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Darden School of Business Tesla Strategic Analysis

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Darden School of Business Tesla Strategic Analysis

  1. 1. B.3 TESLA 1
  2. 2. Tesla Motors designs and sells high performance, super efficient electric cars. Tesla Motors cars join style, acceleration, and handling with advanced technologies that make them the quickest and the most energy-efficient cars on the planet. (Tesla Motors, Mission)
  3. 3. Tesla Motors has brought the best of the automotive and technology worlds together to permanently bury the image of an electric car as a step backwards in performance, efficiency, or design Tesla Motor’s key technology is the 100% electric powertrain They set out to forever alter perceptions of electric vehicles and to make electric cars a viable alternative by producing a car that is at once beautiful and exciting to drive, along with being the most efficient production automobile on the planet (Tesla Motors, Vision)
  4. 4. Strategic Analysis 2003 • Founded 2006 2007 2008 2009 • Prototypes of the Roadster introduced to the public • Two batches of 100 Roadsters sell • Opened first retail store in Los Angeles, second in Menlo Park • Unveiled the Model S Milestones 2010 • Strategic Partnership announced with Toyota • Initial Public Offering Opened 2011 2012 2013 2014 • Stopped taking Roadster orders • Unveiled Model X • Commercial deliveries of the Model S begin • Began building Supercharger stations • Time Magazine’s Best 25 Inventions of 2012 • Musk promises US to be covered with Supercharger stations • First partial recall • Model X will enter production • 80% of US population covered by Supercharger stations Tesla
  5. 5. Roadmap Tesla • Shipping since 2008 • Over 1,800 sold in over 30 countries • Over 13 million miles driven • Available mid 2012 • 20,000 units per year, pricing starting at $49,900 • World’s first, production intent all-EV platform design • Revealed by end of 2011 - Available late 2013 • 10,000 –15,000 units per year • Based on Model S platform • Additional vehicle(s) that leverage the “S” platform • Smaller vehicle platform; pricing starting at $30K • Positioned for “mass-market” appeal and volume Modified Lotus Elise Platform Tesla S Platform Tesla’s “Gen III” Platform
  7. 7. Strategic Analysis Industry Analysis Market US auto industry is full of auto manufacturing companies, BMW Group, Chrysler/Dodge/Jeep, Ford Motors, General Motors, Honda/Acura, Hyundai/Kia, Mazda, Nissan, Subaru are the main competitors in US Auto market For 2012 as a whole, automakers sold approximately 14.5 million vehicles in the U.S. market, a 13 percent increase from 2011 and the highest annual sales total since 2007 marking the third consecutive year of annual sales increases of at least 10 percent Auto Manufacturer Market Share in America (Feb 2013) Luxury Auto Market Share in America (Jan 2013)
  8. 8. Strategic Analysis Industry Analysis As fuel prices remain high and there is greater concern for the environment, more energy efficient cars are increasing in demand Moreover, as part of their bailout specifications, the Big Three automakers are required to quickly release more energy efficient vehicles to the market. This increasing popularity for hybrid and electric cars are going to affect the industry in big ways as it will create a new market for businesses to cater to these new forms of vehicles. Market Auto Manufacturer sales in 2012
  9. 9. Strategic Analysis Industry Analysis Global automobile sales forecasts project divergent market penetration rates of approximately 0.6 – 0.9% for plug-in hybrid electric vehicles (PHEVs) by 2015, 9% by 2020, and 22% by 2030 for Electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEV) Market penetration will depend on battery pack costs, charging infrastructure, competing technologies, oil prices, manufacturer investments in EV and PHEVs, and consumer skepticism of EVs and PHEVs Market USA Monthly PEV Sales Cumulative U.S Plug-In Vehicle Sales “Tesla Model S Grabs 8.4% of Luxury Vehicle Sales in US in First Half of 2013”
  10. 10. Strategic Analysis Industry Analysis Market As a result electric vehicle sales forecast by type in 2015 is: EV Type nº of Models Volumes % of EV Market Regular Hybrid 57 518.200 55,20% Full electric 37 215.200 22,90% Plug-in 18 200.500 21,30% Fuel cell vehicle 6 5700 0,60% All electric Vehicles 118 939.600 100,00% Source: JD Power and Bernstein
