+1(978)310-4246 credencewriters@gmail.com
  

Description

Power ponit

undefined

Tesla Motors 2016

undefined

I need 8 slide powerpoint.

undefined

1-Social Responsibilities and Ethics

undefined

2- Control Systems

undefined

3-

Business-Level Strategy

undefined

4- Corporate-level Strategy

undefined

5- Structure and Control Systems, manufacturing

Corporate-level Strategy:
Corporate-level plans focus on the company’s actions and operations in
order to gain a competitive edge in the industry. Tesla’s vision and
mission are to accelerate sustainable transportation by introducing
market-leading electric vehicles. The company aimed to create electric
vehicles that were as fast as gasoline-powered cars in order to provide
luxury and environmental sustainability to its customers. It is a vehicle
manufacturer that focuses on energy innovation. The Tesla Roadster,
the company’s first electric vehicle, was released in 2008, marking the
start of the company’s mission to accelerate the world’s transition to
renewable energy. In 2016, the company distributed its goods in Europe,
North America, and Asia, with the aim of expanding its reach to all
corners of the globe (Vynakov et al., 2016). Tesla Motors had only
released three models in 2016, the Roadster, Model S, and Model X, in
2008, 2012, and 2015, respectively, but had a reputation for being a
market leader in terms of innovation. Tesla aimed to make electric
vehicles more accessible to the general public in the future.
Tesla’s corporate strategy is to appeal to environmentally aware middleupper-class consumers. With the recent announcement of the Model 3
for release in 2017, the company hopes to attract new potential
customers among typical car buyers in the middle price range who had
previously avoided Tesla models due to their high costs. It’s a calculated
decision that will help the business gain new customers in the lower
price range. It will provide a counterpoint to the solely high-priced, Lowquantity business model that promotes mass production. However, since
it manufactures cars based on orders, adopting the lower-premium price
business model would have an effect on its production and distribution
networks. Electric vehicle powertrain components and battery-based
storage systems are also sold by the firm. Tesla Motors is a company
that produces electric vehicles. Tesla Motors is headquartered in
California, with branches in New York, Canada, France, Switzerland,
Singapore, Australia, and Germany. SolarCity Corp, a company that
develops solar panels and produces solar energy for residents and
businesses, was one of the key acquisitions in 2016. Tesla and
SolarCity combined to form a vertically integrated renewable energy
powerhouse (McKay, 2016). The acquisition would allow the business to
take advantage of the synergy generated by combining solar and energy
storage. By the following year, 2017, Tesla intends to acquire additional
firms, such as Maxwell Technologies for energy storage and power
distribution and Grohmann Engineering for automated manufacturing
systems.
Business-Level Strategy:
Tesla employs a differentiator-based business strategy. Tesla used the
niche differentiator strategy in the beginning to sell market-disrupting
luxury electric cars based on environmentally friendly technology and
focus differentiation. Tesla models were distinct from standard electric
vehicles, allowing them to gain a competitive market edge. Tesla’s
product is exclusive. Customers may customize their cars with daily
software updates, self-driving capabilities, and supercharging
compatibility. Customers who pay a premium for large unit quantities
and lower rates later are the company’s target market. In the electric
vehicle industry, the priority differentiation strategy is also aimed at lowcost buyers. The company sells the items directly to consumers, giving
them a great shopping experience. Tesla develops its investments
annually using a generic investment approach based on a highly
creative and specific ecosystem that improves its returns due to
economies of scale.
The company’s uniform investment approach gives it a strategic edge in
the market. Since it attracts early technology adopters in the market, the
automotive industry is a good fit. Since it has the strengths and
competitiveness needed to sustain long-term profitability in the
automotive industry, Tesla’s functional competencies enable it to
achieve SWOT strategy.
Tesla’s Organizational Structure
Tesla Company was established in 2003 as the first entirely American
electric vehicle manufacturer, and it has evolved over time to sell its
latest products worldwide. Tesla is regarded as a success because of its
influence on the demand for modernized and technologically advanced
electric vehicles. Leaders, owners, and investors make up the
company’s organizational structure. who have assisted the corporation in
gaining a strategic edge in the global market for electric vehicle
production. The corporation employs a flat or horizontal organizational
structure with few management members and low-level workers. A flat or
horizontal organizational approach has been linked to reducing oversight
by minimizing upper management members. as well as the long list of
administrators who would obstruct the decision-making process.
Furthermore, using a horizontal or flat organizational structure has
