Tesla, Inc.

: Strategic Report 2020

The Lisbon MBA 2020

Alban Auffray • Miro Osório • Patrick Henrici • Rudelee Merks • Vasco Freitas da Costa
1 Executive Summary ....................................................................................................... 4
2 Tesla Inc. ....................................................................................................................... 6
2.1 Company Origin ...................................................................................................... 6
2.2 Company Overview................................................................................................. 7
3 Environmental Analysis ................................................................................................ 11
3.1 Macro Environment ............................................................................................... 11
3.1.1 PESTEL Analysis ........................................................................................... 11
3.2 Microenvironment ................................................................................................. 16
3.2.1 United States Automotive Industry ................................................................. 16
3.2.2 United States Electric Vehicle Industry........................................................... 19
3.2.3 Client Segmentation....................................................................................... 19
3.2.4 Current Segment Sales (SL) .......................................................................... 23
3.2.5 Annual Compound Segment Sales Growth Rate (G) ..................................... 23
3.2.6 Margin Assessment based on 5 Forces Model (M) ........................................ 24
3.2.7 Risk Evaluation (R) ........................................................................................ 28
3.2.8 Sustainability Evaluation (SU) ........................................................................ 29
3.2.1 Sustained Value Calculation .......................................................................... 29
3.3 Competitors .......................................................................................................... 30
3.3.1 Strategic Groups ............................................................................................ 30
3.3.2 Competitive Intelligence ................................................................................. 33
3.4 Industry ................................................................................................................. 37
3.4.1 Determination of the Industry’s and Product’s Life Cycle ............................... 37
3.4.2 Key Success Factors ..................................................................................... 41
3.4.3 Industry Value Chain...................................................................................... 41
4 Organizational Analysis................................................................................................ 44
4.1 Resources and Capabilities .................................................................................. 44
4.1.1 Human Resources ......................................................................................... 44
4.1.2 Financial Resources ...................................................................................... 47
4.1.3 Physical Resources ....................................................................................... 47
4.1.4 Organizational/Intellectual Resources ............................................................ 49
4.2 Capabilities ........................................................................................................... 50
4.3 Efficiency and Economies ..................................................................................... 52
4.3.1 Core Competencies – VRIO........................................................................... 54
4.4 Strategy ................................................................................................................ 56
4.4.1 Strategic Fit ................................................................................................... 56
4.4.2 Strategic Intent............................................................................................... 57
4.4.3 New SWOT Analysis...................................................................................... 57
Strategic Thinking and Value Creation ................................................................................ 59
4.5 Classification of the Business ............................................................................... 59
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 4.6 Tesla’s Sustainability Impact ................................................................................. 59
4.6.1 Examples for Environmental Sustainability .................................................... 61
4.6.2 Examples for Social Sustainability ................................................................. 62
4.6.3 Examples for Governance Sustainability ........................................................ 63
4.7 Value Creation for Customers ............................................................................... 63
4.8 Value Creation for Shareholders ........................................................................... 66
4.9 Value Creation Aggregate Indicator ...................................................................... 67
5 Mission, Objectives, Strategy and Products-Markets ................................................... 68
5.1 Vision and Mission ................................................................................................ 68
5.2 Purpose and Value ............................................................................................... 69
5.3 Objectives ............................................................................................................. 70
5.4 Strategy ................................................................................................................ 71
5.5 Business Model .................................................................................................... 73
6 Strategic Dimensions ................................................................................................... 74
6.1 Products-Markets Strategy .................................................................................... 74
6.1.1 Products-Markets Matrix ................................................................................ 74
6.1.2 Ansoff Matrix .................................................................................................. 74
6.2 Generic Strategy ................................................................................................... 76
6.3 Innovation ............................................................................................................. 77
6.4 Vertical Integration ................................................................................................ 78
6.5 Strategic Outsourcing ........................................................................................... 79
6.6 Internationalization ................................................................................................ 81
6.7 Competitive Advantage of Nations ........................................................................ 82
6.8 Diversification ....................................................................................................... 86
6.9 Conglomerates ..................................................................................................... 87
6.10 Business Portfolio Planning .................................................................................. 88
7 Corporate Development ............................................................................................... 90
7.1 Value Creation in Corporate Development ............................................................ 90
7.2 Mergers and Acquisitions ...................................................................................... 91
7.3 Strategic Alliances ................................................................................................ 92
8 Planning ....................................................................................................................... 94
8.1 Organizational Structure ....................................................................................... 94
9 Implementation ............................................................................................................ 95
9.1 Functional Management ....................................................................................... 95
9.2 Process & Project Management ............................................................................ 96
10 Conclusion and Outlook ........................................................................................... 98

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1 Executive Summary

December 2030, an autonomous Taxi TESLA Model Y second generation is driving me to the
airport. The news projected on the brand-new TESLA front window states “another electrifying
year for the global leader of Electric Vehicle breaking its target of 10 million cars sold this
year”. Is it fiction or the life achievement of a visionary leader called Elon Musk?

The fundamental story of TESLA is grounded in the outstanding capacity of its charismatic
CEO to drive the acceleration of sustainable energy vehicle adoption globally and to
revolutionise transportation with the automation of driving. Since the beginning of the story in
2003, Musk’s objective is to leave a legacy and to be at the forefront of the car industry
transformation. Similarly, to Ford in the beginning of the last century with the invention of the
assembly line, TESLA aims to outpace the competition where “the second place should need
a telescope to see TESLA”. The company aims to master product development and innovation
in Electrical vehicle, to lead manufacturing with unprecedent level of automation and to
transform the customer experience with the best technology integration ultimately to enable
autonomous driving and no service concept.

TESLA’s growth is supported by strategic bold choices, focussing first on premium segment
in order to gain momentum and by then increasing volume as new offering is introduced and
internationalisation developed. Its Gigafactories in US, China and soon Europe should propel
the electrical vehicle producer to category champion. The confidence in its growth potential
projected the company at the most valued car maker position on earth in 2020, increasing its
market value by an outstanding 36% per year over the last decade.

The outstanding investor confidence is reinforced by a number of global trends, the VW diesel
gate, global CO2 concern and new generations sustainability concerns are few elements to
promote even further the adoption of Electric vehicles around the globe. The Norwegian
example, with 55% penetration of EV’s for new cars sold, summarises very well how policy
markers could influence macroeconomic trends by subsidising Electrical Vehicles to make
them as competitive as standard cars. China is no exception, concentrating 25% of global car
sales and adopting EV’s at double digit rate, the market is strategic for TESLA. The
construction of its second Gigafactory translates the ambition of the company to play a
leadership role in the country. Whilst over the last decade, all global car leaders have heavily
invested in conventional cars capacity to capture growth in China, TESLA built competitive
edge in EV’s with Panasonic strategic partnership in battery construction.

This competitive edge on electric powertrain could be a considerable advantage for TESLA
but also a major threat as all car manufacturers are now rallying on this new EV trend with an
unprecedented proliferation of EV or hybrid models putting pressure on TESLA’s leadership.
TESLA also stands out by the ecosystem the company developed in the renewable energy
segment, by building a network of superchargers in key strategic countries and by acquiring
Solar City to develop sustainable residential charging and energy storage solutions.

As Ford at the beginning of the last century, TESLA is different in the vertical integration of its
supply chain and is known for rather making than buying while its competitors often quoted as
“car assemblers”. To notice the acquisition of Grohmann automation in 2016 and Perbix in
2017 which gave to the company a competitive advantage in automated manufacturing
systems. This integrated strategy is the most debated as the company constantly
underdelivers on its manufacturing volumes, leaving space for criticism amongst its most loyal
customers.

Contemplating 2030, important challenges remain for TESLA, the proliferation of new EV’s
models by the competition, the evolution of mobility consumption by millennials, the constant
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improvement of combustion cars in a context of low oil cost and the emerging hydrogen
engines supported by Japanese car makers. Our report reveals how TESLA is well positioned
to address the transformation of the car industry in a sustainable manner and what strategic
choices the company has made to play a leadership role.

Image 1: Elon Musk

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2 Tesla Inc.

2.1 Company Origin

Tesla was initially created in 2003 by two Silicon Valley engineers, Martin Eberhard and Marc
Tarpenning. The partners had just sold their eReader company for $187 million and were
looking for their next big idea. They were inspired by the death of GM’s EV1 electric car that
year and they ended up re-inventing the concept of Electrical Vehicle. Elon musk came after
in 2004 as the first A series investor with a 7,5m$ investment.

Figure 1: Infographic about EV's early days1

1Inside EVs: https://insideevs.com/news/336938/teslas-origins-superhero-comic-check-out-this-

amazing-infographic/
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 2.2 Company Overview

Tesla, Inc., former Tesla Motors, Inc., is a US-based mobility services and energy company,
designing, manufacturing and selling high-performance electric vehicles (EV) with the mission
to “accelerate the world’s transition to sustainable energy”2.

Founded in 2003, Tesla claims to have developed the world’s best and highest-selling pure
EVs with a high autonomy and zero tailpipe emissions. At the same time Tesla’s automobiles
are presented among the safest and highest-rated cars in the world. 4 product lines for
passenger transportation have been launched, meaning that they are being produced and
delivered:

● Tesla Model S - launched in 2012

● Tesla Model X - launched in 2015
● Tesla Model 3 - officially launched in 2018 with deliveries having started in 2017
● Tesla Model Y - launched in March 2020

Image 2: From Left to Right: Tesla Model S, X, 3, Y

It is not by chance that the combination of these models’ letters can be read as S3XY – model
3 was actually supposed to be named Model E but due to a claim by automobile manufacturer
Ford for having produced a Model E already, Tesla had to rethink their endeavor.

Above models all incorporate different product line lengths with upgrade options essentially
offering an increase in range or performance as well as customization options offering features
such as self-parking, navigation systems, traffic light recognition, automatic city street driving,
various exterior colours and seating configurations, besides others.

Tesla, Inc. further announced the launch of 3 new models, all of which have been presented
as a prototype and have been tested for going into production.

● Tesla Roadster - pre-order-marketing until expected launch in late 2020

● Tesla Semi - pre-order-marketing until expected launch in late 2020
● Cybertruck - production start targeted for late 2021

2
https://ir.tesla.com
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Image 3: Tesla Roadster Image 3 Tesla Semi Image 5: Cybertruck

The Tesla Roadster is meant for passenger transportation while the Tesla Semi and
Cybertruck open access to new customer segments of the cargo transportation sector.

The company and its brand is strongly correlated with Elon Musk, who initially served as the
company’s chairman of the board, having been responsible for 98% of the initial funding for
the Tesla Motors, Inc. which was founded by July 2003 by the 2 engineers Martin Eberhard
and Marc Tarpenning. The brand’s name is a tribute to Nikolai Tesla, an electrical engineer,
physics scientist and well-known inventor of several technologies in the field of electrical
energy. Musk, who laid down his position as a chairman and nowadays is the CEO, said that
his vision for Tesla Motors, Inc. is to become a technology company and independent
automaker that eventually offer EVs at prices that the average consumer can afford. As of
February 2017, Tesla Motors shortened its name to Tesla.

Tesla’s strategic planning is composed of 2 main phases so far:3

1. Build-up: Establish as a high-performance and high-quality producer of EVs with a

high brand awareness and a wide reach, producing cars for high-income customers.
The main goals were:
a. to create a low volume, expensive car,
b. to then develop a medium volume car at lower price,
c. to then create a high volume, affordable car,
d. and to provide solar power.

2. Hypergrowth: Invest all to establish as the long-term leader in the growing EV market.
This includes opening access to all major automobile customer segments by
lengthening the product line with products for customers with a low to mid-level income.
The main goals are:
a. to create solar roofs with seamlessly integrated battery storage,
b. to expand the EV product line to address all major segments,
c. to develop a self-driving capability 10x safer than manual by massive fleet
learning,
d. to enable cars to generate money while unused.

The Build-up phase has just recently been completed with the launch and ongoing deliveries
of the model 3 and Tesla already entered the Hypergrowth phase. This is already reflected in
their statement to investors: "...we also offer a smaller, simpler and more affordable mid-sized
sedan, Model 3, which we expect will truly propel electric vehicles into the mainstream."4

Tesla’s Common Stock

Since Tesla’s initial public offering in 2010 the company has seen an overall growth in common
stock value having reached its peak on February 17, 2020 with a value of $ 901 per share at

3
https://www.tesla.com/pt_PT/blog/master-plan-part-deux
4
https://ir.tesla.com
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close. Some analysts, investors and forecasters around the world have interpreted this in an
extreme overvaluation, but in any way, point out that the short-term risk of investments in
Tesla remains high due a potentially high chunk of investors being short sellers. As can be
seen in the graph below, the value dropped significantly in the weeks after the peak and
reached a new high on another upward trend with about $548 at close on April, 8 2020. The
difference of $353 (a drop by 39% from $901) is likely to have been triggered by a rapid decline
in the shareholders’ and traders’ valuation following the outbreak of the Covid-19 pandemic
and the consequently expected global economic decline affecting Tesla’s ability to sell their
existing and new products as per initial schedule. The drop was then empowered by
mentioned short sellers betting on the decline.

Figure 2: Tesla's Common Stock Evolution

Besides its market value, Tesla could not yet achieve any profitable year, only individually
profitable quarters such as Q3 and Q4 2018 as well as Q3 and Q4 2019.

Being headquartered in Palo Alto, California, US, Tesla operates multiple production and
assembly plants, such as in California, Nevada, New York and Shanghai and further owns its
own distribution network with which it offers direct sales around the globe. Having established
itself as a key player in the market over time, Tesla was able to become a global EV
manufacturer with further business models in solar panel and solar roof tile manufacturing as
well as in battery energy storage from home to grid scale – thereby Tesla became the first and
only fully integrated automobile and energy company in the world. Tesla’s global vehicle sales
increased by half from about 245k in 2018 to about 367k units in 2019 and on March 9, 2020
Tesla produced its 1-millionth EV.

As will be seen in later chapters, Tesla has been digitizing the automotive industry both with
regards to the model offerings themselves and to the distribution and assistance channels.

Contrary to traditional car offerings, Tesla’s offerings remain subject to continuous

improvement after the point of sale through over-the-air software updates and Internet
connectivity. By keeping the products open-ended, Tesla manages to expand the products’
life cycle and ensure that these are continuously tailored to the customers’ needs as well as
adjusted to new market trends.

Tesla has also been using digital tools to optimize the products’ distribution channels and
after-sale assistance. Customers can customize and order their cars online using the
company’s website. Furthermore, any issues that the customers may encounter when using
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the cars may sometimes be solved remotely with no need for onsite assistance. For example,
Model S can wirelessly upload data so technicians can view and fix some problems online
without ever needing to physically touch the car.

All these innovations, amongst others, have been contributing to set Tesla apart from the
traditional automotive companies and to underpin some of its stock valuation, despite Tesla
having not delivered any profits so far.

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3 Environmental Analysis

3.1 Macro Environment

3.1.1 PESTEL Analysis

Automobile industry was started in the 1890s combining steam engine with road wagon
technology to serve the need of upper class society discovering new mobility vehicles. The
early 1900s marked the first boom of the car industry, France dominating the automobile
industry quickly followed by the United States and Germany. This countries remained the
largest manufacturer and exporter of automobile till the 1980s. The automobile originally
manufactured to cater upper middle class became accessible to every house hold (example
of Ford T model sold over 15 million times) and technological evolution enabled a race to
produce automobiles in the least possible cost to make it accessible to all class level.

