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Tesla Motors Inc.

Company Analysis
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Tesla Motors Inc. Company Analysis


[Group C]

Situation Analysis

Tesla Motors Inc. Company Analysis


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Table of Contents
Table of Contents.............................................................................................................................2
Executive Summary.........................................................................................................................4
Tesla Motors....................................................................................................................................5
Company history..........................................................................................................................5
Company Financial Resource......................................................................................................5
Product Portfolio..........................................................................................................................5
Mission.........................................................................................................................................6
Company Goals............................................................................................................................6
Company Core Competency and Sustainable Strategic Analysis................................................7
Industry Review...............................................................................................................................7
Industry General Outlook.............................................................................................................7
The High End Segment................................................................................................................8
The Electric Vehicle Market.........................................................................................................8
A green vehicle: Within the green vehicle market, there are four types:..................................9
Bargaining Power of Customers...............................................................................................9
Bargaining Power of Suppliers...............................................................................................10
SITUATIONAL ANALYSIS.........................................................................................................10
Tesla SWOT Summary..................................................................................................................10
SWOT Analysis..........................................................................................................................10
Description of SWOT analysis......................................................................................................13
Strengths.....................................................................................................................................13
Weaknesses.................................................................................................................................14

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Opportunities..............................................................................................................................14
Threats........................................................................................................................................14
Assessing Competitors Viability....................................................................................................15
Toyota Motor Company.................................................................................................................15
Toyota Motor Company SWOT Summary................................................................................15
Toyotas Competitiveness in the EV industry............................................................................16
GM.................................................................................................................................................17
GM SWOT Summary................................................................................................................17
GMs Competitiveness in the EV industry.................................................................................18
BMW.............................................................................................................................................19
BMW SWOT analysis................................................................................................................19
BMWs Competitiveness in the EV industry.........................................................................19
Intensity of Existing Competition..............................................................................................20
Customers and Competitors.......................................................................................................20
Tesla Market Analysis....................................................................................................................22
Market Segmentation.................................................................................................................22
Tesla Product Targeting and Positioning....................................................................................22
New Markets..............................................................................................................................23
New Products.............................................................................................................................24
Teslas Marketing Strategy and Current Customers by Segments.............................................24
Product Mix and Marketing Activities.......................................................................................27
The 4 Ms of Advertising............................................................................................................28
Conclusion.....................................................................................................................................29

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Works Cited...................................................................................................................................31
APPENDIX I.................................................................................................................................32

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Executive Summary
The attractiveness of any industry is often determined by the ease of entry to the industry,
governmental regulations, capital requirements, and the possible earning returns from capital
invested. Equally, the more competitive industry is, the more complex it becomes for new
entrants to enter the industry. This essay uses Tesla Motors to discuss Situation Analysis of this
company, its threats opportunities, weakness, and strengths, in a bid to realize the possibility of
inclusion of a new product that might be much cheaper in the market, than the currently available
and future proposed products. Tesla operates at the premium segment of the automobile industry,
where it focuses on the product of electric vehicles (Tesla Motors 12). Most major incumbent
automobile manufacturers have engaged in the production of both internal combustion engines
vehicles and power-train electrification vehicles. The industry is experiencing significant
changes with the impact of new regulation being felt by existing manufacturers. Tesla competes
with manufacturers in the ICE vehicle, electric vehicle, hybrid electric vehicle, and plug-inhybrid section (Bloomberg News 2). However, the company faces major strategic challenges.
Key among them is the ability to guarantee sufficient battery supply as customer demand
balloons. The huge shortage of lithium-ion cells is a major challenge to the company production.
While the company has the merits of strategic partnership, the sustainability of lithium-ion
batteries remains a major challenge to the company.

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Tesla Motors
Company history
Tesla Motors is a high-end car manufacturer founded in 2003 by Palo Alto (Brenan 2). The
company focuses on the production of electric vehicles and EV power train components. The
company first EV was launched in 2008 under the Tesla Roaster. Currently, the company sells
the Model S luxury sedan in North America, China, and European markets (Tesla Motors 13).
According to consumer reports, the Tesla Model S received the highest customer satisfaction
score of any car in the world. Currently, the company has a capitalization of 27.98billion with an
operating income of around 61 billion USD (Yahoo Finance, n.p).
Company Financial Resource
Tesla is a publicly traded company that trades at NASDAQ under TSLA. The company
total assets have continued to increase since 2012, $1,114,190 to $2,416,930 in 2013 and the $5,
849, 251 (Little 13). Equally, the company total liabilities have experience an equal measure of
increase with 2014 recorded as the highest year with high levels of liabilities ($4,879,345). The
company total stockholders equity has risen from $124,700 in 2012, to $667,120 in 2013, and
then $911,710 in 2014 (Brenan 3). The company gross margin for 2014 was 27.57, operating at a
margin of -6.89%. While the gross margin was high, the net margin was very low -9.19%. The
return on investment has remained low at -14.60% (Yahoo Finance, n.p.). The intensive capital
nature of the company investment has been associated with the observed figures.
Product Portfolio
The company products fall into three categories: electric luxury cars, automotive
components, and rechargeable energy storage systems. Under the electric luxury brand, the
company has offered various product lines. Of significant importance under this burner is the