affected the achievement of competitive advantage, as shown by less
problems that can lead to tension in the workplace. Tesla has a CEO
who oversees operations and takes critical decisions. decisions to aid in
the growth of the company Instead of getting several officials who
duplicate the work of the top officials, other associates and
representatives serve various agencies. The horizontal arrangement has
aided in the avoidance of leadership disputes. For example, when Elon
Musk, the company’s CEO, first started out, he ran into disagreements
and communication issues. due to several ways of making decisions
with his partners (Van den Steen, 2015). Tesla Company’s horizontal
and flat organizational structure has shaped the company’s performance
through methods such as giving workers more duties, encouraging timebased collaboration, and improving teamwork. and accelerating the
introduction of new concepts, which is crucial for organizational growth.
The method also aids the corporation in aligning its operational
efficiency and growth strategies (Park & Seo, 2019).
Finally, Tesla has concentrated on sustainable digital production.
However, the creation and analysis of customer needs also aided in the
development of branding. Marketing and distribution are two aspects of
the company. Its design has also taken into account the needs of
customers, including elements such as electric chargers, spares,
maintenance costs, and product availability in various regions.
Horizontal structure encourages the reduction of mistakes and
disagreements, as well as the emphasis on a production line and the
evaluation of customer needs before entering a competitive market.
Tesla’s Control Systems
Organizational management systems have a big impact on how effective
a company is. Tesla has introduced an output control system that
measures the company’s performance in terms of production units. For
example, the company’s CEO stated that measuring the units of electric
vehicles manufactured would be a simple way to determine if the
company is excelling in general. Within a fiscal year, everything is
created and sold. The CEO also reported that the company expects to
sell 10,000 Model S units per year (Van den Steen, 2015). Following the
release of a Model S concept, the company stated that several
consumers had placed orders for the electric vehicle, indicating that the
company’s policy of investing in high-tech and creative automotive was
paying off without the need for marketing procedures, which would
achieve full visibility. The output control system’s usage and emphasis
have been critical because they help the company’s strategy. Tesla’s
business model is influenced by automotive and electric vehicles, which
are strategic and unique in today’s market structures, with little
competition.
The performance control system has changed facets of marketing by
reducing the need to sell relatively new goods and assisting in the
reduction of manufacturing costs and innovation (Cardinal, Kreutzer, &
Miller, 2017). Since it has concentrated on the local retail sector and the
global market, the distribution approach has been reduced.
Pre-orders are taken before manufacturing begins. The organization
does not market its goods by agents, which has resulted in increased
sales and reduced the risks associated with using agents to meet its
target customers. As a result, Tesla’s organizational and control
structure has influenced the company’s growth and uses recognition
from all over the world.
Social Responsibilities and Ethics
Corporate Social Responsibilities refer to the strategies used by a
production company to promote environmental sustainability and ethical
balance in the society. For example, the Tesla Company has maintained
a consistent social commitment to produce environmentally friendly
electric vehicles that contribute to the global concern of reducing
greenhouse gas emissions.
Tesla started by partnering with Panasonic Inc. to open gigafactories
that produce lithium-ion batteries in order to increase the accessibility
and availability of the batteries that will be used by electric car owners
(Van den Steen, 2015). The Powerball system’s invention,
a home energy-storage battery has been critical in assisting electric car
owners in using solar panels to charge the batteries and use the
electricity in different processes. The Tesla Company’s technologies
promote social responsibilities, which are often critical for environmental
conservation. The primary motivation for focusing on electric vehicles
has been social responsibility. The business has concentrated on
producing goods that support societies and the global market in both
societal and economic ways (Baffour-Awuah, 2020). Furthermore,
communities benefit from an effective green-sustainable climate that
encourages people to interact with the business and its goods. This
demonstrates that the company’s owners and officials have considered
the potential consequences of unethical behavior and adopted measures
to stop it. By eliminating the need to sell relatively new products and
aiding in the reduction of production costs and innovation, the
performance management system has changed aspects of marketing.
new ideas (Cardinal, Kreutzer, & Miller, 2017). The distribution strategy
has been simplified as it has focused on the local retail industry and the
