing facilities, vehicle design licenses, skilled workforce, and
regulatory standards for environmental safety (Ruiz, 2014).
Scope of competitive rivalry
 To achieve long term success, automakers compete internationally. Due to globalization,
foreign markets generate a larger portion of the revenue (Ruiz, 2014)
Degree of product differentiation
 Competitor’s products are nearly identical. The consumers deciding factors are the cost
of the vehicle and the effect it has on the environments (Ruiz, 2014)
Product innovation
 The advantage having a system of all electric automobile, with a hydrogen charging
system infrastructure. The initial capital is very costly, as more stations are employed, it
will become more convenient for consumers. This is strongly correlated to electric car
sales.
Production capacity
 Increasing electric car sales revenues will encourage more manufactures to expand
productions in the near future (Ruiz, 2014).
Technological change
 Automotive industry is rapidly advancing in implementing technology in their products.
This requires sophisticated facilities to manufacture the vehicles (Ruiz, 2014).
 Research and development is crucial in advancing hybrid, fuel efficient, and alternative
energy vehicles (Ruiz, 2014).
Vertical integration
 Vehicles are manufactured from thousands of components, which are assembled together
in the manufacturing plant. It would be cost forbidden to manufacture all the parts
themselves. They require long-term contracts with several suppliers for parts in the
vehicles (Ruiz, 2014).
Experience and learning curve
 Efficiently managing the supply chain and lowing costs in the process.
 Negotiating with labour unions (Ruiz, 2014)
Implication
 There is a high barrier of entry to automotive manufacturing industry. It is capital
intensive, along strong rivalry, and product innovation. Firms will struggle to gain

8. market share while the market cycle renews after the recent recession in 2008. The
increasing popularity of green and alternative energy technology is retracting the industry
back to the growth phase.
Porter’s 5 Forces
The Industry: Auto Manufacturing
Sector: Electric and hybrid vehicles
Rivalry – Moderate
 Increasing demand for green energy/ alternative to carbon-emitting energy.
 Competitor’s products are differentiated by travel range, price, features, and
compatibility with charging infrastructure.
Buyer Power – Weak
 Auto dealers make up a significant portion of the sales in the industry.
 Dealerships have large inventories, and the electric car industry is relatively new. It is
not very likely for dealerships to switch auto manufactures due to cost.
 There is no all electric automobile manufactures that sells to dealers.
Supplier Power – Weak
 Large network of suppliers/ availability of auto parts and batteries.
 Majority of suppliers rely of a few auto manufactures to buy their parts, if one
manufacture decided to switch suppliers. This could be economically detrimental to the
supplier’s business.
 Suppliers rely on the demands of the manufactures for revenue, they have little
bargaining power.
Threat of New Entrants – Weak
 Auto manufacturing industry has a high barrier to entry, due to high capital requirements,
and rapidly changing technology, along with compliance with safety and environmental
standards; the need for excellent supply chain, vehicle licences, and an experienced
workforce (Ruiz, 2014).
Threat of Substitute – Strong
 There is a growing number of manufactures producing hybrid and all electric vehicles.
 Public transportation is also a convenient method of traveling. Relatively cheap, and no
required maintenance costs by end user.
Implication
 Taking advantage of direct sale to customers will have an edge over the conventional
method of having dealerships selling to consumers via showrooms. Consumers need to
congregate to have a greater buyer’s power to negotiate, versus the buyer power at a
dealership.
 Strongest force is the threat of substitute, manufactures must collaborate to promote
green energy/ alternative energy, which will expand the charging infrastructure and make
electric cars more convenient to use; produce a lower carbon footprint.
Driving Forces
Changes in Industry’s long term growth rate
 Minimal changes to number of competitors in the industry due to high barrier of entry.
Increasingly, more auto manufacturers are developing hybrid or all-electric cars (Only a