Today’s automobile industry is entering into a new era of technical innovation by producing
smarter, more eco-friendly and even driver less automobiles. In that context the analysis of
the Political, Economical, Social, Technological, Environmental and Legal factors can help to
understand EV’s growth momentum in response to the major trends in its environment.

Context Trend Impact on Demand Impact on supply

+ Demand of EV +Increased EV/HEV supply competition
Government regulation on CO2 emission
- Classic Diesel car Demand -heavy competition on battery supply
+Boom in demand of EV in China
Government incentives on EV & Charging +Rapid development of charging -Fluctuation of policy in Europe and China
Political infrastructure infrastructure globally

Chineese governments measures to improve -Proliferantion of low cost/quality cars in China

quality of EV +EV immatriculation demand +Reduce production cost with EV volume going up

+Growth opportunity and large EV +Opportunity for Global car manufacturer to grow outside legacy
adoption markets
China offering large EV market volume -high investment needed for development
Economical -EV still higher price vs classic cars
Global economy rise 2015-2019 +Increase car sales globally +Devlopment of SUV
+rise of middle class demand + Range extension for middle class demand
Price of material for EV decline +more affordable EV +Additional volume/margin improvement
+Greener car demand +EV brand image
Millenial generation growth -Different ways to consume transport -Affordability vs thermic cars
Social -emergence of alternatives to car ownership
+leasing boom +Green EV taxi in big cities ex-Amsterdam
Shift of ways to consume car transport
-Uberisation of transport +Autonomous car readiness
EV manufacturing requiring high level of investment -Relative high price to consumer -Drive consolidation of global market manufacturers to build scale
"-increase dependance with battery +Growth of supplier of powertrain
Battery storage technology advancement providers -emergence of rivals in China on battery storage
Technology "-Europe and China declared regional priority and manufacturing
investment
Battery manufacturing strategic regional focus +increased autonomy for EV +increased productivity for EV
-decrease barrier to entry
+ strongest Brand echo to environment for pure EV player
Environmental EV best fit for sustainable transportation development +Increased EV car adoption -recycling challenge due to rapid obsolescence of models
-Barrier to entry
+Barrier to entry premium car category
+legislation focus on safety
Safety standards for cars constantly increasing +Safety at the heart of Evs
Legal +Sustainable growth supply
2030 objectives to be at 30% EV +Support of demand EV globally +allow long term investment with 10+ year growth perspective
Table 1: PESTEL summary table

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Political - Policies have major influences on the development of electric mobility
Globally, the automotive industry has been under Governments pressure introducing different
regulations forcing manufacturers to move towards more fuel efficient cars, promoting the
development of electric and hybrid engines and ultimately charging infrastructure.

This innovative sector of the industry is benefiting in certain countries of a specific tax credit
for buying an electric car. Policy approaches to promote the deployment of EVs typically start
with a vision statement and a set of targets. An initial step is the adoption of electric vehicle
and charging standards. Procurement programs kick-start demand and stimulate automakers
to increase the availability of EVs on the market, plus provide impetus for an initial roll out of
publicly accessible charging infrastructure.

Another useful policy measure is to provide economic incentives, particularly to bridge the
cost gap between EVs and less expensive internal combustion engine (ICE) vehicles as well
as to spur the early deployment of charging infrastructure. Economic incentives are often
coupled with other policy measures that increase the value proposition of EVs (such as
waivers to access restrictions, lower toll or parking fees) which are often based on the better
performance of EVs in terms of local air pollution. Measures that provide crucial incentives to
scale up the availability of vehicles with low and zero tailpipe emissions include fuel economy
standards, zero-emission vehicle mandates and the rise in the ambition of public procurement
programs.

Regulatory measures related to charging infrastructure include minimum requirements to

ensure “EV readiness” in new or refurbished buildings and parking lots, deployment of publicly
accessible chargers in cities and on highway networks, and are complemented by
requirements regarding inter-operability and minimum availability levels for publicly accessible
charging infrastructure. So far only observed in Norway, when the EV and charging
infrastructure deployment evolves, some policy measures may need to be adjusted as the
markets and infrastructure mature. One example is how fuel and vehicle taxes are adjusted
and their contribution to government revenue.

Front running countries such as those involved in the Electric Vehicles Initiative are already
making progress from their initial phases of EV policy implementation (e.g. establishment of
standards, public procurement and early charging roll out, economic incentives). Many of
these countries have regulatory instruments in place and, to date, some advanced markets
like Norway have started phasing out some aspects of their EV support policies developed
standards for chargers. Some (China, European Union, India) are mandating specific
standards as a minimum requirement; others (Canada, Japan, United States) are not.

Figure 3: Global Electric Car Sales and Market Share '13 - '18

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Key policy developments in 2018/19 include:
● In the European Union, several significant policy instruments were approved. They
include fuel economy standards for cars and trucks and the Clean Vehicles Directive
which provides for public procurement of electric buses. The Energy Performance
Buildings Directive sets minimum requirements for charging infrastructure in new and
renovated buildings. Incentives supporting the roll-out of EVs and chargers are
common in many European countries.

● In China, policy developments include the restriction of investment in new ICE vehicle
manufacturing plants and a proposal to tighten average fuel economy for the
passenger light-duty vehicle (PLDV) fleet in 2025 (updating the 2015 limits). The use
of differentiated incentives for vehicles based on their battery characteristics (e.g. zero-
emissions vehicle credits and subsidies under the New Energy Vehicle mandate).

● Japan’s automotive strategy through a co-operative approach across industrial

stakeholders, aims to reduce 80% of greenhouse gas (GHG) emissions from vehicles
produced by domestic automakers (90% for passenger vehicles) – including exported
vehicles – to be achieved by 2050 with a combination of hybrid electric vehicles
(HEVs), BEVs, PHEVs and fuel cell electric vehicles (FCEVs). Fuel economy
standards for trucks were revised and an update of fuel economy standards for cars
was announced.

● India's announced the second phase of the “Faster Adoption and Manufacturing of
Electric Vehicles in India” (FAME India) scheme. It reduces the purchase price of
hybrid and electric vehicles, with a focus on vehicles used for public or shared
transportation (buses, rickshaws and taxis) and private two-wheelers.

European
China United States India Japan
Union
ZEV mandate X X*
Regulation
Fuel economy
(Vehicles) X X X X X
standards
Incentives Fiscal
X X X X
(Vehicles) incentives
Targets
X X X* X X
(Vehicles)
Industrial
Subsidy X X
policies
Hardware
X X X X X
Regulations standards
(chargers) Building
X* X X* X
regulations
Incentives Fiscal
X X X* X
(chargers) incentives
Targets
X X X* X X
(chargers)
Table 2: Comparison of different regions

Economical
Globalization of the car industry and the opening of new geographies with booming demand
like China has created opportunities of access to larger markets volume. Sales for electric
cars have risen as the global economy increased. In 2017, it was projected that the world
economy would grow by 3.5 percent. These rises, in Asia and Europe as well as the United
States, led to more electric developments. In fact, the sales of electric cars jumped over 30
percent between 2016 and 2017.

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Consequently, the price of materials is actually on the decline for EV producers. Particularly,
the cost of batteries is lower, which is great for the company. The more popular their cars
become to the public, the lower materials prices may drop.

This allows for the possible creation of a more cost-effective vehicle for the public. That too
can positively impact the price of materials. Results depend on the respective country’s
economy, of course. Any country with a declining economy will slice into the company’s profits.
In many countries though, consumers are investing in luxury vehicles like SUVs and BMWs.

Social
The Automobile industry has played a key role in society up until now but the upper class baby
boomer doesn’t represent the biggest consumer pool anymore. People in developed countries
has now started to believe that automobile has adversely affected their health and
environment, pushing millennials towards healthier alternatives like cycle to travel short
distance or new ways of travelling.

Millennials, this “technology friendly” consumer

group is also influencing the automobile sector,
they are aware of the latest technology
advancement and can easily compare and
evaluate offering. This is considering that they
still want to buy a car. In fact, the biggest
societal trend is the emergence of new ways to
“consume” car and transportation in general,
the example in Spain with Cabify offering car
booking service, Uber revolutionizing the taxi
industry, Blablacar digitalizing car pulling.

Figure 4: Generations share in population

The boom of leasing industry like in Germany demonstrates consumers reluctance to own a
car on the long run with further consequences on the car second hand market being flooded
with these vehicles.

Generation z, native tech. consumers, could be the first generation without the need of a
driving licence. The development of autonomous cars industry seemed to be at a cornerstone
with recent safety limitations observed in a number of programs. Nevertheless, the automotive
industry is made to adopt newest technology and the “part autonomous car” is already around
the corner.

On the other hand, it doesn’t take much for technology to become obsolete. We, as people,
are constantly creating, developing, and advancing what we already have. In a year’s time,
the newest gadgets and apps can be absolutely useless thanks to upgrades and updates.

Technological
Technology advances are delivering substantial cost reductions for batteries Recent
technology progress for battery storage in general has been boosted by high demand for
batteries in consumer electronics. Structural elements indicate not only that continued cost
reductions are likely, but that they are strongly linked to developments underway in the
automotive sector, i.e. changes in battery characteristics (chemistry, energy density and size
of the battery packs) and the scale of manufacturing plants.

Strategic importance of the battery technology value chain is increasingly recognized Policy
support has been extended to the development of manufacturing capacity for automotive
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batteries. This reflects the dynamic development of battery technologies and the importance
of EVs to achieve further cost reductions in battery storage for a multitude of applications. It
also recognizes the strategic relevance that large-scale battery manufacturing can have for
industrial development (due to the relevance of its value chain in the clean energy transition).
Examples of policy measures related to battery manufacturing include:

• In China, policy support aims to stimulate innovation and induce consolidation among
battery manufacturers, giving preference to those that offer batteries with the best
performance.

• In the European Union, the Strategic Action Plan for Batteries in Europe was adopted
in May 2018. It brings together a set of measures to support national, regional and
industrial efforts to build a battery value chain in Europe, embracing raw material
extraction, sourcing and processing, battery materials, cell production, battery
systems, as well as reuse and recycling. In combination with the leverage offered by
its market size, it seeks to attract investment and establish Europe as a player in the
battery industry.

Increase in battery efficiency allows now EV’s to perform 400km+ autonomy together with the
high developing rate of the battery charging station in key market is a positive for the firm.

Environmental
People love the idea of an electric car. Especially people who have eco-friendliness in mind.
An electric vehicle eliminates the need to use as much fuel as a traditional vehicle. And that’s
far better on the environment. Not to mention an electric car is supposed to be cheaper to use
than a traditional car (over time).

A Tesla is environmentally sustainable. It’s also new. Very few cars on the market boast the
power and luxury Tesla does. The company has done an amazing job maintaining their place
in people’s mind as that electric car. This makes it more difficult for other, similar vehicles, to
come onto the scene. Because when you think electric, you expect a Tesla.

Legal
Automobile safety has been one of the biggest fields for legislation around the world.
Regulations are constantly evolving globally putting automobile manufacturers under
continuous pressure.

Most recently, the diesel gate generated additional legislation pressure to limit automobile
carbon emission. The scandal of Volkswagen in Germany had a global impact in terms of re-
enforcing law in that matter.

Outlooks indicate a rising tide of electric vehicles. Dynamic developments in policy

implementation and technology advances underpin the projections to 2030 in the New Policies
Scenario, which aims to illustrate the consequences of announced policy ambitions.
Projections in the EV30@30 Scenario are underpinned by proactive participation of the private
sector, promising technology advances and global engagement in EV policy support. It is
aligned with the goal of the EVI EV30@30 Campaign to achieve a 30% market share by 2030
for EVs in all modes except two-wheelers (where market shares are higher).

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 Figure 5: Electric Vehicle Sales

In the New Policies Scenario, China leads with the highest level of EV uptake over the
projection period (see Figure 5). It is followed by Europe, where the EV sales share reaches
26% in 2030, and Japan, one of the global leaders in the transition to electric mobility with a
21% EV share of sales in 2030. In North America, growth is particularly strong in Canada
(where EV market shares reach 29% by 2030), as well as in California and US states that
have adopted zero-emissions vehicle (ZEV) mandates and/or have stated an intention to
continue to improve vehicle fuel economy. Other parts of the United States are slower to adopt
EVs, bringing the overall EV sales share to 8% of the US vehicle market in 2030.

3.2 Microenvironment

With the ‘bigger’ picture highlighted in the PESTEL analysis above, it is prudent to also look
at the microenvironment – the immediate industry analysis to determine who the market’s
customers are, who competes in the market, and a look at the inner-workings of the
automobile (and electric vehicle) industry. To do that we focussed our analysis on the United
States automotive market which can be extrapolated for the other part of the world.

3.2.1 United States Automotive Industry

Table 3 highlights the total new car sales in the United States from 2000 to 2019. According
to this data, it seems that the US has a maximum limit in annual new car sales of approximately
17 million before the market begins to decline or stabilize. As seen in 2008, the automobile
industry is at a high risk during financial crisis, and the effects of the crisis can be felt for years
afterwards – indicated by the lowest sales experienced in this period occurring in 2009 and
the market taking more than 5 years to return to over 17 million sales per year.

Before the onset of COVID-2019, the US annual sales of new cars were projected to fall
between 16 and 17 million cars. We can assume that the automobile industry will follow the

16
same recession pattern of 2008 with 2020 maximizing out at between 13 and 14 million cars5,
and 2021 being hard-hit and selling between 10 and 11 million cars. A 5-year recovery period
with constant growth can then be expected.

NEW CAR SALES IN US (MILLIONS)6

2000 17.4 2010 11.55

2001 17.2 2011 12.74
2002 16.9 2012 14.43
2003 16.7 2013 15.53
2004 16.8 2014 16.45
2005 17 2015 17.4
2006 16.5 2016 17.46
2007 16.2 2017 17.14
2008 13.3 2018 17.21
2009 10.4 20197 17.1
Table 3: Car sales in US

It is also imperative to look at what kinds of cars make up those 17.1 million sales in 2019 and
who was buying them. Table 48, adapted from a study done by Hedges & Company, divides
the car sales into Sedan, SUV, Truck, Electric Vehicle and Plug-in Hybrid Electric Vehicle.
There are many more ways to segment car types, but these are the segments that were
chosen in the study. The study also takes into consideration the ages, income levels, and
genders of the car owners, as well as whether they own a home or not. Some interesting
insights from Table 4 are gathered below.

Car Type
While all the car types tend to follow a similar breakdown in terms of demographics, there
seems to be two groupings of similarly accessed vehicles - Sedans and SUVs, and EVs and
PHEVs.

Age
Most new cars are bought by people aged 25 - 54, supporting the theory that people younger
than that typically do not have the financial capability to buy a new car, and also supporting
the theory that new car purchases largely coincide with major changes in lifestyle. As people
only retire once, the major change of lifestyle purchases of new vehicles among older people
tends to be less than over the larger age bracket.

Income
The majority of vehicles are purchased by persons whose income is over $100,000 per
annum, which is expected because vehicles these days are very expensive relative to other
costs of living. However, the US is highly unequal, and the bottom bracket of the income table
makes up the majority of individuals. The size of this bracket, coupled with the relatively
unconcentrated public transport, leads to a large amount of vehicle purchases across the
board by low income persons.