global market. By steering its investments toward achieving the global
objective of making environmentally friendly vehicles, the company has
also increased its ethical standards. Since its founding, there has never
been an ethical complaint against Tesla Company.
https://www.tesla.com/blog/tesla-approach-distributing-and-servicing-cars
McKay, J. (2016). Off Like a Rocket: A Media Discourse Analysis of Tesla Motor
Corporation.
Vynakov, O. F., Savolova, E. V., & Skrynnyk, A. I. (2016). Modern electric cars of Tesla
Motors Company. (8, â„– 2), 9-18.
Baffour-Awuah, D. (2020). Essence of Corporate Social Responsibility–Case Study
of Tesla Inc. Available at SSRN 3672317. https://ssrn.com/abstract=3672317
Cardinal, L. B., Kreutzer, M., & Miller, C. C. (2017). An aspirational view of
organizational control research: Re-invigorating empirical work to better meet the
challenges of 21st century organizations. Academy of Management Annals, 11(2),
559-592. https://doi.org/10.5465/annals.2014.0086
Park, E. M., & Seo, J. H. (2019). Effects of shared leadership, psychological
empowerment and organizational justice on organizational commitment. Journal of
Digital Convergence, 17(6), 177-184.
https://www.koreascience.or.kr/article/JAKO201919163087765.pdf
Van den Steen, E. (2015). Tesla Motors. Harvard Business School Publishing.
https://www.yourhomeworksolutions.com/wpcontent/uploads/edd/2020/06/d_4ef2_8767_084a18817cb7.pdf
Power ponit
Tesla Motors 2016
I need 9 slide power point.
1-Social Responsibilities and Ethics
2- Control Systems
3- Business-Level Strategy
4- Corporate-level Strategy
5- Structure and Control Systems, manufacturing
Case 29
Tesla Motors ,2015
. 29-1 l-,.i:.,l:,.ii:,..:ri:;,,.1
. 29-2 !:rSlt.l-‘,, , ,i
. 29-3
.29-4
r
li.::,i:,i
:
ll:,:i:::,,.’i,,i’,r”i ,i, , ‘, ,, :’ .
. 29-5
. 29-5a
. 29-5b
. 29-5C
r”: : r ;:
‘ri ”:’
,
ri
:l
. 29-6 i r.,;i’.:r”rii, ; .;,: r
lofl
r.
i
rl.
311612021,8:03 PM
29-1 Case lntroduction
ln 2015, Tesla Motors was a $3.2-billion company on track to set history. lt had created two
cars that most people agreed were remarkable. Consumer Reporfs had rated Tesla’s Model
S the best car it had ever reviewed. Though it was not yet posting profits (see i’iili;i,.,,i, i and
?), sales were growing rapidly and analysts were hopeful that profits would soon follow. lt
had repaid its government loans ahead of the major auto conglomerates. iMost importantly,
it looked like it might survive-perhaps even thrive. This was astonishing, because there
had been no other successful auto manufacturing start-up in the United States since the
1
920s.
Figure
1
Tesla lncome Statement, in $US Thousands
2014
. :- #,”,,, “.RgYe,q11es ,
2013
2012
, “. , -,-
Automotive
$3,192,723 $1,997,786 $385,699
sales
Development 5,633
15,710
27,557
services
Total
revenues 3,198,356 2,013,496
413,256
Cost of revenues
Automotive 2,310,011 1,543,878
371,658
sales
Developmenl 6,674
13,356
‘11,531
services
I of 5
311612021.8:16 PM
,:o.o
Total cost of
revenues
2,316,685
1
,557
2013
2012
,234
383,189
Figure 2
Tesla Balance Sheet, in $US Thousands
2014
2013
$1 ,905,713
$ 845,889
17,947
3,012
Accounts receivable
226,604
49,1 09
lnventory
953,675
340,355
94,718
27,574
3,198,657
‘1,265,939
Assets
Current assets
Cash and cash
equivalents
Restricted cash and
marketable securities
Prepaid expenses and
other current assets
Total current assets
The road leading up to Tesla’s position in 2015 had not always been smooth, and many
doubts still lingered. Tesla had benefited from the enthusiasm of the “eco-wealthy”-a rather
narrow portion of the market. How would Tesla fare when it was in dtrect competition with
General Motors, Ford, and Nissan for the mass market? Would it be able to turn a
sustainable profit on its auto-making operations? Furthermore, some questioned whether
Tesla’s goals to sell to the mass market even made sense. ln the niche market, it had a
privileged position with customers who were relatively price insensitive and seeking
a
stylish, high-performance car that made an environmental statement. To compete for the
mass market, the car would have to provide good value for the money (involving trade-offs
that might conflict with Chairman Elon Musk’s ideals), and the obstacles to charging would
have to be overcome.
29-2 History of Tesla
project. A tall, slim
ln 2003, an engineer named Martin Eberhard was looking for his next big
launched a
man with a mop of gray hair, Eberhard was a serial entrepreneur who had
Gemstar in a
number of start-ups, including a company called NuvoMedia, which he sold to
would be environmentally
$1g7-million deal. Eberhard was also looking for a sports car that
Middle East
friendly-he had concerns about global warming and U.S. dependence on the
for oil. when he didn’t find the car of his dreams on the market, he began contemplating
Eberhard
building one himself, even..though he had zero experlence in the auto industry.
vehicle (or
noticed that many of the oii$t!ffays that had a Toyota Prius hybrid electric
,,dorkmobile” as he called it) also had expensive sports cars in them, making him speculate
car. As
that there could be a market for a high-performance, environmentally friendly
money on gas’
Eberhard explained: “lt was clear that people weren’t buying a Prius to save
them to make a
Gas was selling close to inflation-adjusted all-time lows. They were buying
statement about the environment.”