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Model S product line and the other model to be released, Model X. The company has patent right
for Electric power trains and other related products. Equally, the company has invested
significantly in the production of rechargeable power products and the establishment of
Recharging stations.
Mission
The company mission since its inception has remained unchanged: To accelerate the
advent of sustainable transport by bringing compelling mass market electric cars to market as
soon as possible. (http://www.teslamotors.com/blog/mission-tesla)
The company goals surround this mission statement. According to the Chairman, the
company has focused on accelerating the transition of the world from gasoline dependent
vehicles to electric mobility with increased affordability. According to the company website,
"they are catalyzing change in the automobile industry." Since the vehicles are fun to drive and
environmentally profitable, the company has won the hearts of environmentally sensitive
clientele. In making sure that the company achieves its mission, the company has developed
more stations and promises to continue this development trend across the world. The aim is to
ensure availability of battery technologies to act as competing agents for gasoline-run vehicles.
Company Goals
According to the company website, the company goal remains the same To accelerate
the advent of sustainable transport by bringing compelling mass market electric cars to market as
soon as possible (http://www.teslamotors.com/blog/mission-tesla)
Company Core Competency and Sustainable Strategic Analysis
The company has focused on differentiation strategy as the main business level strategy.
The company offers high-quality luxurious EVs to its consumers. At the cooperate level, the

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company has chosen to focus on product enhancement and customer experience. The company
focuses on expanding its international markets in the European Union, China, and Japan.
According to Price Waterhouse Coopers, the company is strategically position as a high-end
market manufacturer and dealer. The company owns its stores and service centers, invests
significantly in innovation and high-performance vehicle, and has already acquired its
manufacturing plant in Fremont. The company has departed from the traditional business model
employed by other players in the industry by exclusively focusing on Electric power train
technology and owning their stores and services stations. Unlike other players in the market, the
company has developed what most critics have described as a disruptive technology in which
owners of such technologies deploy it successfully to a specific niche. Equally, the company has
secured strategic alliances with Panasonic cooperate for the development of more efficient and
reliable batteries. The company cooperates with companies like Toyota and Daimler in its
production process.
Industry Review
Industry General Outlook
The industry is one of the most competitive industries in the world. The industry has 35
players but the 10 largest companies control up to 80% of the market share (Tesla Motors 12).
Tesla's current market share is estimated to be 2.6%. The industry has witnessed significant
growth rates over the past few years. 106.3 million Vehicles were sold globally in 2014 (Tesla
Motors 14).
In the U.S where Tesla has its main share of market, the following facts characterize the market:

US Automobile Industry represents 5% of Private Sector GDP

76% of the market is made up of Ford, GM, and Chrysler

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18% of sales are from Japanese car makers

6.6m Americans are employed directly or indirectly in the automotive industry.

Hybrid sales was noted torepresented 1.2% of the market in 2005, 1.6% in 2006.

Forecasts estimate 5% of car sales will be hybrids by 2013 (Yahoo Finance, n.p).
The High End Segment
Tesla is primarily focused on the high-end market. The main factors determining

competition in the high-end segment of the automotive industry are brand image, quality, and
environmental sensitivity. Despite the high levels of competition in the market, the market has
not been fully explored.
The Electric Vehicle Market
The Electric Vehicle market commonly denoted as EV have moved past the infant stage
with a number of companies entering the market and gainfully commercializing their electric car
products (Tovey 1). The industry has reached profitability levels and competition in the industry
is intense. Governments are increasingly recognizing the importance of regulation in boosting
the industry and a number of incentive programs have been developed with the intention of
augmenting adoption of EV vehicles as the green option of automotive products.
A green vehicle: Within the green vehicle market, there are four types:

Electric Vehicles

Flexible-Fuel Vehicles

Hydrogen Vehicles

Hybrid Vehicles

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Bargaining Power of Customers
The bargaining power of consumers is often determined by the sensitivity of prices. Tesla
is operating in an industry where the buyers of the produces are households and businesses. The
company main consumers are private household consumers: this type of consumers is highly
sensitive to price changes. The sensitivity of these clientele means that companies in the
automobile industry find it difficult to offset the increasing costs of products by increasing prices
(Tovey 3). Furthermore, such an action would mean that the company products would witness a
go-slow. As such, companies have to sell at low prices in order to reduce inventory. To counter
the impact of high consumer bargaining power, companies have to invest significantly on brand
building in order to weaken the customers bargaining power. However, the inverse is true in the
premium segment where consumers are less sensitive to prices. Companies operating in this
section are lowly exposed to economic downturn as evidenced by recent profits earned by
premium segment players such as BMW and Audi compared to other players (2). Since the
company operates major in the premium segment, the bargaining power of buyers is moderate
and slightly lower in this section as compared to the other segment of the automotive industry.
Bargaining Power of Suppliers
The automotive industry particularly at the premium sector is organized into suppliers of
motor parts such as exterior, power train, interior, chassis, body, and electrical, and
manufacturers of the materials. The suppliers are auto-specific and have to rely on a limited
number of clients to remain profitable. This dependency on the limited number of client makes
them limited in terms of the bargaining power. However, the bargaining power of these suppliers
largely depend on the material supplied; Price Waterhouse Cooper, (21) observe that suppliers of
chassis and power train have a relatively stronger bargaining power. Manufactures of the high

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quality materials required for the production of EVs have high bargaining power. However, this
power as argued by Little (15) is high switching with cost relative to mass-market competitors
because only a few number of suppliers for the materials are available. The fact that there are a
wide number of suppliers at the equipment manufacturing level means that the company can
threaten to withdraw purchase and therefore reduces the bargaining power of a single supplier.
Inputs such as nickel, steel, aluminum, copper, and lithium offer limited differentiation-making
suppliers rather homogenous and therefore less powerful. As such, the bargaining power of
suppliers is moderate.

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SITUATIONAL ANALYSIS
Tesla SWOT Summary
SWOT Analysis
STRENGTHS

Good engineering and technology

Doesnt have much brand recognition

research capability
Able to raise large amounts of capital
First mover advantage; the first

among the general public


A very small company with small sales

company to offer a relatively practical

volume, so no economies of scale


Possible supply problems with

fully electric car, customers include

components, especially if demand

high-profile figures like Arnold

increases
The Tesla Roadster hasnt been on the

Schwarzenegger, George Clooney, and

power electronics, motor and battery


packs
Vertically integrated value chain allow

for cost and quality control


Proprietary technology
Low marketing expenses
Efficient production
Lower battery costs
Good brand perception
OPPORTUNITIES

market for very long, the longevity of

Jay Leno
Designs and builds many of the
components in its cars, including the

WEAKNESSES

Moving towards the family sedan

fully electric cars remains to be proven


Already high OPEX is expected to

increase
Poor return on invested capital and

equity
Higher CAPEX requirements over the

next years
High long-term liquidity risk

THREATS

Wright speed X1, a prototype high

market and making a product that is

performance electric car that caters to

meant for more of the automotive

the same market; the only direct

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market
Price of oil and gasoline skyrocketing,

making the price premium for an

competitor to Tesla that offers a similar

electric car less of an issue


Expanding into developing lithium-ion
batteries and other energy technologies,

the market with full and hybrid electric

cars, the GM Volt and Toyota Prius


The price of oil falling dramatically in

the short run


A competitor having a breakthrough in

partnering with a battery company to

improve battery technology


Economic growth in key markets and

especially in China
Stricter emission policies
Currently low interest rates

product
Large automobile companies entering

related energy technologies, like


hydrogen powered cars, natural gas, or

ethanol
Higher raw material prices
EV incentives phase out
Lithium supply constraint
Lower oil prices short term

Description of SWOT analysis


Strengths
Tesla has a number of strengths that give it competitive advantage when compared with
the other players in the industry. To begin with, the company has a vertically integrated value
chain, which allows cost reduction and promotes quality control. Cost is one of the main
challenges facing companies operating in the premium segment of automotive industry, with an
integrated and watertight value chain, the company is able to control cost and quality of the
products at the same time. A perfect example of the company dedication to cost is the Model S
design (Tesla Motors 15). The car is designed to be the best in the world offering industryleading technology, in performance, safety, and practicality. Consequently, the company has an
established and loyal customer base. The ability of the company to offer high quality products