  12. 12. Strategic Analysis Tesla´s long-term strategic goal is to create affordable mass market electric vehicles (EV) In order to achieve that goal it will increase the number and variety of EVs available to mainstream consumers in 3 ways: • Selling it´s own vehicles in a growing number of company-owned showrooms and online. First vehicles have been the Roadster, the Model S, and it´s expected to start selling the Model X next year • Selling patented electric powertrain components to other auto manufacturers so that they may get their own Evs to customers sooner. As a result it has partnered with Toyota and Mercedes in order to supply batteries and charging systems • Serving as a catalyst and positive example to others automakers, demonstrating that there is pent-up consumer demand for vehicles that are both high-performance and efficient. Strategic goals Expansion Partner with traditional auto makers Look for new Applications of tech • Achieve 20K Model S Production Goal • Partnership with Toyota and Mercedes • Expand to all automakers • Standardize Ev Parts for efficient manufacturing • Battery technology and electric motors have broad application potential Strategic goals & Competitive advantage
  13. 13. Strategic Analysis Partnerships In order to achieve it´s second strategic goal it has partnered with several auto manufacturers: Strategic goals & Competitive advantage Partners Date Agreements Worth 2009 2008 2010 2010 2010 2008 2010 • Blackstar Investco (an affiliate of Daimler) purchases 19.901.290 share of series E convertible preferred stock for $50M • Tesla begins development of battery pack & charger for Smart fortwo • Daimler agrees to purchase 1500 battery packs and charger to support European trial • Agreement for Tesla to develop and manufacture battery packs % chargers for Daimler´s A-class vehicles • Toyota purchases 2.941.176 common shares in private placement • Toyota RAV4 Program: Tesla to develop powertrain for RAV4 prototype • Toyota RAV4 Program: Tesla to develop validated powertrain system, including battery, power electronic module, gearbox and software • Tesla uses Panasonic battery cells in its advanced battery packs and has collaborates with Panasonic in the development of the next generation battery cells for electric vehicles • Panasonic purchases 1418573 common shares in private placement $50M $23.3M $14.1 $50M $9M $60M $30M
  14. 14. Strategic Analysis As a result of those strategic goals we can see a clear differentiation in the incomes of the two paths: • Vehicles sales & development services Strategic goals & Competitive advantage
  15. 15. Strategic Analysis Competitive Advantage Tesla´s central competitive advantage is the low cost of Tesla’s battery pack, which allow to sell the Model S at a reasonable price but with a near-normal (up to) 300 mile range, a combination other EVs have yet to deliver Tesla Model S battery pack costs will be at/below ~$300/kWh, well below from other OEMs/battery makers ($500-600/kWh for 2011-2012 timeframe, and $375-500/kWh mid-decade target) A key source of Tesla’s cost advantage is its ability to apply commoditized small cylindrical lithium cells (used in consumer electronics) to a car via proprietary thermal/power management Strategic goals & Competitive advantage Tesla Leads on Range (maximum miles per single charge) Tesla Leads on Cost (battery pack cost in $/kWh)
  16. 16. Competitive Advantage It also has a comprehensive, proprietary technology with 40 patents awarded & over 200 patent applications pending Strategic goals & Competitive advantage • Unique Chemistry • Proprietary Cathode Geometry • Automotive-Grade Construction • Passive Safety Features • Modified Cell Case • High Energy Density • Active Cooling • Mfg Trade Secrets • Charge Balancing • Active Safety Features • Power Mgmt Software • 2 Way Inverter • Charge Mgmt Software • On Board Charger • Flux Phasing & Mgmt • Compact Design • Thermal Mgmt Software • Instant Peak Torque • A/C Induction Motor • No Rare Earth Metals • 87% Avg Efficiency • In House Mfg • Proprietary Design • Up to 18,000 RPM • No Shifting • In House Mfg
  17. 17. Competitive Advantage With an unique platform for the development of EV vehicles Strategic goals & Competitive advantage
  19. 19. Strategic Analysis Competitors Analysis By Company Source: Tesla Motors
  20. 20. Strategic Analysis Competitors Analysis By Company Tesla Market Cap: 21.98B 51.57B 61.33B 49.41B 202.81B Employees: 2964 106870 276044 213000 333498 Revenue (ttm): 1.32B 76.45B 114.20B 152.84B 289.95B EBITDA (ttm): -156.36M 10.48B 13.32B 7.90B 36.35B Operating Margin (ttm): -16.38% 10.34 5.51% 1.39% 7.54% Net Income (ttm): -219.99M 5.17B 6.64B 4.53B 15.68B EPS (ttm): -1.95 7.88 6.22 2.79 9.90 P/E (ttm): N/A 9.97 9.22 12.79 12.93 PEG (5 yr expected): 16.13 2.26 N/A 0.60 0.34 P/S (ttm): 16.61 0.68 0.54 0.32 0.70 BMW Daimler AG ToyotaGeneral Motors