hydrogen fuel
Eberhard began to consider a range of alternative fuel options for his car:
and
cells, natural gas, diesel. However, he soon concluded that the highest efficiency
Cocconi
performance would come from an entirely electric vehicle. Luckily for Eberhard, Al
had
(founder of AC propulsion and one of the original engineers for GM’s ill-fated EV-1)
could go from zero
concluded the same thing and produced a car called the tzero. The tzero
heavy lead-acid
to 60 miles per hour in 4.1 seconds, but it was powered with extremely
approached
batteries, limiting its range to about 60 miles between charges. Eberhard
six times more
Cocconi with the idea of using lighter, lithium ion batteries, which offered
been
energy per pound. cocconi was eager to try out the idea (he had, in fact,
powered tzero
experimenting with lithium ion batteries), and the resulting lithium ion
than 300 miles’
accelerated to 60 miles per hour in 3.6 seconds and could travel more
and founded his
Eberhard licensed the electric-drive-train technology from AC Propulsion,
inventor who
company, Tesla Motors (named after Nikola Tesla, an early 20th-century
United States today)’
developed, among other things, the AC electrical systems used in the
interested in developing
Another entrepreneur-one with much deeper pockets-was also
a 31-year-old south
electric vehicles based on the tzero’. Elon Musk.ln2oo2, Musk was
became PayPal’
African living in california, who had founded a company that ultimately
called SpaceX
After selling paypal to eBay in 2OO2 for $1.5 billion, he started a company
(SpaceX’,s Dragon
with the ambitious goal of developing cheap, consumer space travel.
vehicle to
spacecraft ultimately made history in May 2012 by becoming the first commercial
) Musk was also the chairman of a
launch and dock at the lnternational Space Station.
*
1of
311612021, 8:08 PIv
5
high-profile, clean-tech venture in Northern California, Solar City. Musk’s assertive style and
astonishing record of high-tech entrepreneurship made him one of the inspirations for the
TonyStarkcharacterinJonFavreau,slronManmovies’
Like Eberhard, Musk thought electric cars were the key to the U.S. achieving energy
independence, and he approached Cocconi about buying the tzero. Tom Gage, who was
then AC Propulsion’s CEO, suggested that Musk collaborate with Eberhard. After a 2- hour
meeting in February 2004, Musk agreed to fund Eberhard’s plan with $6.3 million. He would
be the company’s chairman; Eberhard would serve as CEO.
The first Tesla prototype, the Roadster, was based on the $45,000 Lotus Elise, a fast, light
sports car that seemed perfect for the creation of Eberhard and Musk’s grand idea (see
tcure ;a). The car would have 400 volts of electric potential, liquid-cooled, lithium ion
batteries, and a series of silicon transistors that would give the car acceleration so powerful
the driver would be pressed back against the seat.
lt wou$d be nearly as fast as a
[:
*
Porsche 911 Turbo, would not create a single emission, and would get about 220 miles on a
single charge from the kind of outlet you would use to power a washing machine. t
Tesla Roadster
While the men at first worked well together, personality clashes soon emerged. Both were
technically sawy and vigorously addressed problems within the company. As described by
Laurie Yoler, Eberhard was “just brilliant, and he has this tenacity that is unbelievable … He
is the guy you want around in those early days when you have naysayers all around.”
However, Eberhard could also be abrasive and critical. Musk, in turn, was not content to just
financially back the company. He began to get intimately involved in decisions about the
car’s design and the operation of the company. Soon Musk and Eberhard were at odds over
decision making. Eberhard preferred to stick with the fiberglass body panels used in the
original Elise; Musk wanted to use the lighter, stronger-and more expensive-carbon fiber.
Eberhard had approved the hiring of PR professionals to build publicity for the car before its
launch; Musk fired them, believing his own involvement and the car itself would generate
2 of
5
311612021.8:08 P]
enough publicity. Eberhard wanted to reap the cost savings of sticking with the Elise’s
original crash-tested, off-the-rack chassis; Musk wanted to lower the doorsills by two inches
to make the,ca;,easier. to.enter and exit. Musk also wanted to redesign the headlights and
door latches, and replace the Elise’s seats with more comfortable-and again, more
expensive-custom seats. =
ln each case, Musk prevailed. He insisted that “you can’t sell a $100,000 carthat looks like
crap.” Musk’s views were hard to ignore given that, by 2007, he had put $55 million of his
own money into the company and had also raised money from wealthy friends, including
eBay’s second employee, Jeff Skoll, and Google founders Sergey Brin and Larry Page.