9. select few manufactures have all electric cars ready for market, discussed later in the
report).
 Expected economic growth in the next 5 years (Ruiz, 2014)
 Emergence of new markets such as the Asian market will continue to be the focus for
many major manufactures. As these economies grow, so will the wealth of its
population; demand for automobiles will increase. Expect American auto exports to rise.
Emerging technology
 Rapid advancements in hydrogen fuel cell and battery technology change the
performance and capabilities of the vehicles.
Product and market innovations
 Tesla is creating an innovative method of marketing and selling to the consumers via
retail locations rather than traditional dealerships.
 New innovations in battery and power management technology will allow for larger
driving ranges.
Increasing globalization
 Some auto manufactures generate greater portion of their revenue in foreign markets
(Ruiz, 2014)
Change in cost and efficiency
 Tesla’s Gigafactory will change the battery industry, by creating efficient production
plants the cost of lithium batteries will decrease for all electric vehicles.
 Auto manufactures have production plants to improve efficiency of the supply chain; in
turn decreasing costs and increasing profitability.
Implications
 There is a decline in sale of gasoline vehicles due to environmental concerns and negative
stigma of carbon emissions; as a result the purchase of hybrid and all electric vehicles has
risen. Furthermore, electric cars/ hybrids are becoming more popular as more charging
stations become available, and the range on batteries increase.
 Auto manufacturers are beginning to capitalize on this market segment by developing
their own hybrid/ electric cars. This means more competition entering the market in the
long term due to growing societal, political, and economic pressures that will be
favourable.
 The Asian market, specifically China is rapidly growing. The demand for cars is
increasing in foreign markets; automakers should allocate resources to supply this
demand. Large portion of auto sales from U.S manufactures already come from abroad.
Strategic Group Map
Implications
 Chrysler does not currently have any electric
vehicles; society views the brand as having
non-environmentally conscious vehicles.
They are situated in the worst position in the
industry to sell electric vehicles.
 Majority of the automakers are situated in
the mid-right of the map, if they lower their
perceived carbon footprint they will be in

10. the best position in the industry. Meanwhile, if Tesla expands their retail locations
globally, they will achieve a greater geographic coverage which will shift them to the
bottom right region of the map. This will be the best position for companies in the
electric vehicle market.
Strategic Moves
Current Strategy and objectives
 Ford is in development for 6 new electric auto models by 2016, also with expanding their
geographic coverage.
 Tesla offered to share the charging infrastructure to all auto manufactures. BMW rejects
the offer, and provides its own charging stations for its all electric car i3. Likewise,
Nissan provides its own charging stations; manufacturers’ stations charge their own
models and no other brand models (Ruiz, 2014).
 GM is beginning to develop all electric vehicles to compete with Tesla.
Capabilities
 Nissan is the industry leader for low priced all-electric automobile: the Nissan Leaf.
Nissan currently has 500 charging stations, that provide free charges to users (Nissan
website)
 Tesla has the longest range of any electric car available on the market (Ruiz, 2014). Have
200 charging stations. Constructed a Gigafactory to mass produce lithium-ion batteries,
this would provide higher capacity batteries for lower cost.
 BWM‘s partnership with ChargeNow provides 18400+ charging stations and expanding
500 stations additionally each month (BMW website); provides free charges to i3 users.
Assumptions
 A larger network of charging stations is very valuable for customers; automakers are
taking advantage of this and expanding their stations to increase coverage.
 Offering free charging to users provides an incentive for consumers to purchase those
brands vehicles. The manufacturer with the most charging stations will likely gain
market share.
Implications
 Currently Tesla has the best overall all-electric car. They have best battery production
capability and charging system infrastructure, which are two of the key factors to success
in the electric car business. Tesla doesn’t have to phase out gasoline vehicles like the
other manufacturers, which means less cost.
 There’s a strong correlation between size of charging station network and the number of
cars sold. Since manufacturers do not want to collaborate on a universal charging outlet,
consumers just have to choose the brand with the most convenient locations to charge
their vehicles.
Key Success Factors
 Technology collaborations are needed for product innovation in niche market, becoming
more cost effective.
 Excellent supply chain and distribution network to get the product to the customer in a
timely manner.
 Developing networks for exporting to foreign markets (Ruiz, 2014).
 Economies of scale, maximizing work flow and resources to take advantage of cost.
 Competitive advantage of alternative fuel/ all-electric car with technology developments.
Industry outlook