  21. 21. Competitors Analysis By Company General Motors Toyota Competitor Response Profile: • GM represents a significant future threat to Tesla, if, as planned, Tesla decides to enter the small premium market near the $30,000 price point • The current development of the Volt, although it is not a true electric car, indicates that GM remains interested in the electric/hybrid car market, and will continue to pursue the market in the foreseeable future • Designed for approximately 40 miles of battery powered driving before the 1.0L turbocharged gas engine automatically begins to recharge the battery, thus extending the range of the Volt to up to 640 miles of highway driving Actions: • The only way for Tesla to compete effectively would be through differentiation, which would focus mainly on technology Competitor Response Profile: • Toyota Motor Company’s has a longstanding hybrid technology and possible entry into the plug-in hybrid and fully electric car market • Toyota’s Prius first took the road in Japan in 1997, arrived in America in 2000, making it the most prevalent hybrid car • Tesla should be wary of Toyota offering a larger battery pack and a home charging station as options for the Prius, as this could eventually lead to Toyota offering a full electric version of the Prius. • This would cut into Tesla’s plans to offer fully electric sedans at different price points Actions: • Tesla should focus on improving their technological advantage in fully electric cars so that by the time Toyota enters the electric car market, Tesla has a technological advantage.
  22. 22. Competitors Analysis By Company Competitor Response Profile: • Tesla’s one of the potential competitor is BMW, which continues to put effort into entering the luxury, high- performance, low-emissions, low-consumption auto market • In August it unveiled the production version of the i3 • The company’s first all-electric series production vehicle will be available next year some time before June and at a seriously competitive price. • Moreover, the i3 is not merely but the first of a line of EVs planned to deliver “individual mobility” – that’s what the “i” brand stands for • BMW has designed and built its own electric motors for its models Actions: Competitor Response Profile: • The Mercedes-Benz B-Class Electric Drive will go on sale in the US and Europe from early next year • Most of the systems that charge and run the little B-Class will be shared with the upcoming SLS AMG Coupe E-Cell. • Mercedes-Benz product R&D manager Dr Thomas Weber says electric vehicle technology will move quickly enough to make dedicated electric vehicles viable even for those who want to travel longer distances and not pay a premium over a traditional petrol or diesel car. • Mercedes-Benz has partnered with Tesla for its electric motor and battery technology BMW Daimler AG • Tesla should improve brand awareness and Global expansion before the most serious threats vehicles from European companies enter the game
  23. 23. Competitors Analysis By Product BMW i-8Tesla Model S Mercedes Benz SLS AMG E-Cell Roadster Premium Vehicles Small Premium Vehicles Tesla Model X Mercedes B Electric Class BMW i-3
  24. 24. Competitors Analysis By Product
  26. 26. Five Forces Analysis Substitutes Suppliers Industry Competitors Buyers Potential Entrants Threat: Low • Small number of competing vehicles, different niches. • Some are collaborating with Tesla Motors • European companies developing their own technology Competition: Moderate • High entry barrier • Majors brands are competing • Tesla sector is niche and yet to be discovered • No other EV in that sector Battery Companies • Bargaining Power: Low since Tesla buys Li- ion cells from different manufactures Engine: In house Chasis/Engineering: • In house. There was a exclusive partnership with Lotus for the Roadster. Bargaining Power: High Transmission: In house Threat: high • High entry barrier: Large number of substitutes available • Hybrids and Plug-in Hybrids • Low displacement turbo diesels with low emissions and good fuel economy B2C • Bargaining Power: Low • Demand very high B2B • Bargaining Power: Low • No other comparable technology available
  27. 27. Five Forces Analysis Substitutes Suppliers Industry Competitors Buyers Potential Entrants Complementing Factors • Oil prices are expected to rise in comparison to electricity prices • Low availability of charging stations and home charging facilities • Tax / Parking incentives: Similar to hybrid tax breaks • Scope for future development in battery technology