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has seen it win the hearts of most of the premium car consumers in the industry. Innovation is
also another key strength for the company. Tesla has thrived to be the best innovator in the
industry since its inception. The company has continued to update its Model S product and the
promise for better innovation in to the to be launched Model X. other facts such as low
marketing expenses, efficient production, low battery costs and good brand perception have
worked to the advantage of the company. Furthermore, with good brand perception, the company
is poised to win more customers. Efficient products lower battery costs, and low marketing
expensive all contribute towards improved profitability.
Weaknesses
The company has a very small sales volume, which means that there are reduced
economies of scale. The company small volume of salves means that there is small return on
investment. Higher CAPEX requirements are also another weakness for the company. The
company also faces the risk of long-term liquidity (Tesla Motors 16). The nature of Tesla
investment demands significant amount of investment in the company infrastructure, which runs
the risk of liquidity in the future. The company brand is not well known to the public. The
company has small brand equity and the company can easily be overshadowed by other large
automakers.
Opportunities
The company is operating in a new market where there are immense opportunities. Model
S according to the company is the only true luxurious electric car. Considering that the company
market is new and fully unexplored, the company can capitalize on the opportunity that currently
exists. There is also projected economic growth in key markets and especially in China, since
there is always a positive correlation between automotive demand and economic growth the

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company should anticipate increased demand (Tovey 2). Stricter emission policies are also in
favor of the company. This means that consumers will continue to be influenced by government
incentives towards turning to EVs as the viable option for sustainable development. The current
low interest rates coupled with high availability of credit is good news for the company.
Threats
The first significant threat to the company is the incumbent automakers. These companies
have established themselves in the industry and have very strong brand equity and resources. If
these brands were to release EVs that may be different at a technical level with Model S and
Model X, the company brand names will weight in significantly in the customers decision
making process. News that companies such as Renault, Volkswagen, Fiat, Audi, Lexus, Daimler,
and BMW some of the most established players in the premium segment of the automobile
industry are involved in the production of EVs is a major threat to the existence and profitability
to Tesla. Consequently, the company faces a major threat financially. The company has limited
resources and very low margin of error. Any mistake can have a significant cost implication on
the company finances. High cost for raw materials, EV incentives phase-outs, and lithium supply
constraints are some of the threats that face the company. EV incentives are not permanent and
will out phased with time, this means that the company will have to bear the full cost of
production and innovation. Raw materials for EV production are very expensive. Increased
demand for these materials might affect their availability and force the prices to go up. Equally,
lithium is the main lifeblood for EVs. This commodity is not abundantly available and therefore
the risk of reduced supply will have a negative effect on the company profitability. Finally, low
oil process is likely going to affect the consumption of EVs. Most of the companies in the ICE
segment of the automotive industry have invested significantly on energy efficient automotives.

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This means that most of the consumers will prefer highly energy efficient ICEs due to the low
costs of maintenance as compared to EVs (Tovey 4). Competition from related energy
breakthrough such as natural gas and ethanol.
Assessing Competitors Viability
Toyota Motor Company
Toyota Motor Company SWOT Summary
STRENGTHS

Strong market position and brand

WEAKNESSES

recognition

Strong focus on Research and

image

Development

Extensive production and distribution

Brand loyalty

Working in Both High end and low


ender user segments of the automotive

industry
OPPORTUNITIES

Declining sales in key geographic


segments

networks

Product recalls could affect brand

Poor allocation of resources compared


to peers

High interest rates and low availability


of credit

High oil prices

THREATS

Growing global automotive industry

Intense competition

Growing partnership with BMW

Appreciation of Japanese Yen

Strong outlook in the EV market

Natural disasters could have an impact


on the company production structure.

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Toyotas Competitiveness in the EV industry
Toyota is the oldest company to venture into the hybrid/EV segment. Before the
introduction of Toyota Prius the first hybrid model of EV in the U.S in 2000, the car had received
wide popularity in Japan by 1997 (Tovey 2). As of September 2010, over half a million Prius
version of EV had been sold in the U.S market alone. The car is cheap fetching around $21,000
and has been applied to the Lexus LS600h, which goes for $104,000 (Tovey 3). The LS600h a
large luxury care is in the same category as the Tesla Roadster, which is less specious and less
luxurious. Tesla should be very concern about Toyota ambitious plan to offer a larger battery
pack and a home charging station as options for the Prius. By providing this option, the company
will be well poised to launch a full EV product line, which will definitely have significant
success in the market. The plan by Toyota to offer larger battery packs and home charging
options will be direct competition to Teslas plans to offer fully electric sedans at different prince
points. Equally, the planned Tesla sedans priced at $50,000 to $70,000 Whitestar and $30,000
Bluestar are very high compared to Toyota, which can offer fully electric sedans for Lexus for
under (Tovay 2) which will be direct competition to the company product. Another Fully electric
version of the Toyota Camry is already available in the market. The company has also released
the Toyota iQ EV in response of Tesla Model S version of the EV generation.
GM
GM SWOT Summary
STRENGTHS