Musk’s inststence on the best materials and parts, however. combined with Eberhard’s
inexperience as the manager of a major firm, resulted in delays and runaway costs. At a
staff meeting in June 2007, Tom Colson, head of manufacturing, revealed a cost analysis
suggesting that the average cost of the cars would be over $100,000 for the first 50, and
would decline only slightly with increased volume. Eberhard could not answer the financial
questions of the venture capitalists on Tesla’s board, and their confidence in him was
eroded even further by his defense: “ln any other company it’s the CFO that provides those
numbers … l’m an engineer, not a finance guy.” ln August 2007 , the board removed him as
CEO and demoted him to president of technology. Then, in October 2007, Musk arranged
for Eberhard to be ousted from the company entirely. Furious, Eberhard started a blog
detailing what he called the “Stealth Bloodbath” going on at Tesla, and he would later sue
Musk for libel, slander, and breach of contract.
Meanwhile, Eberhard’s temporary replacement was Michael Marks, former CEO of
Flextronics. Marks immediately created a priority list that identified items with potential to
delay the car. He mothballed any plans for side projects and focused the entire business on
streamlining costs and launching the Roadster. Despite his efforts, the Roadster missed its
deadline for beginning production at the Lotus facility, triggering a penalty built into the
manufacturing contract Eberhard had signed with Lotus: a $4-million fee.
By the beginning of 2008, morale was at an all-time low. ln March, however, production
began on the Roadster, and by July 2008, most of the production problems had been
forgotten as the first seven Roadsters (the “Founder’s Series”) hit the road. Enthusiasm for
the cars was astonishing–an all-star list of celebrities made reservations to buy one, and
everywhere a Roadster appeared, people (albeit mostly men) stopped to stare. *
Musk’s ambitions did not stop at a niche high-end car, however. He wanted to build a major
U.S. auto company-a feat that had not been successfully accomplished since the 1920s. To
do so, he knew he needed to introduce a less expensive car that could attract a higher
volume of sales, if not quite the mass market. ln June 2008, Tesla announced the Model S,
a high-performance, all-electric sedan that would sell for a price ranging from $57,400 to
$77 ,400 and compete against cars like the BMW S-series (see !’;:;l::r,., 1l:). The car would
have an all-aluminum body and a range of up to 300 miles per charge. H The Model S
cost $500 million to develop; however, offsetting that cost was a $465-million loan Tesla
3 of
5
311612021.8:08 PM
received from the U.S. government to build the car, part of the U.S. government’s initiative
to promote the development of technologies that would help the United States achieve
energy independence.
Tesla Model S
By May 2012, Tesla reported that it already had 10,000 reservations for customers hoping to
buy the Model S, and Musk confidently claimed the company would soon be producing and
selling 20,000 Model S cars per year. Musk also noted that after ramping up production, he
expected to see “at least 10,000 units a yearfrom demand in Europe and at least 5,000 in
Asia.” d’ The production of the Model S went more smoothly than that of the Roadster and,
by June 2012, the first Model S cars rolled off the factory floor. The very first went to Jeff
Skoll, eBay’s first president, and a major investor in Tesla. On the day of the launch, Skoll
talked with Musk about whether it was harder to build a rocket or a car (referring to Musk’s
SpaceX company): “We decided it was a car. There isn’t a lot of competition in space.” e.
To build the car, Tesla bought a recently closed automobile factory in Fremont, California,
that had been used for the New United Motor Manufacturing lnc. (NUMMI) venture between
Toyota and General Motors. The factory, which was capable of producing 1,000 cars a
week, was far bigger than Tesla’s immediate needs and would give the company room to
grow. Furthermore, though the plant and the land it was on had been appraised at around
$1 billion before NUMMI was shut down, Tesla was able to snap up the idled factory for $42
million.
Tesla also used the factory to produce battery packs for Toyota’s RAV4 and a
charger for a subcompact Daimler AG electric vehicle. These projects would supplement
s’
Tesla’s income while also helping it to build scale and learning-curve efficiencies in its
technologies.
ln the first quarter of 2013, Tesla announced its first quarterly profit. The company had taken
in $562 million in revenues and reported an $11.2-million profit. Then more good news
came: The Model S had earned Consumer Reporfs’highestrating and had outsold similarly
priced BMW and Mercedes models in the first quarter.
ln May 2013, the company raised