5
https://www.caranddriver.com/news/a31901914/us-sales-production-huge-declines-estimates/
6
https://fesrvsd.fe.unl.pt:2099/statistics/183713/value-of-us-passenger-cas-sales-and-leases-since-1990/
7
https://www.cnbc.com/2020/01/06/us-auto-sales-down-in-2019-but-still-top-17-million.html
8
https://hedgescompany.com/blog/2019/01/new-car-buyer-demographics-2019/
17
The preference for electric and hybrid vehicles skews far more towards high income
purchasers only, which is expected as electric and hybrid vehicles tend to come with a higher
price tag. They are also generally less all-round practical than gas powered trucks and sedans.
In other words, the extra luxury of electric or hybrid is not something that low- and mid-income
household are particularly willing to pay for.

Gender
Across all car types, men purchase more cars. Women tend to prefer traditional Sedan and
SUV styles and have shied away from purchasing electric or hybrid vehicles.

Home Ownership
Most people who purchased a car in 2019 own their own home.

Taking these elements into consideration, it appears that the market for car sales in the United
States is made up of middle-aged men who earn less than $50,000 in a year and already own
their own home. The segments of older men (55-64 years and 65+ years) should definitely
not be ignored as together they constitute approximately half the sales of cars in the United
States and are more likely to correspond with the $100,000+ income level, which is also a
prominent segment.

SEDAN SUV TRUCK EV PHEV

AGE < 24 years 1% 1% 1% 1% 1%

25 - 54 years 51% 43% 50% 46% 54%

55 - 64 years 21% 26% 23% 22% 22%

65 years + 27% 31% 26% 32% 23%

INCOME < $50,000 39% 31% 37% 20% 21%

$50,000 - $74,999 18% 19% 20% 16% 12%

$75,000 - $99,000 9% 10% 10% 4% 10%

$100,000 + 34% 40% 33% 60% 57%

GENDER Female 44% 43% 14% 25% 25%

Male 56% 57% 86% 75% 75%
HOME Own Home 90% 93% 93%
OWNERSHIP Don't Own / Rents 10% 7% 7%

Table 4: New car sales in the US by car type, 2019

One more interesting trend to note is depicted in Table 5 which looks at the break-down of car
purchases by age over time.9 It appears that in the short time between 2007 and 2017, the
age of a new car purchaser has tended upwards with the median age moving from the 45 –
54 year bracket to the 55 – 64 year bracket.

9
https://www.statista.com/chart/20048/us-buyers-of-new-car-by-age-group/
18
 2007 2017
< 24 YEARS 1% 3%

25 - 34 YEARS 15% 11%

35 - 44 YEARS 29% 14%
45 - 54 YEARS 24% 20%
55 - 64 YEARS 18% 25%
65 YEARS + 13% 27%

Table 5: Age of car buyers in the US in 2007 and 2017

3.2.2 United States Electric Vehicle Industry

Table 6 below gives an overview of the electric vehicle, plug-in hybrid electric vehicle, and
total EV and PHEV sales from 2010 to 2019. At the beginning of the decade, the percentage
growth was exponentially higher than the percentage growth at the end of the decade. While
this can indicate that the trend of electric vehicles might be slowing down, looking at the actual
values of electric cars sold tells a different story with more cars being sold in 2018 and in 2019
than in 2016 and 2017 together.

If COVID-19 had not happened, it would not have been unrealistic to predict that by 2025, the
United States would be selling over 1 000 000 EVs and PHEVs per annum. They still might
reach this value despite COVID-19 as more companies are bringing out their own versions of
electric cars and charging them becomes cheaper and more efficient.

EV PHEV Total Sales Total

EV Sales US PHEV US
Percentage Percentage US EV PHEV Percentage
(millions) (millions)
Growth Growth (millions) Growth

2010 0.00119 - - - 0.00119 -

2011 0.00975 919% 0.00798 - 0.01773 1590%

2012 0.01465 250% 0.03859 584% 0.05324 400%

2013 0.04769 426% 0.04901 227% 0.0967 282%
2014 0.06342 233% 0.05536 213% 0.11878 223%

2015 0.07104 212% 0.04283 177% 0.11387 196%

2016 0.08673 222% 0.07289 270% 0.15962 240%
2017 0.10449 220% 0.09386 229% 0.19835 224%
2018 0.23882 329% 0.12249 231% 0.36131 282%
2019 0.23972 200% 0.08825 172% 0.32797 191%
Table 6: Electric Vehicle and Plug-in Hybrid Electric Vehicle Sales in the United States

3.2.3 Client Segmentation

Vehicles can be segmented in a number of ways. In this report, they are segmented by luxury
sedan, mid class sedan, SUV, pickup, and by sports car / super car. These segments were
chosen to represent the types of electric vehicles already in the market, and are summarized
below:

19
 POTENTIAL SIZE OF SEGMENT IN US
DRIVER VALUES
(MILLIONS)
LUXURY SEDAN Luxury, Space, Comfort 30.3
MID CLASS SEDAN Price, Safety 11.2
SUV Quality 54.8
PICKUP Functionality 35.0
SPORT / SUPER CAR Performance 25.5
Table 7: Potential Segment Size

Luxury Sedan
• The luxury sedan is usually driven by individuals who are wealthy and status-driven.
They have succeeded in their careers and are looking for a way to flaunt that success.
The ‘cool factor’ matters, and these individuals will spend more money for comfort,
luxury, and convenience.
• One type of people who normally drives a luxury sedan is the Ivy Leaguers. These
individuals generally live in urban areas, are college-educated, are between the ages
of 35 and 64, and have a net worth of more than $250 000. The Ivy-Leaguers account
for approximately 30.3 million people in the United States.10
• Drivers of luxury sedans value luxury and space over price.

Mid Class Sedan11

• The mid class sedan is normally driven by your typical, young American family. These
families are starting their lives together, live in urban areas, and are working towards
paying off their own home and car. Most purchases are made out of necessity, with
frivolous spending discouraged.
• An example of the type of people that drive mid class sedans are the Simpsons. The
occupants of this household are married, have a net worth of between $50 000 and
$99 000 in some states, and between $100 000 and $249 999 in some of the wealthier
states. They generally have more than one child under the age of 18. The Simpsons
account for approximately 11.2 million households in the United States.
• Drivers of mid class sedans generally value price and safety over trendiness.

10 Wealth, Asset Ownership, & Debt of Households Detailed Tables: 2016 by the United States Census Bureau
11
Image Src. https://www.esquire.com/uk/culture/tv/a31774974/best-simpsons-episodes/

20
SUV12
• The SUV is often driven by families that are established, wealthy, and willing to spend
money on items of status.
• In the English language, there is an idiom ‘keeping up with the Joneses’ – one example
of SUV drivers are the Joneses. The occupants of this household are married, have
a net worth of over $250 000, and are older than 35 years old. The Joneses account
for approximately 26.7 million households in the United States.
• The SUV driver generally values quality and status over price.

Pickup13
• The pickup is normally driven by the typical American who likely uses the car for work
or for leisure. When used for work, the large vehicle is used for convenience, and
when used for leisure, it is used to signal ruggedness and an outdoor lifestyle.
• One type of person who drives a pickup is the Adventurist. According to the Urban
Dictionary14, an adventurist is someone who would climb mountains, jump out of
planes, and dive below the surface of the water in search of adventure. These
individuals see seeking out adventure as a part of their lifestyle and are willing to pay

12
Image Src. https://collider.com/the-joneses-dvd-review/
13
https://bananaleafnewyork.com/tips-for-a-more-enjoyable-and-safer-road-trip/
14
https://www.urbandictionary.com/define.php?term=Adventurist
21
 for the equipment needed for that lifestyle. These individuals can be of any age, but
typically have an average annual income of $100 000 and express a desire to spend
time outdoors. Adventurists accounts for approximately 1.65 million people in the
United States.
• Another type of person who drives a pickup is the All-round American. These
individuals are generally male, are between the ages of 25 and 54, and have a net
annual income of $50 000 or above. These All-round Americans account for
approximately 33.37 million people.
• Pickup drivers generally value functionality over price.

Sport Car / Super Car15

• Drivers of sports or super cars are individuals who are considered car enthusiasts.
They typically purchase to collect, and brand name is very important. These individual
buy for their own pleasure, and money is often not considered in the equation.
• One group that buys sports cars are men who are generally older than 55 years old
and have a net worth of more than $500 000. In the United States, there are
approximately 25.5 million people who would fall into this category.
• Drivers of sports cars are looking for performance over price.

15
https://www.independent.co.uk/life-style/motoring/a-look-inside-the-car-collection-of-michael-fux-
a7950721.html
22
 Using the past trends in US automobile and electric vehicle sales, predictions can be made
for the expected sales of electric vehicles in the United States in the future (Table 8). These
numbers take into consideration the expected sales of all vehicles in the United States (with
COVID-19 taken into account), the proportion of electric vehicles sold, the popularity of each
type of car, and the price of each car.

EXPECTED EV SALES (THOUSAND DOLLARS)

Total Car EV Car

Segment % of US
Sales ‘19 Sales ‘19 2020 2021 2022 2023 2024 2025 2026 2027
Size (m) Population
(m) (tds)
Luxury
30.3 9.23% 518.13 22.13 2796 1413 1548 1709 2086 2207 2342 2369
Sedan
Mid class
11.2 3.41% 191.52 8.18 607 425 465 514 627 664 704 712
sedan

SUV 54.8 16.70% 937.08 40.02 5372 5223 5720 6317 7710 8157 8655 8754

Pickup 35 10.66% 598.50 25.56 1615 1067 1169 1291 1576 1667 1769 1789

Sports-/
25.5 7.77% 436.05 18.62 5882 2745 3006 3320 4052 4287 4549 4601
Super car
Table 8: Expected EV Sales

3.2.4 Current Segment Sales (SL)

EXPECTED EV SALES 2020 (THOUSAND DOLLARS)

LUXURY SEDAN 2 796

MID CLASS SEDAN 607

SUV 5 372

PICKUP 1 615

SPORT / SUPER CAR 5 882

Table 9: Current Segment Sales

3.2.5 Annual Compound Segment Sales Growth Rate (G)

PERCENTAGE GROWTH

LUXURY SEDAN 185%

MID CLASS SEDAN 217%

SUV 263%

PICKUP 211%

SPORT / SUPER CAR 178%

Table 10: Annual Compound Sales Growth

23
 3.2.6 Margin Assessment based on 5 Forces Model (M)

3.2.6.1 5 Forces Model on EV industry

Analyzing the five forces by Michael Porter, we see a dynamic market that is going through a
big innovation process currently. The power structures are being rearranged which offers new
opportunities for car producers but also creates tensions coming from all five forces. For
further details we applied the 5 forces model assessment.

Figure 6: Porter's 5 Forces Model on EV industry

3.2.6.2 5 Forces Model Assessment

To differentiate the influence of the Porter’s five forces on the relevant six segments, the 5
forces model assessment has been applied to each of them. By combining the margin after
the 5 forces with the average margin rate in the automotive industry of 6%16, we calculate the
margin rate by segment. The results show that among the six segments the “Jeep Wrangler
Crowd” has the highest margin with ca. 6,8%, while the segment of the “Young Family”
represents the smallest margin with ca. 6,3%.

Segments as per 5 Forces Margin after Average Margin Rate

Margin index
Customers Average 5 Forces Margin Rate by Segment

Luxury Sedan 4,6 5,4

1,11 6% 6,65%
Mid Class Sedan 6,5 3,5
0,72 4,32%
SUV 4,3 5,7
1,16 6,95%
Pickup 5,0 5,0
1,03 6,17%
Sports Car/ Super Car 5,2 4,8
0,98 5,91%

16
Euler Hermes:
https://www.eulerhermes.com/content/dam/onemarketing/ehndbx/eulerhermes_com/en_gl/erd/newsi
mport/pdf/profits-in-the-auto-industry-rich-and-richer-snippet-12sep17.pdf (2016)
24
Table 11: 5 Forces Model Assessment

Threat of New Entrants

When it comes to the risk of new entrants, EV producers face a moderate risk. To enter this
market, R&D costs are considerably high and the benefits of an economy of scale cannot be
utilized immediately from new entrants. China just recently announced to raise subsidies for
EVs17 and is also the residence of several EV producers, what makes it harder to control this
important strategic region.18 Considering China as one of the biggest markets in the
automotive sector with a current share of 25% and a projected share of 30% in 202519 this
represents a serious threat.

Another threat can be seen in the segment of car enthusiast (sports car/ super cars). Due to
the high prices of those cars the manufacturers usually don’t rely on the economy of scale and
produce sports/ super cars in small batch sizes. Without the need for big factories, the entry
barriers for this segment are lower than for other segments in the car industry. Good examples
are producers like Koenigsegg who are producing 20 cars per year but also the first Tesla
Roadster of which 490 models left the factory per year on average during its production time
from 2008 to 2012.

Figure 7: Threat of new Entrants

Threat of Substitute Products

The threat of substitutes is high. Since there are almost no switching costs, switching to a
substitute represents a high threat. The biggest substitute for EVs are still primary substitutes
such as petrol-engine cars and hybrids. Those are highly profitable and efficient cars, that

17
Electrive: https://www.electrive.com/2020/04/01/china-considers-extending-ev-subsidies/ (2020)
18
Globalfleet: https://www.globalfleet.com/fr/connected-manufacturers/asia-pacific/analysis/finally-list-
chinese-ev-manufacturers
19
Statista: https://www.statista.com/statistics/225123/chinas-share-of-the-global-car-market/ (2012)
25
create the same or more value for a more affordable price. But also, secondary substitutes
such as biking, or walking are threatening the EV business.

The strong growth in the field of EVs20 makes that segment more attractive for new players
and intensive research. With each traditional car maker entering the EV segment, the threat
of substitutes is increasing.

Since the field of EVs is still considerably young, the brand loyalty is not high yet and
customers rather go for value for money than for a specific brand.

Figure 8: Threat of Substitute Products

Bargaining Power of Suppliers

The threat of bargaining powers of Suppliers is moderate. There are not only global players in
the car industry with a huge financial strength, such as Bosch or ZF but also family owned
hidden champions such as Boysen and Benteler. Those are innovation-driven and have a
huge power over developments in the industry. One of the most important components in the
EV industry are the batteries thus far. Panasonic for example is using this power by not
delivering one producer exclusively but having major contracts with several producers, like the
case of Tesla and Toyota, where both companies use Panasonic battery technology.

20
McKinsey: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/expanding-
electric-vehicle-adoption-despite-early-growing-pains
26
Figure 9: Bargaining Power of Suppliers

Bargaining Power of Buyers

The bargaining power of buyers is high and therefore presents a high threat. The lack of
switching costs for EV’s makes it easy for customers to switch between any model or brand.
The increasing supply in EV’s feeds the factor of price sensitivity on the customer side. With
a growing offer in electric vehicles, the bargaining power of buyers increases.

Figure 10: Bargaining Power of Buyers

Rivalry amongst Existing Competitors

27
The automotive industry is very cost intensive. High investments and fixed costs come along
with producing cars. As expensive and large objects, the storage of cars requests a high
capital expenditure too.
The number of competitors is growing as well, with more and more traditional car makers
entering the field of electric vehicles. I addition, models such as sedans or SUVs highly
profitable, what increases the rivalry amongst those models even more.