11.  The U.S economy is coming out of the 2008 recession and is transitioning to a growth
phrase. Auto Manufacturers must take advantage the growth and invest fully in the
development of electric/ hydrogen fuel cell vehicles.
 The product life cycle is restarting the maturity cycle for electric cars; there is an
opportunity for new competitors to surpass the top four manufactures in the industry.
 Current objectives include: phasing out gasoline vehicles, and having a large coverage of
charging stations.
 Overall, the industry is attractive and profitable for emerging firms.
Tesla – Internal Analysis
Tesla’s Present Strategy
Vision, mission, and objectives
 Vision: To accelerate the transition from carbon fueled economy towards an electric
economy (Musk, 2006).
 Mission: To provide the world with a full range of affordable electric vehicles. To
accelerate the advent of sustainable transport by bringing compelling mass market
electric cars to market as soon as possible. (Musk, 2013).
 Objectives: mass produce electric cars for the public. Enter the premium market, where
customers are willing to pay higher prices, and then expand to the lower income
consumers: higher volume, lower price succession model (Musk, 2006).
Implications
 Produce the best all-electric car, and charging station infrastructure. Tesla wants other
manufactures to use their charging infrastructure; in the end there will be more users that
will adopt electric cars.
Company’s competitive business and functional strategies
Business Strategies
 Building a superior product.
 Expanding geographic coverage
 Creating a charging station infrastructure – The Supercharger system to charge electric
cars. Cover 98% of USA and parts of Canada by 2015 (Musk, 2013).
 Allow other manufacturers to use Tesla Patents to promote electric energy technology,
which encourages growth in the industry. In turn, increasing Tesla’s revenues, and
investments in the infrastructures.
 $5 Billion Gigafactory to produce lithium-ion batteries encourages manufacturers to use
Tesla batteries for their low cost and energy storing capabilities.
Functional Strategies
Marketing
 Build a high quality care, expand to cheaper models later.
 Online presence, online forums and communities provide users with purchase experience,
and ownership experience which influence future users.
 Retail locations mean more foot traffic than a road side dealership. Also, allows potential
customers to customize their car in store, which attracts people to owning one in the
future.
 Media exposure and status positions Tesla products as one of the best vehicles ever built.

12.  Tesla overall cover all major market segments, Model S is targeted for mid-upper class
customers. While the Gen 3 releasing in 2016 is aimed for the mass market.
Sales and distribution
 Retail locations rather than car dealerships. The sales representative informs and
educates the consumers, rather than just try closing the sales deal. Tesla avoids sales
commissions, and big inventories.
 Situated in malls and high traffic areas to make presence well-known. These places are
highly visible and customers regularly visit the shopping centre, and retail locations;
creates a no-pressure environment for the consumers.
Supply chain
 Tesla’s Gigafactory manufactures their own lithium-ion batteries to lower the cost of the
batteries.
 Tesla is the only major auto manufacturer that designs, builds, and tests their own
vehicles.
 Developing a critical supply chain, they are creating a competitive supplier base. Along
with an agile supply chain to keep up with the rapidly changing technology.
 Tesla develops their own circuit boards, which allows them to have more control over
their cost.
Production
 Tesla’s manufacturing plant in North California has an output of nearly 500,000 cars per
annum (Tesla, 2015).
 Outsources non critical parts.
 Designs and tests own parts.
 Produces a high quality electric car.
Product design and technology
 Elon Musk is a part of Tesla, SpaceX and SolarCity. This synergy has manifested the
engineering into Tesla’s innovations.
 Excess cash flow is reinvested back to research and development to produce lower
costing components and brings product to market faster.
Performance indicators
 Tesla’s objective is to expand geographic coverage and expand its charging
infrastructure.
 Currently they have approximately 40 retail locations around the world (Tesla, 2015).
 Has made long distance electric car travel possible in the USA. 80% of the American
population was covered in 2014.
 Sales have grown 37% between 2013 and 2014 (2,013,496 to 3,198,356).
 Tesla stocks have increased 32.36% from 2013 to 2014 (150.43 to 222.41).
Implications
 Tesla is on track for the long term plan. Their business and functional strategies work
support the vertical integration model seen in the industry analysis. They are excelling at
promoting electric car adoption by informing customers; making it more convenient for
customers to drive the car.
SWOT
Implications