$1 billion by issuing new shares, and then surpnsed investors by announcing that it had
4 of
5
3 1612021. 8:08 PM
paid back its government loan. After repaying the loan, Tesla had some $679 million in
cash. Musk had announced confidently that he felt it was his obligation to pay back taxpayer
money as soon as possible, and that the company had sufficient funds now to develop its
next generation of automobiles without the loan and without issuing further shares.
t
Tesla Model X
By 2015, Tesla Motors was also in the process of developing a sport utility vehicle that seats
seven, the Model X, which cost $250 million to develop and would be available in 2016. +”
This SUV was part of Musk’s longer-term ambition to tap a more mainstream market for the
cars.
5 of
5
311612021,8:08 PM
29-3 obstacles to the Adoption of Electric vehicles
A number of obstacles slowed the adoption of electric vehicles. The first was the price:
Electric vehicles were, typically, significantly more expensive than comparable internalcombustion models. Complicating matters further, most consumers had a very difficult time
estimating the cost of ownership of an electric car. How much would they pay to charge at
home? How much would they pay to charge away from home? what would the
maintenance and repairs of an electric vehicle cost? How long would the battery and/or car
last? Would it have resale value? To lessen these concerns, Elon Musk set out to make the
cost of owning a Tesla as certain as possible. First, he created a “supercharger” network
that Model S owners could use for free, for the life of the car. As noted by Musk, “The
clearest way to convey the message that electric cars are actually better than gasoline cars
is to say charging is free.” * The hitch was that a user had to be within range of a
Supercharger station. Second, Musk announced an unprecedented price-protection
guarantee that permitted a Model S owner to trade in their car for a designated residual
value anytime within the first 3 years of the cars life. Musk also announced plans to offer
free repairs, and a free replacement car while a customer’s car was being repaired.
Needless to say, analysts scratched their heads at the potential costs of these guarantees.
The second major obstacle to the adoption of electric vehicles was their limited range and
associated “range anxiety” (cbncerns about driving in places where owners were not sure
they would be able to charge their cars). These concerns were not so much of an issue for
the Tesla cars due to their exceptionally long range. Other “mass-market” electric vehicles
faced tougher hurdles. For example, though a Nissan Leaf could be charged at an ordinary,
110-volthousehold outlet, a full charge bythis method could take 8 hours. Level 2 charging
with a 220-voll outlet could shorten that time to 4 hours, but this was still completely
impractical for recharging during a trip. DC Fast Chargers and Tesla’s “superchargers”
promised to fully charge a vehicle in 30 minutes or less. While this is still significantly longer
than the typical 6-minute gasoline fill-up, it meant that charging could be feasible if it were
co-located with other services that drivers might appreciate, such as restaurants or coffee
shops. DC Fast Chargers and Tesla’s Supercharging stations were expensive to purchase
and install – up to $250,000 depending on the location – and they had to be close to heavyduty electricity transformers. By May 2015, there were 425 Tesla Supercharger stations
worldwide, with a total of 2,338 Superchargers. *
29-4 Competition in the Electric Vehicle Market
Hybrid electric vehicles (HEVs) such as the Toyota Prius made their appearance in the U.S.
auto market in 2000. These vehicles were readily adopted by consumers because they
require no change in typical consumer usage habits; they use gasoline and automatically
switch between electric miles and gasoline miles. Most HEVs, however, have extremely
limited electric range. For many, 10 miles of electric driving before switching over to gas is