Figure 11: Rivalry amongst Existing Competitors

3.2.7 Risk Evaluation (R)

With the PESTEL analysis and the 5 forces model assessment, we now can easily compute
the average risk per segment that automotive companies are focusing on, as being presented
in the table below:

Uncertainty - Macro Uncertainty - Micro

Teslas Car Environment Environment
Segments Average Risk/
P E S T E L TNE TSP BPS BPB REC Segment

High Class Sedan 8 2 7 3 7 9 7 4 3 3 6 5.4

Mid Class Sedan 3 9 2 6 2 2 6 6 8 5 7 5.1

SUV 8 2 9 2 9 9 6 4 4 4 4 5.5

Pickup 6 5 8 7 9 1 7 4 6 4 4 5.5
Sports Car/ Super
Car 9 8 9 8 9 9 6 5 5 3 6 7.1

Table 12: Risk evaluation on Micro and Macro Level

It shows that especially the larger cars such as Pick Ups or SUV but also the sports car with
powerful engines, face a higher risk, partly due to the environmental and social impact.

28
 3.2.8 Sustainability Evaluation (SU)

Evaluating Tesla’s sustainability efforts, the following table shows us the segments in their
respective weight and forms the basis for the following calculation of the sustainable value.
Details will be given in the later chapters.

Governance
Environmental Sustainability Social Sustainability Sustainability
Sustainability
Law Sustainability
Contribution Index by
Teslas Car Emission Contribution Safety for Compliance Business by Segment
to Segment
Segments Reduction to Society Consumers (local & Ethics
Renewables
international

Luxury
6 6 4 8 9 5 38 1,00
Sedan

Mid Class
5 7 7 7 9 7 42 1,11
Sedan

SUV 7 5 5 9 9 5 40 1,05

Pickup 7 5 5 8 8 6 39 1,03

Sports Car
/ Super 7 5 2 5 7 5 31 0,82
Car
Table 13: Sustainability Evaluation

3.2.1 Sustained Value Calculation

Table 14 shows us what value can be sustained from the market in the next 5 years based on
the current sales volumes in the US, accounting for the forecasted growth rate, the margin,
the risk and the sustainability indicator. All sales numbers are indicated in $, as are the
sustained values, for which we can clearly see some trends:

Sports Car /
Market Segments Luxury Sedan Mid Class Sedan SUV Pickup
Super Car

SL (in thousands) 2 796.00 607.00 5 372.00 1 615.00 5 882.00

G (%) 1.85 2.17 2.63 2.11 1.78

M (%) 6.65 4.32 6.95 6.17 5.91

R 5.4 5.1 5.5 5.5 7.1

SU 1 1.11 1.05 1.03 0.82

Sustainable Value (t=1) 9.813 1.809 25.873 5.804 11.161

Sustainable Value (t=2) 27.968 5.735 93.921 18.049 31.028

Sustainable Value (t=3) 79.708 18.180 340.932 56.132 86.259

Sustainable Value (t=4) 227.167 57.632 1 237.582 174.572 239.799

Sustainable Value (t=5) 647.425 182.693 4 492.422 542.918 666.641

29
Table 14. Sustainable Value Calculation

As can be seen from the table, the most attractive market segment in terms of sales volumes
is the SUV market which is based on the current relative share as well as on the high margin
combined with a medium risk for the development of this segment in the market and a medium
sustainability indicator. All of those lead to a sustained value forecast of roughly $4,5 billion in
the 5th year from now.

The segments of Sports Cars / Super Cars, Pickups and Luxury Sedans follow and are
somewhere close to each other in a range between roughly $540 to $665 million in their 5th
year from now, leaving the mid class sedan lagging behind with about $180 million at the same
point in time.

3.3 Competitors

As described in the PESTEL analysis, the historical automotive makers have to respond four
macro trends. First the electrification driven by policy makers around the globe who are
pushing hard in a response to global climate change and urbanization forcing car makers to
massively invest in electrification both in terms of R&D and production. Second, China, the
epicenter of automotive growth for the last decade, wants to build the next global car maker
champion. In the last decade the historical Europeans, Japanese and American leaders
captured most of the growth, but now local authorities are taking advantage of the
technological electrification leap to change the game with the proliferation of new local
entrants. Third, consumers, with millennials taking the lead in terms of global size of consumer
groups, automotive makers have to constantly adapt to new technology putting further
constraints on the speed of development cycle for new models. Finally, partnership with
battery suppliers is crucial for most of the historical players with the risk of becoming irrelevant
if not done in a timely manner. Let’s see first how global leaders are positioned to respond to
the four challenges and how Tesla acts as a gamechanger.

To better understand the competitive landscape of Tesla we’ve analyzed automotive players
with current sales higher than 1 million car per year concentrating 90% of global automotive
sales. Over the last decade, historical markets have restructured due to overcapacity in
Europe, America and Japan and the necessity shift resources in the growing Chinese market.

3.3.1 Strategic Groups

The development of global economy after 2008 turmoil encouraged car sales growth across
the globe. From the histogram below summarizing global automotive sales in 2019 we can
position companies according to their global, multi-regional, regional or local presence.
Volkswagen, Toyota, the future PSA/Fiat/Chrysler and the alliance Renault-Nissan-Mitsubishi
have presence in the 4 major markets China, Japan, Europe and Americas with each one of
them leading a region. The multi-regional group formed is formed by a group of generalists
having a complete range GM, Hyundai, Ford, Honda and Suzuki plus the premium German
manufacturers BMW and Daimler. Finally, accounting for a total of 11 millions of car sales, the
local players dominated by six Chinese companies Sais, Geely, Changan, Dongfeng, Baic,
Great wall and Tata for India. This last group operate with a lower product range but represent
large volumes in comparison of the other players.

30
 Figure 12: 2019 Automotive Industry Volumes in million Cars

Figure 13: Strategic Groups Cluster Global car manufacturers

Another perspective can be taken in terms of Strategic group by looking at EV’s market share
for DEV or PHEV based on sales volume more than 50 000 EV sales per year against car
manufacturers market reach.

31
Figure 14: Strategic Groups Cluster EV car manufacturers > 50 000 unit sold in 2019

This perspective shows first the global leadership of Tesla as a pioneer of EV manufacturing.
Second, the local emerging stars are concentrated in China with BYD, BAIC and Geely with
almost 400 k BEV vehicule sold in 2019 which is 5 times more than VW global BEV sales.
This demonstrates the ambition of the Chinese state to create the next EV giant like TOYOTA
did in the 90’s with the standard car industry. BMW, VW, TOYOTA and Hyundai/Kia are the
only global challengers with 100k+ EV car sales with a mix of BEV/PHEV technology in their
portfolio marking a transition in terms of technology. Finally the follower group is spread
across GM, Nissan/Renault, Toyota, Mitsubishi and Daimler concentrating their EV offering in
different regions.

It is important to mention that some of the top 15 global car makers don’t appear on that chart.
Companies like FORD for instance are taking a significant delay in transforming their range to
the new EV reality. Newly announced Peugeot/Fiat/Chrysler conglomerate announced that
the benefits of their scale advantage will be mainly focused on EV transformation and global
mobility services. The conglomerate can benefit from the fast follower advantage often proven
successful if the global integration is made at a fast enough pace.

32
 3.3.2 Competitive Intelligence

Mobility electrification has created an unprecedent investment momentum in the automotive

industry, forcing key players to adapt. In 2018 all global or major regional automotive
manufacturers have announced strategic move towards Electric vehicles (DEV or PHEV).
Whilst in the last 10 years this category of vehicle was the playfield of a few car makers like
Toyota, Nissan and Mitsubishi, Tesla has clearly disrupted the market with its pure player DEV
positioning.

Figure 15: Global Plug-In Deliveries

In that context, to better understand the competition for Tesla, we must analyze the global
automotive landscape by looking at current EV global volume, product range and understand
Tesla positioning with the level of investment undertaken towards electrification.

Global plug-in vehicle deliveries 2019 reached 2 264 400 units (see Figure 15), 9 % higher
than for 2018. This is a clear departure from the growth rates of the previous 6 years, which
were between 46% and 69 %. The reasons are in the developments in the two largest markets,
China and USA, where sales stagnated in the 2nd half of 2019 and stayed significantly below
the sales boom in 2018 H2. In USA, sales of most plug-in models decreased compared to the
boom in 2018 H2. In China, further slashing of subsidies, paired with more stringent technical
regulation caused a crash in NEV demand and supply, starting in July.

Europe became instrumental in 2019 EV sales with 44 % growth, accelerating towards the
end of the year.

The global BEV&PHEV share for 2019 was 2,5 % and the smaller car markets continue to
lead EV adoption. The share leader is Norway, where 56 % of new car sales were Plug-ins in
2019. Iceland came 2nd with 24,5 % and the Netherlands 3rd with 15 %. Among the larger
economies, China lead with a plug-in share of 5,2 %, UK posted 3,2 %, Germany 2,9 %,
France 2,8 %, Canada 2,7 %. All other car markets with over 1 million total sales showed 2 %
or less for 2019.

This shows the top-10 markets for plug-ins, underlining the significance of China in the
development of the sector. 4,7 % NEV share in the world’s largest car market of 25,4 million
light vehicles generated 1,2 millions of volume in 2019. Business is kept local: Few units were
exported from China and NEV imports accounted for just 56 500 units, over 80 % from Tesla.
Imported plug-ins are burdened by the usual import duties and do not receive NEV subsidies.
The only way to sell at equal terms is to produce EVs (incl. their batteries) in China and recent

33
efforts start to pay off. For 2019, 196 000 units China made NEVs, which were sold under
foreign brand names, more than double the volume of 2018.

Figure 16: Global EV Sales

Tesla accelerates
Tesla completed the roll-out of the Model-3 which is now available in 48 countries, the top-3
markets being USA (145k), China (34k, all imported) and the Netherlands (30k). With 368 000
deliveries incl. Model S&X, a 50 % increase over 2018, Tesla commanded 16 % share of
global BEV&PHEV volume in 2019, 22% if only BEVs are counted.

The slump in China means that most of China's previously fast growing NEV makers faced
steep declines during the 2nd half of the year. Notable exceptions were Guangzhou Auto
(GAC) with their new Aion S Sedan, Great Wall with the Ora mini-EV and FAW. Also, the EV
start-ups NIO, WM-Motor and Xiaopeng fared well, albeit from small volume bases. The larger
Chinese OEMs created vast NEV portfolios in recent years but saw volumes of many fresh
entries crumple when they did not fit revised policies and requirements anymore. Waste at its
worst.

BEV and Model-3 domination

As expected, the new Tesla became the world's bestselling plug-in, with 300 000 deliveries
last year. High volume sales outside USA/Canada started in January 2019 and nearly all the
additional volume vs 2018 were from exports. The car sells without advertising or rebates and
demand remained strong throughout the year.

Beijing based BAIC landed a real hit with the 2nd generation of the EU 260/400 series, aka
EU5. It has become very popular among the cities taxi operators and hide hailers, supported
by the plan to convert the taxi fleet to EVs and savings on operating cost.

34
 Figure 17: Plug-In Sales USA

The Nissan Leaf lost 17k compared to last year, despite the intro of a larger 62 KWh battery
variant called e+, at a €6000 price premium. Too much in an environment where battery
upgrades are offered every 2nd year without significant price hikes, read BMW i3, which is still
going strong.

The BYD e5 gained for similar reasons as the BAIC EU5, but mostly around Shenzhen, where
it is built.

The only PHEV in the 2019 top-10 is the venerable Mitsubishi Outlander, introduced 2013,
face-lifted 2 times and still one of the few PHEVs which can use DC fast-chargers.

The Renault Zoe got re-designed for MY2020, Europe deliveries started in Q4 and reached
7500 units for 2019. 40k units were from the old model, unit sales unchanged vs the year
before.

The Hyundai Kona BEV became an instant success, reasonably priced and with a 64 kWh
battery option. A large order backlog indicates that the 44k do not reflect the real demand for
this small SUV. Excluding entries with less than 50 units of sales, 250 individual BEV and
PHEV models (nameplates) were available worldwide during 2019. The top-50 models stood
for 74 % of the global volume.

Figure 18: Top 10 EV Models

35
Industry 2030 projection and investment
The forecast shows that a lot of companies are investing heavily in the EV sectors as shown
in the table below.

Table 15: Projection & Investment

36
 3.4 Industry

3.4.1 Determination of the Industry’s and Product’s Life Cycle

Industry’s life cycle

From a life cycle perspective, each industry (or segment within the industry) tends to assume
four typical stages, these being:
1. Introduction
2. Growth
3. Maturity
4. Decline

If we look at the automotive industry as a whole, we can say that this industry is currently at a
maturity stage.

Looking at past years, we should note that the global automobile production has increased
markedly from 2001 to 2016 (except for a brief period during the 2008 financial crisis). From
2016 onwards, however, the growth rate began to slow down and even became negative from
2017 onwards, as illustrated in the following graph.

Figure 19: Estimated worldwide automobile production

Even though the auto manufacturing industry in general can be considered to be in a maturity
phase and may even experience some decline as car usage moves from personal ownership
to car-sharing schemes, there are some emerging segments in that industry that are still in
the first phases of their life cycle.

Chief among those is the manufacturing and sale of electric vehicles.

Electric vehicles were at the first phase of their life cycle back in the beginning of last decade.
From 2015 onwards, their production and usage became increasingly popular in such a way
that this segment is now at its growth stage and is expected to continue growing in the coming
decade, as illustrated in the following graphs.

37
Figure 20: Global Plug-In Vehicle Sales Figure 21: Projected Size of Global EV Fleet 2020-2030

The production and sale of electric vehicles has been fostered by declining costs of available
technology (batteries, in particular), as well as by the expanded network of recharging points.
Another segment that is currently being introduced and is expected to enter the growth stage
in the coming decade has to do with autonomous driving.

Some tech and auto companies have already introduced the first prototypes of autonomous
vehicles, but these are still being tested for wider usage pending regulatory checks and overall
acceptance in the market.

From the outset, it should be noted that there are several degrees of automatization, some of
which are already achieved in current market products. These degrees are illustrated in the
following graph by Roland Berger21:

Figure 22: Automated Driving Functions

Level 4 automation is expected to increase

constantly along the coming decade. A
question mark is still pending over level 5 (full
automation), whose market introduction is
expected to occur only after 2025. In any
case, robo-cars in general are set to become
a reality over the coming years.

Figure 23: Car sales by autonomous vehicle level in 2030

21
Roland Berger’s global automotive supplier study highlights, Jan 2019.
38
 The shortening of the product’s life cycle
On a more granular level, the products in the
industry can be also analyzed from a life cycle
perspective, covering the same four stages that
we pointed out for the industry as a whole.

At this level, we should point out that in the auto

industry there has been a shortening of the
product’s life cycle. This trend can be explained
by the increasing complexity of the end product
Figure 24: Projected autonomous driving market
and by the fact that the sector is exposed to an
increasingly fast-paced rhythm of
technological innovation.

The increasing complexity of the end product can be seen in the following graph, which depicts
the evolution of the customer requirements along the years22:

In developed countries, the lifetime

of an average car model has been
shortened by half (approximately
from 8 to 4 years) over the last
decade23.

Moreover, the average time of the

product development (from
concept design to start of series)
has been reduced from 48 to 25
months on average24.

