Tesla Case Study Strategy
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This document summarizes the history and development of Tesla Motors. It discusses how Tesla was founded by Martin Eberhard and Elon Musk to produce an electric sports car called the Roadster. It describes the personality clashes between Eberhard and Musk that led to Eberhard's departure from the company. The document also outlines obstacles to adoption of electric vehicles like price and range anxiety, and Tesla's strategies to address them, such as creating a nationwide supercharging network. While Tesla had early success with the Model S, the document notes ongoing challenges for the company in achieving sustainable revenues and market share in the automobile industry.
Tesla Case Study Strategy
- 1. CAPARAL. HAMAWY. MAGALIAO. NACILLA. PARAISO. REYES. BA 190 - STRATEGIC MANAGEMENT UNIVERSITY OF THE PHILIPPINES PROF. MITA ANGELA M. DIMALANTA
- 2. 2013 • 4500-PERSO COMPANY • CREATED 2 REMARKABLE CARS • POSTED ITS 1ST QUARTERLY PROFIT • REPAID ITS GOVERNMENT LOANS • LOOKED LIKE IT MIGHT SURVIVE • BENEFITED FROM ENTHUSIASM OF “ECO-WEALTHY”
- 3. HISTORY
- 4. HISTORY • MARTIN ERBERHERD • ENGINEER LOOKING FOR HIS NEXT BIG PROJECT • SERIAL ENTREPRENEUR WHO LAUNCHED A NUMBER OF START-UPS • HAD CONCERNS FOR GLOBAL WARMING & USA’S DEPENDENCE ON THE MIDDLE EAST FOR OIL • LOOKED FOR A SPORTS CAR THAT WAS ENVIRONMENTALLY FRIENDLY “IT WAS CLEAR THAT PEOPLE WEREN’T BUYING A PRIUS TO SAVE MONEY ON GAS – GAS WAS SELLING CLOSE TO INFLATION – ADJUSTED ALL TIME LOWS. THEY WERE BUYING THEM TO MAKE A STATEMENT ABOUT THE ENVIRONMENT.”
- 5. HISTORY • ALTERNATIVE FUEL OPTIONS: • HYDROGEN FUEL CELLS • NATURAL GAS • DIESEL • ELECTRICITY
- 6. HISTORY • AL COCCONI, FOUNDER OF AC PROPULSION & PRODUCER OF TZERO • TZERO • COULD GO FROM 0-60 MILES/HOUR IN 4.1 SECONDS • POWERED WITH EXTREMELY HEAVY LEAD-ACID BATTERIES • EBERHARD APPROACHED COCCONI WITH IDEA OF USING LIGHTER LITHIUM ION BATTERIES • HE LICENSED ELECTRIC-DRIVE-TRAIN TECHNOLOGY FROM AC PROPULSION & ESTABLISHED HIS COMPANY, TESLA MOTORS
- 7. HISTORY ELON MUSK • FOUNDED PAYPAL BUT SOLD IT TO EBAY FOR $1.5 BILLION • STARTED SPACEX • ONE OF THE INSPIRATIONS FOR TONY STARK IN IRON MAN SERIES OF MOVIES • APPROACHED EBERHARD ABOUT BUYING TZERO BUT LATER ON AGREED TO JUST FINANCE PLAN WITH $6.3 MILLION
- 8. HISTORY ROADSTER • FIRST TESLA PROTOTYPE • FEATURES: 400 VOLTS OF ELECTRIC POTENTIAL, LIQUID-COOLED LITHIUM ION BATTERIES, AND A SERIES OF SILICON TRANSISTORS • GIVE CAR ACCELERATION SO POWERFUL, DRIVER WOULD BE PRESSED BACK AGAINST THEIR SEAT
- 9. PERSONALITY CLASHES: EBERHARD VS. MUSK BOTH WERE TECHNICALLY SAVVY & VIGOROUSLY ADDRESSING PROBLEMS WITHIN TESLA EBERHARD: “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.” BUT ABRASIVE & CRITICAL
- 10. PERSONALITY CLASHES: EBERHARD VS. MUSK AT ODDS OVER DECISIONS OF: BODY PANELS MARKETING Use lighter, stronger – and more expensive – carbon fiber
- 11. PERSONALITY CLASHES: EBERHARD VS. MUSK CHASSIS
- 12. PERSONALITY CLASHES: EBERHARD VS. MUSK MUSK’S PREFERENCE PREVAILED EVERY TIME MUSK’S INSISTENCE ON BEST MATERIALS&PARTS +EBERHARD’S INEXPERIENCE AS MANAGER OF A MAJOR FIRM = DELAYS AND RUNAWAY COSTS EBERHARD: CEO TO PRESIDENT OF TECHNOLOGY TO NOTHING MICHAEL MARKS, TEMPORARY CEO FOCUSED ON ROADSTER ALL-TIME LOW TO ALL-STAR CELEBRITY STATUS TESLA ANNOUNCED MODEL S - A HIGH PERFORMANCE ALL-ELECTRIC SEDAN