13.  Technologically, Tesla is years in advance of other manufacturers in the industry. Tesla
has been in development for over a decade, while other manufactures are only beginning
to develop electric cars. Tesla has the fastest charging system, however their lack of
geographic coverage and insufficient production capability are two of the major concerns
to address; they have long term strategic plans to address that already.
Strengths Weaknesses
 High quality all-electric cars.
 Offers the fastest charging stations on the
market.
 Very keen on innovation.
 Only car in the industry to have 17”
touch screen information display inside
the car, with the same power as a large
smart phone.
 Quality first mentality.
 Has the longest range of any all-electric
car in the industry.
 Production level not able to meet market
demands.
 Lower inventory turnover than Tesla’s
competitors. Even though it sells its cars
online.
 Business to consumer direct sale is not
legal in all states in the U.S.
 Lack of service centres and dealerships can
deter customers from buying a Tesla.
 BMW has 18400 charging stations, Nissan
has 500 charging stations, and Tesla only
has 278 charging stations. This means low
geographic coverage on their charging
infrastructure.
Opportunities Threats
 Growing concern for the environment
and carbon emissions. Consumers are
buying hybrids and alternative fuel cars
such as hydrogen cell or all electric.
 Supercharger system could be the gold
standard if Tesla expands rapidly. It is
the fastest charging system in the
industry.
 U.S. regulations preventing auto
manufacturers from selling directly to
customers.
 Inefficient utilization of Tesla’s
superchargers. Long waits for users to
charge their cars.
Value Chain
Primary Activities
Supply Chain
 Tesla’s Gigafactory
 Parts design and manufacturing, and secondary outsourcing of parts.
 Tesla’s supercharger charging station infrastructure
Operations
 Tesla produces all of its vehicles on-site in northern California. The Fremont Factory
produces nearly 500,000 cars annually.
Distribution
 Approximately 40 stores worldwide, where customers can customize the car to their
preference before the purchase.
Service
 Retail stores provide an open environment buying experience.
 Service centres are near their retail stores.

14. Key Success Factor /
Strength Measure
Importanc
e weight
Strength
Rating
Weighte
d Score
Strength
Rating
Weighte
d Score
Strength
Rating
Weighte
d Score
Quality/product
performance 0.25 10 2.50 7 1.75 9 2.25
Aesthetic/product design 0.10 8 2.00 4 1.00 8 2.00
Reputation/brand image 0.10 6 1.50 6 1.50 10 2.50
Manufacturing capability 0.10 7 1.75 10 2.50 10 2.50
Dealer network/distribution
capability 0.10 7 1.75 10 2.50 10 2.50
New product innovation
capability 0.15 10 2.50 5 1.25 5 1.25
Financial resources 0.05 6 1.50 8 2.00 8 2.00
Relative cost position 0.05 7 1.75 10 2.50 10 2.50
Customer service capability 0.10 9 2.25 8 2.00 8 2.00
Sum of importance weights 1.00
Overall weighted
competitive strength rating 17.50 17.00 19.50
Tesla Nissian BMW
Competitive Strength Assessment
(Rating scale: 1 = very weak; 10 = very strong)
 Tesla provides a loaner tesla car, while the user’s car is being serviced.
Sales and Marketing
 Innovative way to sell cars, retail stores instead of car dealerships. Sales representatives
inform and educate the consumers rather than pressure sale the customers to buying the
cars.
 Retail stores located in high foot traffic shopping centres.
 Cars are made from order, customizable online, ecommerce and forum community.
Support Activities
Product research and development
 Elon Musk is a part of Tesla, SpaceX and SolarCity. This synergy has manifested the
engineering into Tesla’s innovations.
 Upgrading facilities at Fermont factory is expected to increase output to 2500 cars per
week. Along with the newly constructed Gigafactory will increase production and make
the supply chain more efficient (Ruiz, 2014)
Human resources
 Headquarters situated in Silicon Valley, the human capital is immense with veteran
software developers and engineers.
General administration
 Tesla partnered with Panasonic to fund the construction of the Gigafactory to
manufacture lithium batteries.
 The car’s retail price includes the electric charging fees so customers don’t have to pay
from their pockets to charge their cars.
Implications
 Differentiated from all the competitors in the industry, by navigating a different sales
channel. Selling directly to consumers via retail stores; utilizing the made-to-order
approach.
 Most of the cost is associated with their retail locations, which lowers their overall supply
chain costs by avoiding costly dealerships and inventory to turnover.
 Large amount of their cost structure is supplementary to R&D.
Competitive Strength Assessment
Implications
 Relatively, Tesla is a fairly new auto manufacturer. They are not acting to their
maximum potential; there
could be improvements to their
financial resources,
distribution and manufacturing
capabilities. These
weaknesses are customary for
new automakers.
 Tesla excels at product quality/
performance, and new product
innovation. These strengths
are more crucial than the
weaknesses stated above.