Figure 25: Customer Requirements over Time

According to a survey conducted by Jabil based on a sample of 126 qualified participants from
automotive companies, in 2018 about 50% of the companies stated that their product
development and launch cycle was less than 18 months (and 22% stated that it was less than
12 months)25. This marks a big difference to previous years when the timeline for vehicle
development and launch was much longer.

Against this backdrop, it should be noted that Tesla has been revolutionizing the product’s
life cycle in the car industry. The key element for this change lies in Tesla’s digital
technology that allows it to keep modifying each car’s features after the point of sale through
continuous over-the-air software updates and improvements.

22
Sabadka / Molnár / Fedorko, Shortening of Life Cycle and Complexity Impact on the Automotive
Industry, TEM Journal, Vol. 8, Issue 4, November 2019, pp. 1295-1301.
23
Sabadka / Molnár / Fedorko, Shortening of Life Cycle and Complexity Impact on the Automotive
Industry, TEM Journal, Vol. 8, Issue 4, November 2019, pp. 1295-1301.
24
Sabadka / Molnár / Fedorko, Shortening of Life Cycle and Complexity Impact on the Automotive
Industry, TEM Journal, Vol. 8, Issue 4, November 2019, pp. 1295-1301.
25
Jabil, Managing Automotive Technology Trends, A Survey of Automobile OEM Stakeholders,
December 2018.
39
As indicated in a 2018 LSE article, traditionally cars are sold as finished and complete
products. Buyers do not expect new cars to improve or change once they are rolled out of the
dealer’s premises. Only occasional maintenance, software updates or repairs are carried out
to keep the vehicle functional. To stay competitive, car makers introduce new models to
market every four to seven years and these models are refreshed with minor functional and
cosmetic changes around halfway through their life cycle’26.

But Tesla has been changing this reality. ‘Much like [a] smartphone, Tesla releases frequent
software updates to improve and change the functionality of the cars they design and
manufacture, thereby modifying cars continuously after the point of sale’27. This allows Tesla
not only to keep adjusting the car’s functionalities according to customer needs and
preferences but also to generate new revenue streams, by selling additional features
throughout the car’s lifetime.

The authors of the above-cited article collected data on the Model S from various online
sources over 1344 days between June 2012 and February 2016. During that period, Tesla
made five major software releases, complemented by 23 minor and 89 maintenance updates.
On a more qualitative level, it is also interesting to note that occasionally the functionality was
changed or removed as a response to safety risks or regulatory intervention. Namely, Tesla
raised ride-height (ground clearance) when battery fires were under investigation in 2013; later
on, in 2015, they temporarily disabled the Autosteer and Auto Lane Change functionality to
comply with an order from Hong Kong’s Transport Department28.

26
Lyyra / Koskinen, How Tesla is changing product life cycle in the car industry, LSE, February 5th,
2018.
27
Lyyra / Koskinen, How Tesla is changing product life cycle in the car industry, LSE, February 5th,
2018.
28
Lyyra / Koskinen, How Tesla is changing product life cycle in the car industry, LSE, February 5th,
2018.
40
 3.4.2 Key Success Factors

We identified the key success factors for the electric cars market (BEV/PHEV). Within that
market, we considered two basic segments of passenger cars: economic and luxury cars.
Linking these segments to Tesla’s offerings, in the economic segment we include Model 3 and
in the luxury segment we include the other Tesla offerings (Model S and Roadster - sports
cars - and Model X - large SUVs).

The table below presents the key success factors for each of the segments, based on key
purchasing factors and competition factors.

Car industry Key purchasing factors Competition factors Key success factors
segment (value to customers) (competition variables)

· Production efficiency
· Price · Value for money
· Operating costs
· Payment terms · Mass
· Infotainment
· Fuel efficiency communication
· Mass communication
Economic cars · Reliability · Range/autonomy
· Warranties and
· Comfort · Distribution network
assistance
· Service (incl.
charging network)

· Production efficiency
· Infotainment, digital
· Innovation edge
add-ons, vehicle
· Affection to the brand · Product design
connectivity
· User experience · Targeted
· Engine performance
· Quality communication
Luxury cars · Targeted
· Status · Range/autonomy
communication
· Design · Distribution network
· Warranties and
· Service (incl.
assistance
charging network)
Table 16: Key Success Factors

3.4.3 Industry Value Chain

The value chain covers all the activities starting from conception of the product to final delivery
to the end customers.

The value chain of the automotive industry encompasses the following primary activities:
• Inbound logistics - this is the first step of the value chain, involving the procurement of
raw materials from suppliers all over the world;

• Design, engineering and manufacturing - this consists of the production phase by

which raw materials are transformed into the final product; the related operations may
be split into different units with different locations, and/or involve the sub-contracting
of some activities, depending on each specific company; Tesla stands out for the high
level of automation they brought in their GigaFactories which will ultimately give them
a high competitive advantage in terms of manufacturing costs;

41
 • Quality and warranty - this activity involves the control and monitoring of quality
throughout the supply chain; it covers, in particular, the management of corrective
actions to improve quality of the products and the management of the operations
relating to product warranties and correction of defects;

• Connected vehicles services - this activity encompasses a new branch of services

dealing with the connectivity of vehicles to other devices through the Internet, allowing
for an expanded user experience and for continuous software updates;

• Marketing and sales - this part of the value chain includes distribution of the cars in the
market, management of the sales force and dealer networks, advertising, promotions
and management of customer relationship; there are nearly no marketing investments
around the brand, besides Elon Musk who has a high reach via Twitter;

• Service - this is the final activity of the value chain, comprising post-sale customer
support in the maintenance of the vehicle and in the repair of any defective or damaged
parts.

The primary activities of the automotive value chain rely on a set of support activities, which
include:
• Infrastructure: this comprises all the organizational structure that supports the
automotive industry, including aspects such as culture, finance and other enterprise
resources; the emergence of the electric vehicles’ segment has led to new
infrastructure components, such as the recharging networks that serve those vehicles;

• Information technology - technology plays a crucial role in the automotive industry,

from the earlier steps of the value chain up to the final phase of delivery and sales;
currently, it is important to, among other aspects, provide users with a complete
infotainment system, including mobility data (maps, traffic information), assistance
systems, device integration (mobile phone) and weather data; in the coming years, IT
is expected to become a highly differential point as vehicles move into full
autonomation and achieve greater levels of digitalization and connectivity; data
analytics and artificial intelligence, in particular, emerge as key aspects in this new
environment;

• Procurement and finance - management of procurement is a key activity to ensure a

smooth and efficient production process; relationships with suppliers should be
established and monitored in such a way as to reduce costs, ensure product quality
and timely delivery; any issues in the supply of raw materials or production components
may ultimately have a serious impact in the timely delivery of the final product and/or
in the quality of the end product;

• Human resource management - last but not least, there should be an adequate
management of the human capital, from recruitment to ongoing training and control of
performance.

42
By looking into the various intervening parties and activities, the EVs automotive value chain
can be represented through the following graph:

Figure 26: Industry Value Chain

43
4 Organizational Analysis

Every automobile company in the industry has to contend with the same environmental factors
as each other, but there are some companies who consistently perform better than others.
Table 16 helps to highlight some of these performance differences between Tesla and some
of its direct competitors.

VEHICLES NUMBER OF SALES VALUE PRICE PER NET INCOME NET INCOME / MARKET CAP
SOLD EMPLOYEES (BILLION $) VEHICLE ($) (BILLION $) VEHICLE ($) (BILLION $)

TESLA 367 50029 48 016 19.95 54 291 -0.775 -2 109 151.9030

BMW 2 538 36731 133 77832 91.68 36 118 5.022 1 978 36.0733
AUDI 1 802 07334 90 78335 61.69 34 235 4.369 2 424 46.2436
PORSCHE 280 80037 35 42938 31.59 112 505 3.104 11 052 15.5039
JAGUAR 578 91840 43 224 31.94 55 179 -4.752 -8 208 3.9941
Table 17: Structural Performance Differences between Tesla and some Competitors

Even though all of these companies produce at least one high-end electric vehicle, we can
see that their net incomes per vehicle and market capitalizations vary considerably. This
difference is due to their strategic intent. To determine Tesla’s strategic intent, we first need
analyze the strategic fit – a cross-section of the key success factors defined previously and
Tesla’s core competencies.

To determine Tesla’s core competencies, we need to first look at their resources and
capabilities, couple them with how efficiently Tesla uses those resources and capabilities and
ask ourselves what kind of competitive advantage can be gained due to these assets.

4.1 Resources and Capabilities

A company’s resources are the assets that provide the foundation for the company. These
resources can be human, financial, physical, or organizational.

4.1.1 Human Resources

Elon Musk42
Before becoming the CEO and being named a founder of Tesla, Musk had already
experienced success in business. With his brother, Musk started a web software company,

29 Annual Report Tesla Inc., 2019

30
https://ycharts.com/companies/TSLA/market_cap
31
https://www.bmwblog.com/2020/01/10/bmw-group-posts-record-sales-for-2019-and-remains-worlds-
leading-premium-automotive-company/
32
BMW Annual Report 2019
33
https://ycharts.com/companies/BAMXF/market_cap
34
https://www.best-selling-cars.com/brands/2019-full-year-global-audi-sales-worldwide/
35
Audi Financial Report 2019
36
https://ycharts.com/companies/AUDVF/market_cap
37
https://www.best-selling-cars.com/global/2019-full-year-global-porsche-worldwide-sales/
38
https://newsroom.porsche.com/en/company/annual-sustainability-report-2019/brief-overview-2019.html
39
https://ycharts.com/companies/POAHF/market_cap
40
Jaguar Land Rover Automotive PLC Annual Report 2018/2019
41
https://ycharts.com/companies/TTM/market_cap
42 Musk Image: https://www.cnet.com/roadshow/news/tesla-ceo-elon-musk-pay-salary-bonus-stock/

44
Zip2, which was acquired by Compaq for $307 million in cash. He then went on to co-found
an online bank called X.com, which merged with PayPal creators Confinity to create the
PayPal we know today, which was acquired by eBay for $1.5 billion in stock. Musk then used
some of his own fortune to found Space X, and is currently the CEO and CTO of the
company.43

Musk was originally interested in Tesla from an investment point of view, and later joined the
board of directors as its chairman. He soon found himself overseeing the Roadster product
design, and in 2008 was elected the CEO and product architect.

Image 4: Elon Musk

Like Apple and Steve Jobs, Tesla has become synonymous with Elon Musk. Musk has been
dubbed the ‘real life Tony Stark’ with his reputation of invention, disrupting industries, and
erratic behavior, and Tesla benefits from his ability to generate headlines. Musk has been
dubbed the ‘Most Inspirational Figure in Tech’44 in the 2019 Global Brand Health Report
compiled by hired.com and was ranked joint-first with Amazon’s Jeff Bezos on the Forbes list
of ‘Most Innovative Leaders of 2019’.45

43 https://www.businessinsider.com/the-rise-of-elon-musk-2016-7
44 2019 Global Brand Health Report compiled by hired.com, accessed via https://hired.com/page/brand-
health-report
45 https://www.forbes.com/lists/innovative-leaders/#48f76f6326aa

45
Franz von Holzhausen46,47
Before joining Tesla, von Holzhausen boasted an impressive CV
having worked in car design for over 16 years. He started his
career at the Volkswagen Group where he became the Assistant
Chief Designer, then moved to General Motors where he was
the Design Manager, and then spent some time as Director of
Design at Mazda North American Operations.
Having taken the step away from the traditional automobile
industry, von Holzhausen has been described as “the most
influential designer of his generation”48 and is credited with some
of the radical design decisions that Tesla is known for, such as
the uncluttered dashboard inside the cars. Without von
Holzhausen, the Tesla we know today would look very different.

High-Skilled Employees
In order to keep up with the level of innovation desired, Tesla has focussed on hiring some of
the best automotive and technology industry experts. Their list of employees ranges from
electrical, mechanical, and ocivil engineers, to world-class designers, to software and security
engineers, as well as supply chain experts and data analysts. There is huge competition
between the companies in Silicon Valley, especially with Apple, for these experts, with Apple
often coming out the victor due to their higher salaries and more stable stock options.

Despite the competition, Tesla has been growing in employee numbers49 since its IPO as
indicated in Figure 27. The large jump in employees in 2016 was from acquiring Solar City.
As of 31 December 2019, Tesla had 48,016 full time employees and had issued $973 million
in stock-based compensation to these employees (includes CEO and other upper
management).

Figure 27: Tesla Employees from 2010 to 2019

46 Von Halzhausen Image: https://br.pinterest.com/pin/35888128268781525/

47 https://www.bloomberg.com/graphics/2018-tesla-org-chart/
48 https://www.businessinsider.com/how-tesla-designs-cars-to-look-so-good-2017-11
49 Annual Reports Tesla Inc., 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011

46
 4.1.2 Financial Resources

Stocks
Tesla's current public market equity financing is constituted solely by common stock and Tesla
has reserved the right to future stock issuances. With the increasing stock price (when Musk
is not on Twitter), Tesla is in a powerful position where it could issue new shares at a higher
price than their IPO to raise capital. Stocks can also be used to make acquisitions or to
compensate employees, therefore a higher stock price leads to less stocks being needed for
these other transactions.

Despite the high volatility of Tesla stocks (with a Beta value of more than 2 against the S&P
500), once Tesla is profitable it could be inducted into the revered S&P 500 and power up to
a new level of institutional buying power.50

Cash
According to Tesla’s annual financial statements, as of December 2019 Tesla had $6 268
billion in cash and cash equivalents. This is up from $3 686 billion in 2018 and $3 368 billion
in 2017. This on-hand cash is important for day to day running of the company, but also to
keep the lights on if there’s an emergency (like a pandemic).

Pre-order Payments from Customers (Deferred Revenues)

Tesla generally opens up sales of their latest releases before they have the capacity to meet
the demand. This results in hundreds of thousands of pre-orders that need to be fulfilled in
the future. For example, in 2016 Tesla experienced the “biggest one-week launch of any
product ever” when the newly unveiled Model 3 received 325 000 pre-orders.51 Each
customer had to pay a $1 000 deposit, which amounted to $325 million in cash and over $14
billion in implied future sales. Over time they received approximately another 193 000 pre-
orders, of which 63 00052 were cancelled over time.

The reason why this is important is because $518 million received in pre-orders was
essentially an interest-free loan from the customers of Tesla. It was also a statement from the
customers to Tesla that they have trust in the company, which allows stock prices to rise, and
a promise that when Tesla makes the Model 3 there will be people ready to buy it, which
allows Tesla to plan for the future.

This phenomenon is common in the electric vehicle industry, and in 2019 the excitement of
unveiling Tesla’s Cybertruck53 led to more than 622 000 pre-orders for the truck in less that 6
months. The deposit in this case was $100, resulting in an extra ‘free’ $62.2 million in cash.

4.1.3 Physical Resources

Property, Plant, and Equipment54

As of 31 December 2019, Tesla owns approximately $10,396,000.00 in property, plant, and
equipment. Despite leasing many of its facilities - including its headquarters in Palo Alto,
California; locations utilized for warehousing, engineering, retail and service location, and

50 https://www.marketwatch.com/story/teslas-stock-could-see-new-peaks-thanks-to-these-3-catalysts-
2020-05-09
51 https://www.theverge.com/2016/4/7/11385146/tesla-model-3-preorders-375000-elon-musk
52 https://www.vox.com/2017/8/2/16087432/tesla-model-3-electric-car-manufacture-preorder-
cancellations-elon-musk
53 https://robbreport.com/motors/cars/600000-tesla-cybertruck-preorders-2909910/
54 Image src: Tesla website https://www.tesla.com/factory

47
administrative and sales offices; and supercharger sites – Tesla has chosen to own most of
their manufacturing facilities.55

In order to sell a car you need to first make the car, and in order to make a car you need to
have factories. Tesla currently has four named factories globally, and a fifth has been in
planning.