WEAKNESSES

Global presence

High cost structure

New vision and strategy

Brand dilution

Strong brand portfolio

Bureaucratic culture

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Strong presence in China

Knowledge of home market

4 well performing brands


OPPORTUNITIES

Car recalls

THREATS

Positive attitude towards green

Fluctuating fuel prices

vehicles

New emission standards

Increasing fuel prices

Rising raw material prices

Changing customer needs

Intense competition

Growth through acquisitions

Exchange rates
GMs Competitiveness in the EV industry

General Motors is a significantly formidable force in the industry that poses a major
challenge to Tesla. The company has invested a large amount of its capital in the development of
alternative vehicles for EVs. The current development of Volt, which is not true EV, indicates
that GM is highly interested in hybrid care market and will continue to pursue the goal to achieve
EV capabilities in the future. A preorder of 20,000 Volt as the care got into product indicates that
the market for Volt is formidable (IEDC 6). The car is designed approximately forty miles on
battery power and then the care engages 1.0L turbocharged gas engine automatically to recharge
the battery solves that main challenges facing EV vehicles. Furthermore, the main challenge
facing purely EVs is battery recharge. Consequently, the option provided by GM can run on both
biodiesel and gasoline. The company E-Flex system adopted in the production of Volt represents
a significant force in standardizing EV components making it an added advantage for the
company. The companys alternative model for Model S is relatively cheap. It will definitely

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attract more client base compare to the current Tesla Product. If the company were to choose the
lower end market, it would face significant competition from GM.
BMW
BMW SWOT analysis
STRENGTHS

WEAKNESSES

Brand reputation

High cost structure

Environment friendly vehicles

Weak brand portfolio

Quality products

Perception of high prices

Highly skilled workforce

Too few acquisitions and strategic

Corporate Social Responsibility (CSR)

Strong brand presence in China


OPPORTUNITIES

partnerships

THREATS

Increasing fuel prices

Intense competition

Positive attitude towards green

Rising raw material prices

vehicles

Decreasing fuel prices

Expand brand portfolio

Growing euro exchange rate

Changing customer needs


BMWs Competitiveness in the EV industry
BMW has been an established player in the luxury market. The company has continued to

innovate and produce low consumption automobiles, high performance luxury products. BMW
has major advantages due to its ability to its ability to manufacture efficient Dynamics, such as
Mild hybrid technologies. The company has sole patents in start-stop systems which shuts engine
off when not needed, regenerative breaking system, and small 4-cylinder gas and diesel engine.

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The company has established hybrid technology model options particularly the BMW X5 model.
Coupled with its BMW vision efficient dynamics, the company has prototypes for solar powered
hybrid technologies and BMW hydrogen 7-powered version of the Luxury 7 series. The
company is the world fist hydrogen-drive luxury. The i series model of BMW EV has performed
exemplary well with the latest model i8 selling around 10,000 units immediately after its
production. Considering its technological capabilities, the company is a significant competitor to
Tesla (Brenan, n.p).
Intensity of Existing Competition
Competition in the automobile industry is intense. Material costs are always high, price
wars and strict regulations by the government reduce profitability. While the automotive industry
is at a mature stage in the developed nations, the only way for manufacturers to capture new
markets is through innovation. At the world stage, 35 automobile products companies exist in the
market, 22 of these companies are based on Asia (IEDC 4). However, only the ICE segment of
the automobile industry has reached a maturity stage. The EV segment has high potential and
most of the automakers are increasingly investing a significant amount of their resources on
production of EVs. Companies are increasingly being forced to innovate and any company that
seeks to remain competitive in the automobile industry must be innovative. As such, the intensity
of rivalry in existing automakers is very high. Furthermore, automakers are being forced to go
with contemporary changes in environmental sensitivity, which demand for fewer ICEs and more
of EVs.
Customers and Competitors
Tesla is a niche car manufacturer. It is the only all-electric, commercial luxury sports
vehicle, which makes Teslas customers and competitors very unique. While exploring Teslas