the norm. This limits their ability to reduce carbon emissions or influence energy usage. Allelectric vehicles, also called plug-in electric vehicles, known alternatively as AEV or PEV
get all of their energy from electricity. They are thus considered true zero-emission vehicles.
Plug-in hybrid electric vehicles (PHEVs) such as the Chevy Volt plug in to charge but can
also use gas.
By 2015, a number of automakers were producing electric vehicles, in large part due to
California’s standards mandating that, for automobiles to be sold in California, a certain
portion of an automaker’s fleet had to be emission free. As a result, some automakers were
willing to produce all-electric vehicles at a loss in order to also sell more lucrative internalcombustion models. These zero-emission mandates spurred a flurry of introductions of
electric vehicles in the early ‘1990s. The subsequent downscaling of California’s zeroemission mandate in the late 1990s led GM, Toyota, Honda, and Ford to shutdown their
loss-making EV programs, including most notoriously GM’s EV-1s, which were literally torn
from their owners and crushed, as shown in the film Who Killed the Electric Car?) Other
automakers opted to buy zero-emission credits from those companies that sold more than
their required proportion of zero-emission vehicles. Other states had adopted similar
programs, and at the federal level firms could earn greenhouse gas (GHG) emission credits
by exceeding the U.S. Environmental Protection Agency’s greenhouse gas standards. Tesla
was one such automaker who had surplus credits (since it produced no internal combustion
vehicles), and as a result Tesla earned $40.1 million in 201 2, $194.4 million in 2013, and
$216.3 million in 2014 selling its surplus credits to other automakers. H
Several companies had attempted to enter the all-electric vehicle market, but had run out of
cash and ceased operations. These included Fisker, Coda, Azure Dynamics, Bright
Automotive, and others. The more serious competition was coming from established
automakers that had deeper pockets to withstand the losses of building the electric vehicle
market. Among these, there were a few competing cars that had sold significant (though still
small) numbers of cars into the market. The Nissan Leaf, for example, retailed for about
$35,000, and had a range of about 90 to 100 miles per charge. By the end of 2014, it had
sod72,322 units in the United States and over 140,000 worldwide. The Chevy Volt was a
plug-in hybrid that could travel about 40 all-electric miles per charge, and an additional 340
I of
2
311612021.8:11
miles on gasoline (making it a good solution for individuals who primarily made short
commutes but also wanted to drive the car long distances without “range anxiety”). lt also
retailed for about $35,000, and including its rebadged “Ampera” versions, it had sold over
88,000 of the cars worldwide by the end of 2014.
2of2
311612021.8:1 1 PM
29-5 Tesla’s Strateg ies
29-5a Automated Man ufactu rin g
ln 2015, nearly all of Tesla’s manufacturing was done at its plant in Freemont, California,
though it had plans to build a manufacturing center in Tilburg, the Netherlands, where it had
an assembly facility. t” Tesla’s manufacturing process was highly automated, with
extensive use of 8- to 1O-foot-tall red robots, reminiscent of lron Man. Each robot had a
single, multijointed arm. While typical auto factory robots perform only one function, Tesla’s
robots perform up to four tasks: welding, riveting, bonding, and installing a component. Eight
robots might work on a single car at each station of the assembling line in a choreographed
pattern, like ballet. The robots produce up to 83 cars a day and can be reprogrammed to
produce the Model X on the same assembly line. “‘
I of
I
311612021.8:12 PM
29-5b Distribution
Musk saw the franchise-dealership arrangements that U.S. car companies use to sell cars
as an expensive, margin-killing model. Furthermore, selling an electric vehicle is more