- 13. OBSTACLES TO ADOPTION OF ELECTRIC VEHICLES
- 14. PRICE E-VEHICLES ARE MORE EXPENSIVE TESLA’S RESPONSE A. SUPER CHARGER NETWORK - FREE - 6 STATIONS IN THE WORLD AS OF 2013 B. GUARANTEES - FREE REPAIRS & FREE CAR REPLACEMENT WHILE CAR IS UNDER REPAIR
- 15. LIMITED RANGE & ASSOCIATED “RANGE ANXIETY” PEOPLE ARE CONCERNED ABOUT DRIVING TO PLACES WHERE CHARGING STATIONS ARE UNAVAILABLE TESLA’S RESPONSE A. NOT A BIG ISSUE FOR TESLA’S CARS DUE TO ITS LONG RANGE CAPACITY
- 16. COMPETITION IN THE ELECTRIC VEHICLE
- 17. HYBRID ELECTRIC VEHICLES TOYOTA PRIUS, 2000 REQUIRE NO CHANGE IN TYPICAL CONSUMER USAGE HABITS HAVE EXTREMELY LIMITED ELECTRIC RANGE
- 18. ALL-ELECTRIC VEHICLES/PLUG-IN ELECTRIC VEHICLES Nissan Leaf Chevy Volt
- 19. TESLA’S STRATEGY
- 20. STRATEGIES
- 21. LOOKING TO THE FUTURE
- 22. NOT OUT OF THE WOODS YET TESLA’S SUCCESS • REVENUE OF $562 MILLION & PROFIT OF $11.2 MILLION • MODEL S EARNED CONSUMER REPORT’S HIGHEST RATING • MAY 2013: COMPANY RAISED $1 BILLION BY ISSUING NEW SHARES • PAID BACK GOVERNMENT LOAN WITH $679 MILLION CASH STILL AVAILABLE • SURVIVED INFANCY, APPEARED TO BE SOLVENT, & WAS MEETING SALES OBJECTIVES
- 23. NOT OUT OF THE WOODS YET INVESTMENT ANALYSTS SAY • 2013 PROFITS INCLUDE STOCK WARRANT PROFITS & ZEV CREDIT SALES • WARRANT REVENUES WOULD NOT BE REPEATED • NO FORECAST FOR YEARLY DEMAND OF ZEV CREDITS • NO ONE KNOWS WHETHER REVENUES WERE SUSTAINABLE • INCREASING COMPETITION • WHAT’S MARKET SIZE FOR ELECTRIC VEHICLES & WHAT PORTION OF MARKET WOULD PAY HIGHER PRICE OF A TESLA? • POSSIBILITY OF TESLA’S STOCK PRICE TO BE AN OVERINFLATED BUBBLE REFERENCE : HILL, C. & JONES, G. (2013). STRATEGIC MANAGEMENT: AN INTEGRATED APPROACH (11TH ED., PP. C-201-C-210). STAMFORD, CT: CENGAGE LEARNING
Editor's Notes
- #18: Meaning they are filled with gasoline and automatically switch between electric miles and gasoline miles For many, 10 miles of electric driving before switching over to gas is the norm. This limits their ability to reduce carbon emissions or to influence energy usage
- #19: Nissan Leaf Retailed for about $35,000 & had a range of about 90-100 miles/charge. It had sold 25,000 units in the US & 50,000 worldwide by June 2013 Chevy Volt PHVE that can travel about 40 all-electric miles/charge & an additional 340 miles on gasoline (making it a good solution for individuals that primarily made short commutes but also wanted to be able to drive the car long distances without “range anxiety”) It also retailed for about $35,000 and had sold over 20,000 units in the US by June of 2013
- #23: 1st quarter of 2013 – 1st quarterly profit Highest Rating – Outsold similarly priced BMW & Mercedes models in the 1st quarter $679 M Musk announced 1. It was his obligation to pay back taxpayer money ASAP 2. The company had sufficient funds not to develop its next generation of automobiles without the loan & without issuing further shares
- #24: ZEV – zero emission vehicle credits Possibility Market capitalization in june of 2013 = $11 billion Difficult to reconcile such a large market capitalization with Tesla’s sales If the stock was over valued & began to drop dramatically, it could undermine people’s faith in the company