Image 5: GigaFactory

Tesla’s first, and largest, factory is the Fremont Factory, located in Fremont, California. This
facility has a long history of building cars, having been previously owned by General Motors
from 1962 to 1982 and then by Toyota’s New United Motor Manufacturing from 1984 to 2009.
The Fremont Factory has an overall capacity of 500,000 vehicles per year but is currently only
equipped for 400,000 vehicles with plans to bring the last 100,000 capacity online in the near
future. Most Model 3 and Model Y vehicles, as well as all Model X, are produced here.

Tesla also owns or leases a number of ‘Gigafactories’. The Gigafactory Nevada (owned) and
the Gigafactory New York (leased) are focused on Tesla’s energy storage products, including
the manufacturing of the battery packs and drive units that are currently used in the Model 3
and Model Y vehicles.

Gigafactory Shanghai (building owned, land leased) in Shanghai, China, has allowed Tesla to
increase the affordability of its Model 3 car for customers in the local market due to reducing
transportation costs and import tariffs. The factory currently has a capacity of 150,000 Model
3 vehicles per year, and there are plans to add the equivalent capacity for Model Y cars in the
near future. The current bottleneck in Shanghai is the access to battery packs, which will be
locally produced in the near future. Similarly to Gigafactory Shanhai, Tesla has plans to open
a manufacturing plant in Berlin, Germany with production expected to start in 2021. 56,57,58

All factories contain the tools and equipment needed in order to manufacture Tesla’s vehicles
and energy products.

55 Consolidated Balance Sheet, obtained from Annual Report on Form 10-K of Tesla, Inc. for the year
ended December 31, 2019
56 https://www.tesla.com/factory
57 https://insideevs.com/news/395889/q4-2019-tesla-production-sites-assignment-capacity/
58 Annual Report on Form 10-K of Tesla, Inc. for the year ended December 31, 2019

48
Superchargers
One of the limiting factors in owning an electric vehicle is charging the battery in your car. You
not only have to find a charging station, but charging your battery takes time. This is why
Tesla has a growing network of superchargers. Tesla currently has 16,585 superchargers
available to their customers, located in 1,870 supercharger stations globally (primarily in the
United States and Canada, Western Europe, China, and Australia)59, which can give a car 150
miles of power in a 30-minute charge.

4.1.4 Organizational/Intellectual Resources

Website
At its heart, Tesla is a tech company. This is demonstrated on their website in the form of
simple user experience and a unique, sleek design. The true genius of Tesla’s website is that
it is the primary sales vehicle for the entire company. A consumer can, through the website,
learn everything there is to know about Tesla’s cars, energy solutions, and about Tesla itself,
as well as order their very own Tesla with the click of a button.

Mergers and Acquisitions

While Tesla is at the forefront of innovation in the vehicle and energy sectors, they are unable
to do everything and develop all the technology solely by themselves. When they come across
another company that has synergy with what Tesla does, or can offer economies of scale or
cost reductions, Tesla can offer to acquire or merge with that company. Since 2016, they
have five acquisitions that are public knowledge: SolarCity, Grohmann Automation, Perbix,
Maxwell Technologies, and Deep Scale. These acquisitions are further explored later in the
report (section 8.2.)

Strategic Alliances
Similar to mergers and acquisitions, strategic alliances are created to further increase profits,
decrease costs, or enable the sharing of intellectual property, without the need to acquire an
or merge with another company. Three partnerships of note are with Daimler, Toyota, and
Panasonic, which are expanded upon in section 8.3.

Patents
Due to the extensive research and development done by Tesla’s engineers, Tesla has been
able to file over 240 patents over the past few years.60 They have patented everything from
roof tile modules to driving controls for autonomous driving to trip-planning software.61 In June
2014, Musk released a statement called ‘All Our Patent Are Belong To You’, which announced
that Tesla’s patents would become open source in a bid to encourage innovation and the
advancement of the electric vehicle and energy industries.62 The drawback of using one of
Tesla’s patents in your own business is that, by using the patent, you agree to not bring any
action against Tesla for patent or intellectual property infringement that they might be liable
for.63

59 https://www.tesla.com/supercharger
60 http://www.patentsencyclopedia.com/assignee/tesla-motors-inc/
61 https://cleantechnica.com/2020/01/03/7-new-tesla-patents/
62 https://www.tesla.com/blog/all-our-patent-are-belong-you
63 https://www.lexology.com/library/detail.aspx?g=ca6c332f-2cc5-401b-b80d-36473d0754c7

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 4.2 Capabilities

A company’s ability to exploit its resources is called its capabilities. Capabilities are often
processes or routines and can fall into any category such as marketing, manufacturing, or
human resource capabilities.

Futuristic Car Design

When cars are designed at Tesla64, the first assumption is that the car needs to be beautiful -
Tesla wants their drivers to be proud of their electric vehicles and to show them off. Under
the capable hands of Franz von Holzhausen, major design choices were made such as
replacing all knobs and buttons with a large touch screen that controls almost all the vehicle’s
function, keeping the interior of the car extremely minimalistic, and emphasizing natural light
by having larger windows.

Vehicle Technological Innovation

Other than reigniting the development of electric vehicles in the automobile market, Tesla has
questioned every assumption about the car and has worked towards making each part of their
cars as efficient and high-tech as possible. Tesla combines engineering and innovation in
extraordinary ways to see their version of the future come to life. The dream is to not only
have a car that can drive and charge itself, but to have a car that can make an income by
driving other people around when they’re not in use by their owner.

Level of Vertical Integration6566

Many big auto manufacturers are known for outsourcing their production and assemble the
final product in their factories. Tesla, known for doing the opposite, has vertically integrated
both forwards - in terms of marketing, distribution, and servicing - and backwards - in terms of
research and development, procurement, and operations. This level of vertical integration has
created value for Tesla because it allows them to be more flexible with their decisions, and
shortens the time needed to learn and improve.

Public Image Management

When you consider the history of the electric vehicle and the reasons why they have failed,
it’s clear why Tesla has succeeded – they made electric vehicles cool67. Besides just focusing
on beautiful and futuristic design, Tesla used Musk’s already established fame to create an
appealing narrative of ‘the real life Tony Stark’ saving the planet. They also pulled in
celebrities such as Arnold Schwarzenegger to introduce the Roadster to the world, and
George Clooney, Leonardo DiCaprio, and Jeff Skoll to receive the first 100 cars.

While Tesla has opted out of traditional marketing (choosing to focus their attention on their
product instead), they are active on social media where they acknowledge and address issues
directly to the consumer. Their online announcements are often informal and humour-driven.
Today, Tesla continues to make a show of new releases, and some have argued that the
announcements of the Cybertruck and Roadster 2.0 are engineered to keep Tesla in the
headlines and on top of mind, rather than to sell new types of vehicles68. Regardless of what

64 https://www.forbes.com/sites/innovatorsdna/2016/08/24/teslas-innovations-are-transforming-the-
auto-industry/#54edb87019f7
65 WIRED: Teslas secret second floor (2017): https://www.wired.com/story/teslas-secret-second-floor/
66 Magna Complete vehicle manufacturing: https://www.magna.com/products/complete-vehicles/complete-

vehicle-manufacturing
67 https://evannex.com/blogs/news/tesla-made-electric-cars-cool-and-they-re-still-the-coolest
68 https://mondaynote.com/tesla-cybertruck-pr-or-product-e1ef51b22554

50
people say, there is no denying that it is the image of constant innovation that keeps Tesla in
the public eye and is one of their biggest assets.69

Sales Process Innovation70

One of the biggest differences between Tesla and other car manufacturers is that Tesla can
sell their cars directly to the consumer through their website. In the United States, this has
been an uphill battle. When Tesla first started selling cars online, it was illegal in a number of
states for a car manufacturer to sell directly to the public (due to state laws lobbied for by
dealerships), but because they were so firmly set on selling cars through their website and
innovating in that department, they fought it out and have succeeded in winning over in a
number of those states.71

One benefit of selling online is that it allows for the customization of the car by the consumer.
You go to Tesla’s website, choose what car you want, change the outside colour, choose your
interior fittings, decide if you want to install the automatic pilot system hardware, and with 5 or
6 clicks you will have the amount that you can pay immediately. There are also leasing
options, which gives a lot of control over to the consumers.

Image 6: Tesla's Online Car Configurator

Convenient Servicing
In terms of servicing72, Tesla has successfully combined technology with convenience in a
massive step away from traditional views of servicing in the automobile industry. Necessitated
by the huge costs in owning and managing servicing centers, Tesla launched their ‘Mobile
Service Technicians’ (also known affectionately as ‘Tesla Rangers’) who go to the consumers
to service their cars, instead of asking the consumers to come to them73. Up to 80% of repairs
can be done outside of service centers, saving Tesla money and saving the consumer time.

69 https://brandastic.com/blog/marketing-tesla-brand-review/
70 Image src https://www.tesla.com/models/design?redirect=no#interior
71 https://www.thecarconnection.com/news/1092795_terrified-of-tesla-nada-launches-campaign-to-
tout-benefits-of-franchise-dealerships
72 https://www.tesla.com/service
73 https://electrek.co/2017/03/11/tesla-mobile-service-rangers/

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Tesla does still have service centers, which are called ‘service plus locations’ when they
double as a sales center. However, even at their service centers Tesla tries to cater to the
convenience of the customer by making it easy to schedule appointments through the Tesla
app, provide automatic check-in, and keeping the time of the repair or service to an absolute
minimum (often the time it takes to drink a coffee).74 The key to keeping services and repairs
timely is each car’s on-board diagnostics, which allows Tesla to diagnose a problem and
prepare for the consumer’s visit before they come in. Tesla is also able to send software
updates ‘over-the-air’, which allows their cars to constantly improve without requiring time in
a service center first.

Business Model Innovation

With the invention of Uber and other car-sharing apps, Tesla has been inspired to combine
their innovative technology with the new ways that consumers are thinking about their cars.
As one of the leaders in the mobility revolution, Tesla is considering alternative uses for its
technologies, such as robotaxis – a driverless taxi that can be summoned using an app.

Tesla uses their resources strategically to increase the attractiveness of the electric vehicles
industry as a whole. The introduction of the supercharger network was a stroke of genius to
encourage people to buy electric vehicles. Tesla is also dabbles in licensing its tech to other
electric vehicle manufacturers, enabling a common tech platform, which allows electric
vehicles to be more attractive no matter where it is being bought from. Increasing the
attractiveness of the industry can lead to more people wanting an electric car, and with Tesla
being the current market leader of electric vehicles, a likely increase in sales.

Brand Reputation
It can be argued that Tesla is as much a tech company as it is an automobile company75. It
sells high-end products, is admired by critics, focusses on disrupting the automobile industry,
and has a product and founder that elicit loyalty and an excited buzz. Despite generating
losses and the resulting high negative price-to-earnings ratio, Tesla has seen an increased
valuation in the market and is experiencing growth that is similar to other tech companies,
such as Apple and Alphabet.76

4.3 Efficiency and Economies

When analyzing a company’s resources and capabilities to determine their core

competencies, it is important to also look at how efficient the company is being in terms of
using those assets. We use the economies of scale, experience, and scope in order to
investigate a company’s efficiency.

Scale Economies
When Tesla launched the Roadster, the type of car (a sportscar) was chosen with the idea of
a lack of economy of scale in mind.77 Tesla was a start-up with very little experience and no
existing processes to encourage economies of scale, and so their first product, no matter what
type of car it would be, was expected to be expensive to produce and therefore expensive for
the consumers to buy. The only way Tesla could be competitive is if it competed in the

74 https://electrek.co/2018/05/21/tesla-mobile-service-request-ranger-through-app-elon-musk/
75 https://www.investopedia.com/articles/active-trading/072115/what-makes-teslas-business-model-
different.asp
76 https://slate.com/technology/2013/05/tesla-model-s-the-electric-car-company-is-a-little-bit-apple-a-
little-bit-google-and-about-to-be-huge.html
77 https://www.investopedia.com/articles/active-trading/072115/what-makes-teslas-business-model-
different.asp
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sportscar category where car enthusiasts would be more likely to pay the high price of a
vehicle created with very little efficiency.

Over the years and with a proven concept, Tesla has had the freedom to start focusing on
mass production of their cars with the aim of creating a more affordable electric vehicle. In
2016, Musk famously revealed Tesla’s master plan78 of:

Build sports car

Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options

It appears that Tesla is currently on step two of the master plan, and is using economies of
scale to make it happen. One way of doing this is to take a modular approach, where different
components are produced as efficiently as possible and then assembled afterwards. Tesla
employs this strategy of maximizing capacity when producing their Powerwall, Powerpack,
and Megapack products.

Although Tesla is heavily vertically integrated, when they do purchase components from
suppliers, they make sure the components are shared across product lines in order to take
advantage of economies of scale and pricing efficiencies.

Experience Economies
Servicing. Due to their innovative on-board diagnostics system, Tesla receives continuous
data on their vehicles, including if there are any problems. Using this remote system, they are
able to diagnose and remedy problems without needing to look at the physical vehicle. Tesla
also performs their own services, choosing not to outsource like many traditional automotive
companies. This allows them to quickly identify problems, find solutions, and implement those
solutions, and to learn faster in the process.

Production Time. Due to the learning process, Tesla was able to reduce their production time
by 40% in 2013.79 Continuing along the learning curve has allowed Tesla to increase its
production capacity exponentially, and reducing the amount of time needed to assemble a
vehicle is a huge part of why this has happened. Shorter production times lead to more cars
being assembled in the same amount of time, which means factory and employee time is
being used more efficiently.

Scope Economies
Same Factory, New Model. When General Motors owned the Fremont Factory, it had the
capacity of approximately 500 000 vehicles per year. Musk believes that the Fremont Factory
actually has the potential for a capacity of nearly 1 000 000 due to overlaps in components for
the Model 3 and the Model Y, and there are talks of adding a new assembly line to the existing
factory to manufacture the Model Y with little to no extra costs.80

Same Technologies, Different Product. Tesla has been adapting some component-level
technologies to advance their energy storage products. Some of these technologies include

78 https://www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me
79 https://slate.com/technology/2013/05/tesla-model-s-the-electric-car-company-is-a-little-bit-apple-a-
little-bit-google-and-about-to-be-huge.html
80 https://electrek.co/2019/09/10/tesla-new-assembly-line-fremont-factory-model-y-production/

53
cooling, charge balancing, electronics management, structural durability, safety, and high
density energy storage.

Making one Technology more Efficient by Coupling with Another. In order to reduce costs,
Tesla has been co-locating their Superchargers with the energy storage systems that they
also produce. This allows for their electric vehicles to be charged with renewable energy, and
saves on electricity costs.

Strategic Partnerships. Most of Tesla’s strategic alliances and acquisitions take place with the
goal of reusing existing technology to make their own products better, while still enjoying the
revenues those technologies bring in separately. An example of this is at Gigafactory Nevada
where Tesla partnered with Panasonic to produce battery cells in an attempt to reduce the
cost of their battery packs.