  29. 29. Environmental analysis Political & Legal • US $8 billion program for advanced vehicle technologies supports engineering and production of the Model S, and the development of powertrain technology • Department of Energy granted $465 million loan to Tesla in 2009 • Several laws in different US States does not allow Tesla to sell directly to the consumers • To facilitate growth, the U.S. government has invested $5 billion through the American Recovery and Reinvestment Act and the DOE‘s Advanced Technology Vehicle Manufacturing (ATVM) Loan Program. • The DOE aims to increase the public accelerated charging stations from 500 to 20,500 in 2012 and reduce battery pack costs by 70% by December 2015. Technological developments • Maximum range for Tesla cars is 300 miles • There is a need for charging station infrastructure required on long highways Environmental & Social • Tesla´s awareness to climatic changes and low carbon footprint in production • Promotion of new technologies and changes in energy policies by government • Increase in environmental consciousness of consumers (green / eco ) products • Declining preference for petroleum fuel • Tesla vehicles produce zero emission Economic • Economic conditions in 2014 also should mirror those in 2013, including moderate but steady economic growth and job creation, low interest rates and readily available credit, low inflation, a strong stock market, and improved housing prices. • These conditions and, in particular, their persistence over a number of months inspire consumer confidence and motivate consumers to buy new cars • The auto industry will enjoy another year of growth in 2014 with new car sales topping 16 million for the first time since 2007 • The release of pent-up demand from buyers who deferred sales during the recession will continue as the increasingly aged fleet drives more consumers back to the new car market • Sales will also benefit from an expected 300,000 additional lease returners compared to 2013, who will lease or buy a new vehicle when their current leases terminate Demographic Trends • Because Tesla’s main product is a sports car, their target market consist mainly of the male sex. • Due to their currently high price point these males must be businessmen who have yearly disposable incomes of possibly $100,000 and higher. • This target market live stylish lives, are car enthusiast, and follow trends, such as going green.
  30. 30. B.3 SWOT ANALYSIS 7
  31. 31. Swot Analysis Tesla Swot Analysis Strengths Opportunities Weaknesses Threats • Product: fastest and most energy-efficient electric car on the market • Innovative technology • Brand image • Positive strategic partnerships • Growing market • Increasing oil & gas prices • Rising consumers sentiment • Government support • Young industry with no set standards • Large International market potential • Increasing awareness and support for environmentalist • Scale of operations, no economies of scales, low sales volume • Dependent on continuing innovation • Financial profile • Deep pocket competition • Large motor companies devoting more resources to developing electric cars and cars fuelled by other alternatives • Increasing Internal Combustion Engine efficiency • Limited EV support Infrastructure • Concentrated industry • Auto buying dynamics • Loss of government subsidies According to all data gathered and exposed before we can do the next Tesla SWOT analysis:
  33. 33. Recommendations Performance Vehicles Premium Vehicles Small Premium Vehicles Family Vehicles Subcompact / City Vehicles Cars Technology Transfer EV Infrastructure Tesla should focus only in the Premium sector in order to achieve it´s first strategy goal Expanding to the other sectors will dilute its brand recognition affecting it´s premium segment sales and lowering it´s margins It will also require to expand it´s current infrastructure to support mass EV production and management In order to achieve it´s second strategy goal towards the creation of affordable mass market electric vehicles Tesla should not only license it´s technology to high premium manufacturers like Mercedes but to less premium ones so Tesla technology becomes a standard and most companies dependent for their EV vehicles on Tesla´s improvements In line with the previous strategy goal Tesla should set the industry standard for EV infrastructure, by creating an unique charging system and allowing other auto manufactures whose vehicles are based on Tesla´s technology to access Tesla´s EV infrastructure This should be done gradually at it can become a risk by saturating Tesla´s own capacity for it´s vehicles Market