15. Income Statement Tesla Motors, Inc.
($ thousands) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Sales 116,744 204,242 413,256 2,013,496 3,198,356 100% 100% 100% 100% 100%
Cost of Goods Sold 86,013 142,647 383,189 1,557,234 2,316,685 74% 70% 93% 77% 72%
Gross Profit 30,731 61,595 30,067 456,262 881,671 26% 30% 7% 23% 28%
Research and development 92,996 208,981 273,978 231,976 464,700 80% 102% 66% 12% 15%
Selling, general and administrative 84,573 104,102 150,372 285,569 603,660 72% 51% 36% 14% 19%
Total Operating Expenses 177,569 313,083 424,350 517,545 1,068,360 152% 153% 103% 26% 33%
Net Loss (154,328)$ (254,411)$ (396,213)$ (74,014)$ (294,040)$ -132% -125% -96% -4% -9%
Liquidity 2010 2011 2012 2013 2014
Current Ratio 2.8 1.9 1.0 1.9 2.2
Quick Ratio 2.2 1.7 0.5 1.4 1.9
Working Capital 150321 181499 -14340 590779 1742577
Financial Analysis
Revenue Trend
 Sales have
rapidly been
growing. In
the last
3years, it has grown by 673.94%. From 2013 to
2014, sales have grown 59%.
Gross Revenue vs. Net Income
 Tesla’s net income was increasing till 2013. 2014
experienced an increase in expenses, with caused
a bigger loss. However their gross sales were
increasing which indicates they are becoming
more profitable each year.
 The net income vs gross profit chart shows after
the first 3years, as a result of heavy reinvestments
they were at a big loss. In 2014 they began
turning some profits.
Leverage
 High T/A and Equity ratio informs that Tesla is
heavily financing their assets with debt.
 Tesla also signals they are heavily relying on long
term borrowing to finance their Assets, which
decreases credit worthiness/ weak BS.
 In 2012 leverage ratios were at its peak, this was
due to their launch of the Model S and the
supercharger systems.
Share Price
 Stock prices are rapidly increasing; these
increases correspond to the new vehicles
released during that time. Tesla Model S and
the supercharger charging system.
 P/E ratio indicates investors had little
confidence in the firm till 2013, and is
beginning to decrease in 2014 due to the
increase in net loss.
Liquidity
 Tesla has a very high liquidity, with a current ratio higher
than 1. This is good because they can meet short term
obligations.
Efficiency
 Tesla has very low inventory turnover, this is due to
selling directly to consumers via retail locations and
online, but it is steadily improving annually.
Leverage 2010 2011 2012 2013 2014
LT Debt/Equity 0.9 2.2 7.9 2.6 3.9
TD/TA 0.5 0.7 0.9 0.7 0.8
TA/Equity 1.9 3.2 8.9 3.6 4.9
D/E 0.4 0.9 4.3 1.0 1.5
Market Ratios 2010 2011 2012 2013 2014
P/E -16.4 -11.7 -9.8 -250.2 -93.8
P/Book 12.2 13.3 31.0 27.8 30.2
Efficiency 2010 2011 2012 2013 2014
Avg Collection Days 21 17 24 9 8
Inventory Days 192 128 256 80 71
Inventory Turnover 2 3 1 5 5

16. Issue Identification
 Is Tesla aiding the problem of electric car adoption, as a result placing itself in a higher
risk position?
 Should tesla consider switching from its direct sale to consumer model to a more
traditional model of selling via dealerships?
Conclusion
 Tesla is promoting an alternative fueled auto mobile. Encouraging electric car use by
providing infrastructure and innovation to make it more convenient for the consumers.
 Tesla is unable to meet customer demand, and this could be a threat to itself. The new
investments in the Gigafactory and upgrading of the Fermont factor in California should
address these issues.
 Differentiating itself form other auto manufacturers by selling directly to consumers via
retail stores. Along with new sales tactics by educating the customers rather than force a
sale.
 Expanding product lines to lower market segments, along with sharing patents to other
manufactures should promote the electric car industry.
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