4.3.1 Core Competencies – VRIO

In order to determine if any capabilities give Tesla a competitive advantage, it is important to

analyse them using the VRIO framework.

VRIO Framework
The VRIO Framework analyses whether a capability is a core competency by asking if it adds
value for the customer, if it is rare to find in the market, if it is difficult to imitate by competitors,
and if the organization is equipped to exploit that capability. Only if it meets all of these criteria
is it deemed a core competency.

Figure 28: VRIO Framework

Using the flow diagram and the above-mentioned capabilities, we can identify five core
competencies for Tesla (application of VRIO framework below):

• Vehicle technological innovation – Tesla’s ability to reimagine and re-engineer

every part of their cars allows them to not only differentiate themselves on efficiency,
but to innovate the mobility industry.

54
 • Energy Sourcing – Tesla is not only an automobile company; it is also an energy
company, and this works as a valuable complement to the traditional car segment.
Tesla’s solar power segment, as well as their growing charging network, is something
that is both valuable and unique to the company.

• Convenient servicing – While servicing is imperative for all automotive companies to

offer, Tesla has creatively solved their lack of service centers problem with Tesla
Rangers, creating convenience for customers and being unlikely to be imitated by
rivals due to their current investments in traditional service centers.

• Business model innovation – Tesla isn’t just looking to join the competition; they’re
looking to change how the competition is played. Their pushes into autopilot
technology and the consequences of a driverless world keeps Tesla differentiable and
the leader of the mobility revolution.

• Brand Reputation – Being considered a tech company gives Tesla more freedom
than traditional automotive companies. Their research and development budget allow
for them to make the innovative leaps that they need to be competitive in the market.

DIFFICULT TO
VALUE RARE ORGANIZED STATUS81
IMITATE

Vehicle technological innovation Yes Yes Yes Yes

Energy sourcing Yes Yes Yes Yes

Convenient servicing via rangers Yes Yes Yes Yes

Business model innovation Yes Yes Yes Yes

Brand reputation Yes Yes Yes Yes

Futuristic car design Yes Yes No Temporary Advantage

Sales process innovation Yes Yes No Temporary Advantage

Level of vertical integration Yes No Competitive Parity

Licencing tech Yes No Competitive Parity

Public image management Yes No Competitive Parity

Table 18. VRIO Framework to determine Core Competencies

81 Image src: https://cleantechnica.com/2019/06/13/elon-musk-at-e3-fallout-shelter-netflix-youtube-

coming-to-tesla-much-more/

55
 4.4 Strategy

4.4.1 Strategic Fit

Having defined Tesla’s core competencies as well as the industry’s key success factors, we
can now perform an analysis of the company’s strategic fit in the EVs market.

Below we analyze both the economic and luxury segments of that market. It should be
cautioned, however, that most of Tesla’s models are located in the luxury segment. In any
case, Tesla’s most produced and sold model – Model 3 – is somehow located midway through
the economic and the luxury segments. Moreover, Tesla is expected to develop low-cost, high-
volume offerings once it enters the phase 3 of its Master Plan. Therefore, it is worth taking a
look at both segments, as the company is likely to achieve a wider coverage of the market by
capturing lower customer segments in the social pyramid.

Luxury cars

KEY SUCCESS FACTORS

CORE Production Innovation Product Targeted Range/
Distribution Service
COMPETENCIES efficiency edge design communication autonomy
Vehicle tech
3 5 5 4 5 - 4
innovation
Energy
4 4,5 - - 5 - -
sourcing
Convenient
- 3,5 - - 5 - 5
servicing
Business
model 3,5 4,5 3,5 4 5 4 4
innovation

Brand
- 5 - 5 - 4 -
reputation
Strategic fit
(average: 3,5 4,5 4,25 4,33 5 4 4,33
4,27)
Table 19: Luxury Segment Analysis

Economic cars

KEY SUCCESS FACTORS

CORE Production Value for Mass Range/
Distribution Service
COMPETENCIES efficiency money communication autonomy
Vehicle tech
3 2 - 5 - 4
innovation

Energy sourcing 4 4 - 5 . .

Convenient
- 4 - 5 - 5
servicing

Business model
3,5 3 - 5 4 4
innovation

Brand reputation - - 3 - 4 -

Strategic fit
3,5 3,25 3 5 4 4,33
(average: 3,85)
Table 20: Economic Cars Segment Analysis

56
 4.4.2 Strategic Intent

From the strategic fit analysis, it can be noticed that Tesla is particularly strong in factors
relating to car innovation and vehicle range/ autonomy. In fact, Tesla has been leading new
technological breakthroughs relating to vehicles’ in-car software, connectivity and
autonomous driving. Moreover, it avails itself of cutting-edge battery technology and has been
spreading out a supercharger network to support its vehicles’ use and recharging.

Conversely, Tesla’s strategic fit is dragged down by weaknesses in the production efficiency
and distribution/service factors. In particular, Tesla has been met with difficulties in delivering
vehicles on time and in meeting the increasing demand for its cars. Likewise, the company
still needs to improve its servicing networks and capabilities in order to ensure prompt
assistance to customers whenever the arising issues cannot simply be solved through over-
the-air updates.

Lastly, with regards to the economic cars segment, Tesla would still need to improve its cars’
affordability as well as invest in new mass communication strategies apart from general word-
of-mouth in order to create more brand awareness amongst customers of that segment.
4.4.3 New SWOT Analysis

Figure 29: New Swot Analysis

57
 Opportunities and Time

Short-Medium Term Opportunities Medium-Long Term Opportunities

1. Competition in EV segment from all

major car producers such as
1. Increased competition in Electric
Volkswagen, BMW, etc.
Vehicles market both for passenger
2. Production capacities will be key for
and cargo as well as B2C and B2B
medium-long term establishment in
2. Limited global market presence
new and growing markets (e.g.
and product availability
developing countries)
3. Increased availability of
3. Density of charging station
diversified models in the market
networks will be key to global
presene of electric mobility
Strengths
1. First Mover Advantage: front- 1. Target new customer segments with
runner of electric mobility, e.g. first recently launched and upcoming
fully electric cargo truck models: Recently launched Model 3
2. Increasing no. of vehicle sales: for lower-income customers, and 1. Expansion of Product-Line: Create,
from 2.600 deliveries in 2012 to upcoming Cybertruck & Semi for design & Innovate to produce and
367.500 in 2019 cargo transportation businesses distribute new models to serve low-
3. Increasing market position: 1% 2. Internalize battery production to income customers as well as cargo
global market share from passenger car have the technology as an asset and transportation customers
revenues in 2019 expand on it for the vehicle 2. Increase cross-selling activities: also
4. Top Employer: Diversity & production as well as the own energy for supercharger-networks, solar
Innovation-Engaging Culture supply & storage panel distribution to Tesla-
5. Expertise in innovation: Best-in- 3. Expand solar energy production customers as well as the batteries
class electric vehicles (Models S, 3 and market by increasing sourcing & 3. Expansion of super charger
X with highest range) marketing efforts, e.g. buying networks to other countries and
6. Brand recognition: Reach & another smaller company in the field increase of density in the US,
perception of leader in electric mobility 4. Put high marketing effort on partnering with / acquiring of other
7. Fully integrated: Vehicles, Charging Cybertruck distribution in the US: operators of such networks
Stations, Energy Production, Supply & 17,6% of total car sales in the US
Storage automotive market are made up by
8. Cross-selling: e.g. Insurance Pickup trucks
program "InsuremyTesla" with Liberty
Mutual insurance
Weaknesses
1. Limited customer segments: due
to expensive pricetags & models for
passengers exclusively 1. Sales Expansion into untapped
markets, especially Asia with existing 1. Get more market power in the supply
2. History of losses: Tesla had no
models chain by diversifying suppliers even
profitable year til today
2. Put high marketing effort for Semi more and contracting with financial
3. Innovation risk: e.g. problems in
Truck for cargo transportation to options counter highly volatile
production with mechanical
conquer a small share of that market resources needed for production
complications
segment 2. Optimize distribution network for
4. History of overpromises & under-
delivering: e.g. Cybertruck falsly 3. Keep investing in in-house customer services by investing into
declared "unbreakable" technology for product-line and repair services and sparepart
5. Lack of quality in customer product-breadth expansion as well as availability in/around Tesla
service: customers satisfaction with new business development in the distribution centers
Tesla is on a low energy sector 3. Continuously distribute the Semi
6. No cargo transportation: models 4. Invest in sourcing as well as in R&D Truck and innovate to expand in the
are desgined exclusively for passenger on resources in order to become cargo transportation segment and
transportation expert in the supply chain + reducing get a significant market share
7. Lack of High-Volume production: production costs or keeping them on
Issues with production costs, space and the same level
resources
8. Battery shortage: limited supply
lead to production rate decrease
Table 21: New SWOT Analysis

58
 Strategic Thinking and Value Creation

4.5 Classification of the Business

Tesla is predominantly an automotive manufacturing company. Its core activity consists of the
design, development, manufacturing, sale and lease of automotive vehicles, especially of
electric vehicles.

Besides manufacturing and marketing its own vehicles, Tesla has also been supplying auto
parts to other auto manufacturers, namely powertrain systems and components. Nonetheless,
Tesla qualifies as an OEM (original equipment manufacturer), producing its own electric
vehicles and selling (or leasing) them to end customers.

Just like many of the other automakers, Tesla has been rendering financial services in the
context of its automotive retail offerings, namely in the form of lease or other credit schemes
for the acquisition of the vehicles.

Apart from the activities in the automotive sector, Tesla has been developing energy
generation and storage solutions for residential clients as well as commercial and industrial
businesses and utilities. The energy storage solutions include the Powerwall, Powerpack and
Megapack products. Moreover, following the acquisition of SolarCity in 2016, Tesla has been
complementing these offerings with solar generation solutions, including solar panels and the
Solar Roof (roofing tiles that are capable of converting sunlight into electricity).

Through this business expansion, Tesla features itself as “the world’s first vertically integrated
sustainable energy company, offering end-to-end clean energy products, including
generation, storage and consumption” (page 1 of 2019 Form 10-K).

In any case, in our analysis we will essentially be framing Tesla as an automotive

manufacturing company, given that this is by far the most representative segment in the
company’s financials at this date. Nevertheless, we shall bear in mind that the company has
been developing additional energy products that can make up for a valuable complement to
the automotive segment and improve the company’s overall sustainability.

4.6 Tesla’s Sustainability Impact

Tesla is proud to call itself “the vanguard of the world’s inevitable shift towards a sustainable
energy platform.” and is also in public constantly evaluated by its visible actions for fulfilling
the promises made. Besides Tesla’s environmental impact, following table gives an overview
about Tesla’s activities to promote sustainable business practices followed by representative
examples:82

82
Sources:
https://www.businessinsider.com/million-mile-battery-tesla-miles-lifetime-2019-11
https://www.tesla.com/ns_videos/tesla-impact-report-2019.pdf
https://electrek.co/2019/04/16/tesla-battery-recycling-system/
Tesla Annual Report 2019
https://www.statista.com/topics/2086/tesla/
59
 Economic Sustainability Environmental Sustainability
• Investment in research and development for the
development of a 1 million mile battery provided
• No profitability overall but sufficient y-o-y growth Savings and results that potentially changes lifetime of
Economic and to indicate future profitability efficiency in the existing batteries: resources will probably be
financial • Profitable business segments based on net use safed (status end of 2019)
results margin but reinvestments are used for rapid of natural • EVs provide savings on use of fuels for
growth resources combustion engines
• Reduced water consumption due to solar energy
production

• Provision of EVs + Commitment of working for a

sustainable energy future
Emissions • Contribution to reduce the environmental
Remuneration
reduction and impacts of transportation, electricity production
of
• Overall fair salaries for employees adoption of and energy use
shareholders
renewable • Selling and usage of scalable clean energy
and employees
energies generation and storage products
• Provision and operation of charging stations for
EVs

• Guidelines for all employees from front to

backend for sustainable business practices
Regular • High-end equipment in factories and cutting edge
Prevention of air, • Production sites and processes are constructed
renewal technologies in place with frequent renewal and
land and water and constantly improved to enable sustainable
of equipment updates as well as partly company internal
pollution production
and software development
• Guidelines for all employees from front to
backend for environmental business practices

• Tesla has invested and continues to invest in

company internal battery recycling programs in
cooperation with third parties
• Investments in other business models such as a Recycling and
Investment in • Tesla launched their project to have their own
energy parks or product distribution for solar reuse
new products battery recycling system in the near future
energy production of materials and
and services • Tesla implements various recycling measures at
• Lengthening of product lines products
their sites for recycling e.g. Wood used in the
process (in some factories with a recycling quote
of 100%) as well as for the scrap

Social Sustainability Governance Sustainability

• Code of Business Conduct and Ethics and our
Compliance with
Protection of • Global Environmental, Health and Safety (EHS) Corporate Governance Guidelines to meet local
local and
employees’ strategy in place with team to monitor it and international laws
international
physical health • Low level of injuries in the factories • Board with procedures to monitor, audit and
laws
implement compliance

Absence of • Ensuring of low level of corruption, bribery and

corruption, fraud practices by training personnel on other
• The company keeps information reported by bribery and corporate governance policies, such as our
employees in confidence. fraud practices Worldwide Bribery & Anti-Corruption Policy
Privacy of • committed to maintaining an open and transparent • Policy and principles to hire employees,
employee data culture where it is safe and acceptable for all "regardless of race, color, religion, sex, sexual
employees to raise concerns about policy Promoting
orientation, age, national origin, disability,
violations by their manager employee
protected veteran status, gender expression or
diversity
gender identity, and any other protected status
under applicable law"

Transparency
• Board and Management staff is known,
and supervision
corporate structure is public and changes are
of the directive
made public upon occasion
structure

Community • Partnership with local high schools, universities • strive to have a diverse supply chain and
development and nonprofits for the education of the yourh Ethical provide the maximum practical opportunities to
relationship with provide goods and services as a part of the
suppliers and corporate procurement process.
partners • use of diverse suppliers is an integral part of
Tesla’s purchasing plans

Table 22: Sustainability at Tesla

60
 4.6.1 Examples for Environmental Sustainability

Emission savings by EVs in comparison to ICE vehicles

As of data from 2018: >550K Tesla vehicles have been sold which had driven over 10bn miles
back then. That resulted in a combined savings of over 4mio. metric tons of CO2, which is
the equivalent of saving emissions from being released into the environment from over
500.000 ICE vehicles with a fuel economy of 22 miles per gallon.

Tesla’s Supercharger Network

As of data from 2018 Tesla’s supercharger network had delivered over 595 Gigawatt- hours
of energy, saving the equivalent of over 75mio gallons of gasoline, which is enough gasoline
for the average ICE vehicle with a fuel economy of 22 miles per gallon to travel round trip from
Los Angeles to New York City over 290.000 times.

Solar Installations
As of February 2019, Tesla Energy has installed over 3.5 Gigawatts of solar installations and
has cumulatively generated over 13 Terawatt- hours of clean, emissions-free electricity. This
amount of energy could supply the annual residential electricity consumption for the entire
state of Connecticut. Over their entire expected use life of more than 35 years, these solar
installations are expected to generate 86.5 Terawatt- hours of energy, enough electricity to
power all of Washington D.C. for nearly a decade.