complicated than selling an internal combustion vehicle. Because consumers are less
familiar with electric vehicles, they required more explanation about the electricity costs,
service issues, potential resale value issues, and more. Musk thus chose to sell direct to
consumers with boutique-like stores in upscale shopping malls where salespeople could
provide high-touch service and answer customer questions without using high-pressure
sales tactics. The company also sold direct to consumers on the lnternet.
Musk’s decision to own and operate Tesla dealerships himself was a controversial move
that provoked the ire of dealership networks. ln the 1950s, regulation had been passed in
the United States to protect dealers from exploitation by what were then very powerful auto
manufacturers. This regulation prohibited auto manufacturers from competing with their own
dealers by directly selling cars to consumers. The industry, however, had become
increasingly competitive due to globalization, thereby lowering the power of auto
manufacturers. Though most economic analysis suggested that the industry would be more
efficient if the dealership restrictions were removed, the regulation remained largely
unchallenged until Tesla’s entry. : Tesla was chipping away at them one by one. ln 2015,
there were still 28 states that banned direct sales, making it extremely difficult for Tesla to
enter.
I of
I
311612021.8:12 PM
29-5c Marketing
Tesla spends no money on advertising, nor does it have any plans to hire advertising
agencies or run ads in the future. lts in-house marketing team has only seven people on
staff, and an internal team runs the website. Nissan, by contrast, spent $25 million
advertising the Leaf in2012. According to Tesla spokesperson Alexis Georgeson, “Right
now, the stores are our advertising. We’re very confident we can sell 20,000-plus cars a
year without paid advertising … lt may be something we’ll do years down the road. But it’s
certainly not something we feel is crucial for sales right now.” ”
I of
I
311612021.8:13 PM
29-6 Looking to the Future
|n2014, Tesla announced it would be opening a “gigafactory”-a giant, lithium-ion battery
factory-with its partner Panasonic. The factory, located in Nevada after the state oflered
$1.1 billion in abatements, was slated to produce 500,000 lithium-ion battery packs peryear
by 2020. e That number exceeded total global production of lithium-ion batteries in2O14.
Musk believed he could drive battery production costs down by as much as 30% at the
factory, but many industry observers werc puzzled by the move. lf there were a major
innovation in battery technology-advances in aluminum air batteries for example-the
massive technological investment could be rendered obsolete.
|n2015, Tesla also introduced the “Powerwall”-a home energy-storage battery that would
store electricity generated by dolar panels during the day to then be used whenever needed
by the consumer. Within a week of announcing the Powerwall, the company had orders for
all of its production through 2016-roughly $8oo million worth of revenues. +
Tesla’s moves have been bold and risky, and its success thus far is inspiring. The company
had survived its infancy, appeared to be solvent, and was meeting its sales objectives even
though serious obstacles remained for electric vehicles. lt was also competing against
companies with far greater scale. As noted by O’Dell, a senior editor at auto information
sites Fonriri:dt .:r,,,:, on Tesla’s success, “A lot of people have been very, very skeptical …
when you want to be an automaker, you are competing with multibillion-dollar
conglomerates … lt’s entrepreneurism on steroids … They had a huge learning curve but
they’ve powered through it.” Theo O’Neill, an analyst at Wunderlich Securities, adds that
“lt’s going to prove everybody in Detroit wrong
They all say what Tesla is doing isn’t
.
possible’
lof
1
d’
311612021.8:14 PM

Purchase answer to see full
attachment

  
error: Content is protected !!