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customers and competitors, we can simultaneously look at its 4 Ms of advertising. This
consists of to whom Tesla markets and who the market consists of, what motivates
customers to buy, what message Tesla is relaying to consumers, and how Tesla
communicates to its consumers through media.
Teslas market consists of early adopters, consumers that are seen as affluent,
educated, and motivated by social prestige. Consumers are also viewed as highly
technologically literate. Model S owners typically have an income of over $100,000, and they
consist of mostly men (Tesla Motors 13). Tesla is a status symbol and customers see owning
one as part of defining their personal brand. The social prestige of owning a sleek,
sophisticated, luxurious vehicle that is also environmentally friendly is the main, but not the
only motivator. The vehicles safety also influences buyers. In fact, Teslas model S received
the highest safety ratings out of any car ever manufactured. Tesla sells so well because
the message it relays is the the driving force for customers, but its not all about the
look. Musk says, It is more than just a company, it is more than just a product. There
is a cause there that really matters, and this is something that all consumers know. The
Model S is often compared to the Chevy Volt and Nissan LEAF because they are the
top three selling all-electric or extended-range electric cars (IEDC 3). However, it attracts a
completely different type of buyer. On average, Tesla owner are younger and wealthier
than owners of the Volt or LEAF. Customers are not particularly price-sensitive and seem
to typically place a premium on service and design, making Teslas main competition
luxury vehicles rather than electric.

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Tesla Market Analysis
Market Segmentation
The company has adopted a geographical segmentation approach. The company has three
geographic markets, North America, Europe, and Asia. North America has remained the largest
segment of the company sales accounting to 77% of the total revenues generated by the company
(IEDC 4). Europe is the second leading in terms of sales generated by the company. The
company has focused on countries such as Switzerland, Denmark, and other Scandinavian
countries. In Asia, the company has started rolling out some of its products in Japan and China.
The diagram below captures Tesla Market Segmentation.

Tesla Product Targeting and Positioning


The company targets high-end users in the luxury segment of the automotive industry. By
differentiating itself from the existing brands, the company has proved that electric vehicles are
possible by offering models of electric vehicles that are fun to ride and comfortable to the user.
To control the market, the company has segmented its target market into four sections:
the BlueStar, the WhiteStar, the Roadster, and Future models (IEDC 2). The segment values are
represented as follows:

Tesla Motors Inc. Company Analysis


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Adopted from, PriceWaterhouseCooper, 21.


The company has positioned itself in the market through the zero emission and
environmental friendly tag. By embarking on environmental awareness, the company products
use 100% renewable energy, and are better for the world economy. Some of the benefits
associated with company products include, zero gas price, tax incentives in selected states,
single-occupancy access to car pool lanes, discounted electrical rates, free parking at LAX and
other airports, no parking meter fees, and the reduction of oil dependency in the world.
New Markets
China offers one of the most reliable markets for the company. Contemporary statistics
indicate that china is the largest automotive consumer in the world. Equally, it is the largest
world green house gases emitter. Consequently, statistics show that it is the largest growing
luxury vehicle market across the globe (IEDC 4). China therefore offers a great opportunity for
Tesla. Recognizing this opportunity, the company has already began establishing its presence in
China. However, the company faces major challenges in the Chinese market because of import
duties imposed on foreign vehicles. For example, the current model S is priced at $120,000
approximately 50% more than the prices in the U.S (Price Waterhouse Cooper 12). These prices
position Tesla at the middle in the luxury brands in China.

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New Products
To capture the low-end consumer market, the company has announced that it will be
releasing a third generation model of EV by 2017. The car is estimated to cost an estimated
$35,000. The new model comes as a response to the current gap on the low-end market. The
company has also announced that it would be releasing its Model X cross over by 17 but
commercial production will commence on 2018 after the estimated launch and full operation of
Gig factory. Consequently, the company has announced release of new domestic power batteries
costing $3,500 and $2,000. The entry into the new domestic market as explained by the CEO is
in tandem with the company goals of transitioning the world into green energy (Tovay 3).
However, to have an advantage in the market, with other companies that have stronger
brands and are good at utilizing the current technology to produce cheap yet competitive
products as well, Tesla would have opted for a model that costs even lesser than the proposed
new car of $35,000 (Tesla Motors 14). The low-end consumer market does not prefer
extravagant and leisurely components of a car, and the company can reduce the leisurely
components of the new product, which will subsequently reduce the costs of production, and
allow the company to introduce in the market, a product much cheaper than the $35,000 car
announced.
Teslas Marketing Strategy and Current Customers by Segments
Tesla Motors Company is often attracting much fanfare among the customers and the
investors as well. It has long-term fundamentals hence EVs are here to stay and the company
holds an enviable position in this market. It has never disappointed investors and has been
outperforming the legacy carmakers stock by a huge margin. However, the prices for EVs have
continued to be prohibitive in spite of the increased technological innovations as well as the