  34. 34. Recommendations Tesla should seek to gain a more global presence and grow their business through international expansion before most established european firms are able to get their premium EV cars to the market In order to do that it should: - Increase it´s own brand awareness (Most Europeans don´t even know that Tesla Motors exist) - Target countries with EV infrastructure currently developed International Expansion
  35. 35. Recommendations Tesla‘s battery pack technology is critical to the company‘s positioning and competitive differentiation. The low cost of the battery pack allows Tesla to not only design cars with battery ranges greater than the competition but also place equal emphasis on design, performance, and energy efficiency. Electric battery manufacturers rarely release exact battery pack costs, but most estimates range from $500 - $1200/kWh ($33,000 for 100-mile range) depending on chemistry and cell-form factor. However battery pack costs have decreased faster than expected. In November 2009, Deutsche Bank analysts projected average battery pack costs reducing from $675/kWh to $500/kWh by 2015 and $325/kWh by 2020; but in March 2010 it cited industry reports of battery pack bids in the mid-$400/kWh for 2011/2012.2 Further evidence is Nissan reporting the battery pack in its economy EV Leaf costs only $375/kWh. In addition, Tesla CEO Elon Musk stated that the Model S battery pack cost less than the Leaf’s pack, a statement corroborated by calculations of battery pack costs given information in Tesla’s IPO. If battery pack costs reduce as the DOE projects, consumers will have further incentive to own EVs and PHEVs since costs are $0.02 - $0.04/mile to operate whereas a 25-MPH gasoline vehicle costs $0.12 - $0.15/mile to operate. In addition, maintenance costs will likely be lower for EVs and PHEVs. Keeping this crucial advantage is essential for Tesla in order to maintain it´s competitive advantage in the EV market. Innovation and R&D
  36. 36. Recommendations Because of the high cost of the Roadster, Tesla‘s target market was rather small. Owners were often referred to as eco- hipsters,‖affluent environmentalists or rich early adopters • With the goal of selling 20,000 Model S vehicles per year initially, Tesla must target a larger segment of consumers who are both interested in functionality and performance and are also environmentally and politically conscious According to the IPO, Tesla believes that the combination of functionality, performance, style, energy efficiency and overall cost of ownership of the planned Model S will draw buyers from several market segments, including the lower, medium and upper premium sedan classes • The ideal target market for the Model S will include consumers who see EVs as symbolizing their commitment to the environment and will embrace the role as a member of a brand community by becoming a Tesla Enthusiast Tesla is still a young emerging company, but it has created strategic partnerships that have ensured its survival thus far, brought in top leaders from the automotive and technology industries to run its operations, and given itself a competitive advantage through its superior battery technology and product design. If it can see its way through the success of the Model S as it´s currently seeing, meet projected sales, and increase its operating margin, Tesla will be well on its way to its mission of increasing the number and variety of electric cars available to mainstream consumers by creating cars that are fun to drive and environmentally responsible Customer Target
  37. 37. B.3 BIBLIOGRAPHY 9
  38. 38. Strategic Analysis Bibliography Bibliography • Tesla Motors Company Overview - Tesla • Strategic marketing plan - New york university; Partha Mitra • Tesla Strategic Marketing- UC Berkeley; Byron Pittam, Laura DellaGuardia , Lisandra Maioli , Ryan Shi, Svetlana Fedorova • Tesla tomorrow, the future of tesla motors - University of Wisconsin – Madison Wisconsin School of Business – MBA; Danielle Boyke Jia Cheng, Jared Clevers, Michael Schroeder, Karen Strupp • Tesla Motors Business Strategy – Joseph Baker, Asaf Korkut, Erica Long, Salmon Camhi, Jithu Krishnan • Tesla Motors - An Analysis of Tesla’s Marketing Efforts in the U.S; Adam Cimala, Evangeline Demos, Pandi Lera, Andre Jordan • Competitive Analysis of Tesla Motors; Charlene Abdo • Goldman Sachs Group, Inc. Americas: Clean Energy: Energy Storage. June 27, 2010., p.25 • Deutsche Bank. Vehicle Electrification: More Rapid Growth; Steeper Price Declines For Batteries. March 7 2010, p.3. • Garthwaite J. Retrieved from • Goldman Sachs Group, Inc. Americas: Clean Energy: Energy Storage. June 27, 2010.