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massive government dole outs. A section of the market has been having reservations on the longterm utility that can be obtained from the EVs. It has been argued that they are not
environmentally friendly as the deadly fossil fuels always go into the electric generators used to
run the vehicles. Others do question its soaring valuations although Tesla may not be valued with
the same metrics used for many automobile companies such as Ford and General Motors. EVs
are not a new concept and most companies have it on their portfolio. Nissans Leaf was the best
selling electric vehicle in 2014, where the automaker managed to sell 60,000 units (Little 14).
Tesla is striving to deal with challenges surrounding the EV industry including range
anxiety. No one wants to purchase a vehicle that runs out of power or energy faster with no place
to recharge the battery. The company has been able to address the issue by providing a driving
range of more than 250 miles in excess (Bloomberg News 3). It has been on the verge
developing superchargers that will be of help to those driving over long distances. The company
has made this possible by choosing strategic places for the charging program. Busy places have
been chosen to reach out to several clients and in a way market the new items being introduced
by the firm. Tesla has adopted a differentiated strategy in selling its cars whereby the customer
books the car online hence does not need to visit a dealer. It also offers its potential customers a
drive test, which acts as a contact point with the customer.

Tesla Motors Inc. Company Analysis


26

Adopted from Little (13)


Tesla is experiencing competition in the area it has chosen as its major segment. Several
models from the traditional automobile manufacturers offer viable alternatives to the current
Tesla models in the market. Their competitors are expected to introduce EVs as well as the Plugin hybrids that will compete with Tesla Model 3 in the mid-price segment (Little 14). It should
thus take caution while coming up with the new designs that will compete effectively in the
market.

Tesla Motors Inc. Company Analysis


27

Adopted from Little (16)


Product Mix and Marketing Activities
Teslas current product mix is comprised of vehicles and accessories. At present, the
only car in their lineup is the Model S sedan. The Model X crossover will be released
within the next year, and Tesla is currently planning a smaller, less expensive car
expected the next few years. The Tesla Roadster, which is no longer produced, is
available for purchase in pre-owned form (Little 14). Accessories include vehicle accessories
and apparel. Teslas largest source of advertising comes from its brick-and-mortar
showrooms, not advertising and media campaigns. Tesla strategically places its dealer
showrooms in large areas of shopping such as malls and high-endretail clusters. It causes a lot
more foot traffic simply walking by, and actually going in and checking out the
showroom than typical car dealerships. This in itself is a key marketing tool that helps

Tesla Motors Inc. Company Analysis


28
Tesla gain brand awareness. Teslas marketing team is currently comprised of only seven
people. As of late, Tesla does not have any plans to run any traditional or new media
advertising campaigns in the near future.
The 4 Ms of Advertising
Market: The target market for Tesla is middle aged affluent consumers who tend to
balance high end luxury goods with social responsibility, or being green. The
demographics of this market segment do not affect how Tesla conducts business as who is
driving the car is not so much important as whether or not they can afford to drive the
car. Geographically some consumers may not be as interested in Teslas products because
a lack of charging stations. Yes, you can charge the car at home but some may wish to
charge on the go.
Motivation: Consumers are interested in buying Teslas products because of the brand
image and reputation. Tesla is known as a prestigious and luxuries brand that comes with a
life style and has a high perceived value from consumers. With that being said, what
motivates them is the image they will posses when driving their vehicles. In that
consumers social group they will be seen as environmentally friendly with very good taste as
the cars look very sleek, sophisticated and modern. Lastly, another motivating factor is the
safety behind the vehicles. The Tesla Model S has received the highest safety rating of any
car ever manufactured in the world!
Message: The companys marketing communications should really follow the way
the brand has been positioned. How your message comes across with what youre saying, how
your saying it and where your saying it should all coincide with the portrayed lifestyle
that consumers see as engrained in the brand.
Media: We believe that Tesla does need to work on its marketing a little bit. It is a very
small department and Tesla could use more employees to help out with their marketing

Tesla Motors Inc. Company Analysis


29
and rely less on customer advocacy (Bloomberg News 2). To do this we would suggest
they start doing more commercial advertisements on channels their target market is most
likely to be watching, like major news stations. Also we believe it would be a good
idea for Tesla to do more with print and digital marketing. They should be placing ads
in for example, Forbes magazine, Wall Street Journal, and maybe even National
Geographic. With their digital ads we believe they would have success not only on
these companies websites mentioned above, but also maybe advertise on major search
engines like Google.
Conclusion
Tesla is arguably the leading green energy automotive manufacturer in the world. The
company has previously focused on the high-end segment of the automotive industry. However,
the company has diversified to domestic and low-end segment of the market. A few weeks ago,
the company launched the first lithium battery options for domestic customers. Additionally, the
company has planned to release the first low end EV by 2017, which will compete with other
green vehicles in the low-end segment of the automotive industry. One of the main success
factors in the market is its vertically integrated value chain. This allows cost reduction and
promotes quality control. Cost is one of the main challenges facing companies operating in the
premium segment of automotive industry; with an integrated and water tight value chain, the
company is able to control cost and quality of the products at the same time. However, the
company faces major strategic challenges. Key among them is the ability to guarantee sufficient
battery supply as customer demand balloons. The huge shortage of lithium-ion cells is a major
challenge to the company production. While the company has the merits of strategic partnership,
the sustainability of lithium-ion batteries remains a major challenge to the company.

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30
Works Cited
Bloomberg News, Goldman Sees Tesla Consuming Up to 17% of Lithium Output. Web.
Accessed from, http://www.bloomberg.com/news/2014-02-28/goldman-sees-teslaconsuming-up-to-17-of-lithium-output.html
Brenan, Morgan. Tesla and Elon Musk's 'major new product line'is it a battery? CNBC News,
2015. Accessed from, http://www.cnbc.com/2015/03/31/tesla-and-elon-musks-majornew-product-line-is-it-a-battery.html
International Economic Development Council. Creating the Clean Energy Economy: Analysis of
the Electric Vehicle Industry. International Economic Development Council 2013. Print.
2-36
Little, Dan. Battle for Sales in the Premium Segment: Six Key Levers Impacting Current
Automotive Sales Models. Automotive Viewpoint, 2015. Print. 2-15
Price Waterhouse Cooper. State of the Plug-in Electric Vehicle Market. EV Market Outlook. Pw|
C, 2014. Print. 1-40
Tesla Motors Annual Report 2009, 2010, 2011, 2012, 2013, 2014. Tesla Motors, 2014. Print.
Tovey, Alan. Tesla's economy Model 3 electric car to hit the road in 2017. The Telegraph, 2015.
Accessed from,
http://www.telegraph.co.uk/finance/newsbysector/industry/engineering/11841624/Teslaseconomy-Model-3-electric-car-to-hit-the-road-in-2017.html
Yahoo Finance. TSLA. Accessed from, http://finance.yahoo.com/q?s=TSLA
APPENDIX I

Period Ending

Tesla Motors Inc. Company Analysis


31
Mar 31,

Dec 31,

Sep 30,

2015

2014

2014

Jun 30, 2015


Total Revenue

954,976

939,880

956,661

851,804

Cost of Revenue

741,606

679,807

694,964

599,953

Gross Profit

213,370

260,073

261,697

251,851

181,712

167,154

139,565

135,873

201,846

195,365

196,970

155,107

Non Recurring

Others

Total Operating Expenses

Operating Expenses
Research Development
Selling General and
Administrative

Operating Income or Loss

(170,188) (102,446)

(74,838)

(39,129)

(22,121)

(369)

(2,792)

(156,708) (124,567)

(75,207)

(41,921)

28,703

29,061

(103,910)

(70,982)

Income from Continuing Operations


Total Other Income/Expenses
13,480
Net
Earnings Before Interest And
Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest

24,352

26,574

(181,060) (151,141)
3,167

3,040

3,719

3,727

Tesla Motors Inc. Company Analysis


32

Net Income From Continuing


(184,227) (154,181)

(107,629)

(74,709)

Ops
Non-recurring Events
Discontinued Operations

Extraordinary Items

Effect Of Accounting Changes

Other Items

Net Income
Preferred Stock And Other

(184,227) (154,181)
-

(107,629)
-

(74,709)
-

Adjustments
Net Income Applicable To
(184,227) (154,181)
Common Shares

(107,629)

(74,709)