Looking at Tesla’s energy generation in

comparison to the Model S, X and 3
energy consumption as of 2018 we can
see that it has far exceeded the amount
of energy the entire Tesla vehicle fleet
on the road has consumed.

Figure 30: Tesla Energy Generation vs. Consumption

Furthermore, power generation is one of the leading causes of water withdrawal in the U.S.,
e.g. for steam-driven turbine generators and also for equipment cooling, Tesla’s solar energy
production not only lowers CO2 emissions but also water consumption.

Global carbon impact in operating

activities
Besides the products, Tesla also spans its
efforts to reduce its carbon footprint
among their operating activities and
measures its global carbon impact in its
efforts to become a net zero company.

Figure 31: Global Carbon Impact 2017

61
 4.6.2 Examples for Social Sustainability

Contribution to air quality

Harmful air pollutants, such as particulate matter, ozone, nitrogen dioxide and sulfur dioxide,
are estimated by the World Health Organization to cause over 7mio premature deaths around
the globe per year. Tesla’s contribution to reduce the use of fossil fuels for decreases the risk
of cardiovascular and respiratory disease and stroke in developed and undeveloped countries.

Safety for consumers

Tesla’s EVS have an improved frontal impact safety because of the front trunk, which is an
entire crumple zone since there is no gasoline engine block. This improves impact absorption
in a crash.

Society & Education

Tesla partners with local high schools, universities and nonprofits
to accelerate the world’s transition to sustainable energy and address the growing demand for
science, technology, engineering and mathematics (STEM) jobs.

Employees: Safety & Diversity

Tesla constantly puts effort on

improving safety for its
employees at work and thereby
achieving higher results as
traditional manufacturer get as
can be seen in the decrease of
the TRIR by about a half after
takeover by Tesla. In addition are
Tesla’s factories highly
automated, which reduces the
level of risk even further.

Figure 32: Total Recordable Incident Rate (TRIR)

Furthermore a good example on how Tesla embraces diversity amongst its employees is the
achievement of the full 100 score-points for 5 years in a row from the Human Rights
Campaign’s Corporate Equality Index, the national benchmarking tool on corporate policies
and practices pertinent to lesbian, gay, bisexual, transgender and queer employees, and has
been named in the “Best Places to Work for LGBTQ Equality” from the Human Rights
Campaign.

Tesla announced that it thrives to hire people regardless of race, color, religion, sex, sexual
orientation, age, national origin, disability, protected veteran status, gender expression or
gender identity, and any other protected status under applicable law.

Supply Chain Responsibility

Tesla is committed to exclusively source responsibly produced materials and established “The
Tesla Supplier Code of Conduct” and a “Human Rights and Conflict Minerals Policy”.

Tier 1 suppliers have to register and complete the domestic and international material
compliance requirements in the International Material Data System (IMDS) to meet EU and
other international material and environmental related regulations. This is obligatory for all
62
suppliers in the production-parts approval process. Tesla, with partners and independent third
parties, conducts audits to observe these principles in action. On a basis of reasonable believe
of violation of the Code, Tesla will transition away from that relationship unless the violation is
cured in a satisfactory manner.

Furthermore, Tesla has a zero-tolerance policy towards human rights abuses in their
supply chain. A lot of products like most electronics contain minerals such as tin, tungsten,
tantalum and gold, also known as “3TG”. These minerals can be found over the globe, but
also exist in the Democratic Republic of Congo (DRC) and surrounding areas. To cope with
local practices, Tesla put a “Human Rights and Conflict Minerals Policy” in place to make sure
that Tesla's products do not finance or benefit armed groups through mining or mineral trading,
directly or indirectly.
4.6.3 Examples for Governance Sustainability

Board of Directors
At Tesla, the Board of Directors sets standards for the employees, officers and directors and
Tesla is committed to establish an operating framework that exercises appropriate oversight
of responsibilities at all levels throughout the company and manages its affairs consistent with
high principles of business ethics, represented in the Code of Business Conduct and Ethics
and the Corporate Governance Guidelines, besides others.

Bribery & Anti-Corruption

Tesla trains its staff on corporate governance policies, such as its Worldwide Bribery & Anti-
Corruption Policy, which essentially contains: “Don’t offer any bribe to anybody, anytime, for
any reason (and when in doubt, please consult with the General Counsel or the Legal
Department).” Tesla further maintains the US Office of Foreign Assets Control compliance
policy, which helps Tesla to make sure it doesn’t participate in transactions with sanctioned
countries, legal entities or individuals such as terrorists.

Whistleblower Hotline
Tesla maintains a hotline through which employees can report concerns at any time.
Information is taken in confidence and policies prohibit retaliatory actions against employees
for raising concerns.

Besides having looked at environmental, social and governance sustainability, economic

sustainability can be seen in the following chapters about value creation.

4.7 Value Creation for Customers

Current Customers
Tesla, being in its growth phase, has gained more and more customers as time goes on. Their
biggest bottleneck in gaining new customers is their own production capacity. Due to the
excitement behind the release of each Model, Tesla receives thousands of pre-orders that
they may not be able to serve, and so customers herein are defined as people who have had
their orders fulfilled and have had their car delivered.

From Table 23, it is clear that Tesla’s worldwide growth in customers has been exponential,
reaching a record high in 2019 of 734,772 cars delivered worldwide, with 195,125 of those
cars being delivered in the United States. The first quarter of 2020 saw the production of
102,672 cars and a good start to the year delivering 88,496 vehicles to new customers around
the world.

63
 WORLDWIDE WORLDWIDE WORLDWIDE WORLDWIDE
US TOTAL83
MODEL S MODEL X MODEL 3 + Y TOTAL
2013 22 44284 - - 22 442

2014 31 655 - - 31 655

2015 50 446 212 - 50 658 18 742
2016 50 931 25 312 - 76 243 26 725

2017 54 715 46 535 1 764 103 014 50 067

2018 50 630 48 680 146 046 245 356 197 517
2019 66 683 300 703 367 386 734 772 195 125

TOTAL 327 502 421 442 515 196 1 264 140 488 176

Table 23: Tesla car deliveries from 2013 to 2019

So, who are Tesla’s customers?85 In 2016, before the release of Model 3, Tesla customers
tended to be older (50+ years old) Asian males who earned an annual income of more than
$100,000 and owned their own home. The release of the Model 3 had changed these
demographics, which now tends to a slightly younger (35-44 years old) male who has an
annual income of between $50,000 and $100,000 and is less likely to own his own home. As
the Tesla becomes more accessible, the more their customer base diversifies. Table 24 is a
summary of a study done by Hedges & Company, which corroborates the above customer
identification.

AVERAGE GENDER HOME

MEDIAN AGE GENDER MALE
INCOME FEMALE OWNERSHIP
MODEL X86 $143 177.00 52 71% 29% 88%
MODEL S $153 313.00 54 77% 23% 88%
MODEL 387 $128 140.00 46 84% 16% 56%
USA $61 372.00* 38 49% 51% 64%

Table 24: Demographics about current Tesla car owners

83
https://www.goodcarbadcar.net/tesla-us-sales-figures/
84
Tesla Quarterly Updates from 2013 to 2019, accessed via https://ir.tesla.com/financial-information/quarterly-
results
85
https://www.quantcast.com/blog/tesla-model-3-%E2%80%92-an-electric-car-for-the-masses-or-still-the-
select-few/
86
https://hedgescompany.com/blog/2018/11/tesla-owner-demographics/
87
https://hedgescompany.com/blog/2019/03/tesla-model-3-demographics-income/

64
For the value creation for customers 3 phases are looked at: Pre-, During and After Purchase.
The following table shows the most relevant aspects.88

1. Potential customers come to company owned stores and service

centers
Number of customer contact
Journey 2. Customers get the model presentation on site
points until the purchase is made
3. Customers order their model through an online-sales-system on the
Pre- Tesla Website
Purchase

Number of direct interactions

Interaction is done on site with a number of times depending on the
Interaction with customers until the purchase
customers' needs
is made

Evolution of the amount of

Products and
products/services sold to 1 mio cars sold in March 2020 to Tesla customers
Services
During customers
Purchase Evolution of the average price of From 2012 with Model S now starting at $80k Tesla initially stayed in the
Prices products/services sold to high price segment with Model X starting at $84k, then moved towards
customers lower starting prices with Model 3 ($40k) and Model Y ($53k)
2020: Tesla customers are more satisfied than those of any other auto
Evolution of the level of customer
brand for the 3rd consecutive year, according to Consumer Reports, ranked
Satisfaction satisfaction with the consumption
by Owner satisfaction (89 / 100 points based on driving experience, value,
of products/services
comfort, styling, audio and climate systems)
Evolution of the number of likes
Tesla's Twitter Follower grew from about 4,3mio users in end october 2019
Support and followers on the company's
to 5,1mio users in mid April 2020
social networks

A "Bernstein" survey from 2018 showed that only 42% of customers

Evolution of customer problems described their service center experience as “excellent,” vs. 57% in the
Complaints
and complaints previous survey due to growing wait times for appointments, and with
After poorer rates of problem resolution
Purchase
Evolution of the retention rate in
A 2019 study by EXPERIAN revealed that with about 4/5 (80,5%) Tesla has
Retention number and sales of existing
the highest customer loyalty ranking of all auto manufacturers.
customers

From 2008 to 2019 the revenue from automotive sales grew from about
Evolution of the acquisition rate in $14,7mio to about $20bn. Automotive leasing revenues grew from about
Acquisition
sales to customers $132mio in 2014 to about $870mio in 2019. Car sales increased in 2019 by
50% compared to 2018.

Tesla became the most valuable US car maker ever in 2020 with market
Evolution of the company's brand
Brand value of $86.5 billion as of January 2020, having gone through a 160% since
valuation
June 2019.
Table 25: Tesla Value Creation

88
https://www.businessinsider.com/tesla-tops-consumer-reports-owner-satisfaction-list-2019-2
https://cleantechnica.com/2019/01/09/tesla-has-the-highest-customer-loyalty-of-all-car-brands/
https://www.socialbakers.com/statistics/twitter/profiles/detail/13298072-tesla
https://edition.cnn.com/2020/01/10/investing/tesla-market-value/index.html
Annual Report 2019
https://www.cnbc.com/2019/03/11/teslas-biggest-problem-is-customer-service-new-bernstein-survey.html
https://www.tesla.com/blog/tesla-approach-distributing-and-servicing-cars
www.tesla.com
65
 4.8 Value Creation for Shareholders

While Tesla was able to increase its

revenue by a dozen times from 2014
to 2019, it had to account losses ever
since. Tesla’s highest loss was
recorded in 2017 with nearly $2bn.
Tesla’s cumulated loss in the same
period sums up to about $ 5,73bn in
contrast to a cumulated revenue of
about $74bn which leads to a total
loss/revenue ratio of about 8%.

Tesla, generating its revenues mainly

via its automobile distribution, was
able to generate a positive net profit
from its 2 main revenue sources –
automobile sales and automobile
leasing – as can be seen in the to
Figure 33: Tesla Revenues vs. Losses graphs below:

Figure 35: Revenue sources Figure 34: Net Profits from sales & leases

While Tesla has never paid or declared any dividends on the common stock Tesla was able
to dramatically increase its market value by creating an average annual return on a stock of
36,81%89 looking at the time between its initial public offering on 29.06.2010 to 08.04.2020.

As Tesla points out in their investor’s FAQ, “Tesla has never declared dividends on [its]
common stock [and intends] on retaining all future earnings to finance future growth and
therefore, [does] not anticipate paying any cash dividends in the foreseeable future.”90
That Tesla holds true to that can be seen in their spending on research and development in
the graph below:

89
Calculation: Annual Return = 100 * (($548,84/$23,89)^1/10-1). → $548,84 = Selling price of 1 share
on 08.04.2020; $23,89 = Purchase price of 1 share at IPO-date 29.06.2010.
90
https://ir.tesla.com/investor-faqs
66
Figure 36: Tesla's R&D Expenses

4.9 Value Creation Aggregate Indicator

For the value creation aggregate indicator this report takes a look at Tesla’s total company
results.
Tesla Total
Sales
24,578
(in millions)
Growth 24%

Margin 4%

Risk 82%

Time 5

Value
3,179
(in millions)
Value for customers
71,820
(in millions)
Value for shareholders 0.04
Table 26: Value creation aggregate indicator Tesla (2015-2025)

The value creation aggregate indicator shows us, that Tesla creates a huge value for the
customers (71,820 million) compared to an incredibly small value created for shareholders
(0,04). This is due to the high risk shareholders are facing by holding stock from Tesla. Based
on this Analysis, we wouldn’t expect such a high valuation, that just had another peak in 2020,
outnumbering GM and Ford together.

67
5 Mission, Objectives, Strategy and Products-Markets

5.1 Vision and Mission

Since its creation in 2003, Tesla’s mission was initially to create but now it is to accelerate
the world’s transition to sustainable energy. Tesla has focused its strategy to develop high-
performance Electric Vehicles that are not only the world’s best and highest-selling pure
electric vehicles but also the safest and most evolutive cars driven in the world. Starting with
a unique roadster model, since 2011 Tesla conquered the premium EV category globally with
its model ‘Model S’ sedan and later Model X sports utility vehicle. Lately, Tesla also entered
the small premium category with Model 3, which will truly propel electric vehicles into the
mainstream.

In addition, with the opening of the Gigafactory and the acquisition of SolarCity, Tesla now
offers a full suite of energy products that incorporates solar, storage, and grid services. As the
world’s only fully integrated sustainable energy company.

Tesla Vision is to be the leader in EV Technology, “second place should need a

telescope to see us” said Elon Musk in 2014. To achieve that vision, Tesla ambition is to
grow vehicle, production and customer support with a unique set of values summarized in
their culture statement:

move fast, do the impossible constantly innovate, reason from “first principles”,
think like owners, we are ALL IN

To materialize the vision, the company has put relentless focus on differentiation around three
key pillars

#1 Master product development and innovation for EV

● Leadership on range to achieve maximum miles per single charge and free long distant
driving with EV.
● Leadership battery cost: battery pack cost in $/kWh
● Focus on innovation and proprietary technology for battery module, Power electronics
and motor
● Partnership with Panasonic (automotive cell), Daimler (battery packs/chargers) and
Toyota (full drive train for RAV 4)

Image 7: Drivetrain

68
#2 Lead manufacturing of Electric Vehicles
● First production platform for EV with blend of vehicle design (aerodynamic, trunk in
front, low center of gravity) and EV technology (electric powertrain, quick charge
capacity, aluminum body, connectivity)
to drive better performance (300miles
autonomy, fun to drive, acceleration)
● Unique design inspired by the
endurance athlete, blend of
aerodynamics and beautiful design,
incredible interior utility and cargo
space.
● In house engineering creating all
aluminum chassis construction,
lightweight, low center if gravity, safety
5 star
● Powertrain engineering
Integration to build a system that is
greater than the sum of its parts and highly scalable, superior cost dynamic and trade
secret methodology
Image 8: Photo inside Tesla GigaFactory

#3 Transforming the customer experience with the best technology integration

● Reinventing sales with their own
distribution centers
● Distribution and marketing combined
and controlled
● Superior customer experience,
streamlined purchase process online,
capture retail mark-up and more efficient
● Reinventing Service: best is NO
SERVICE with valet loaner service,
ranger remote service, no scheduled
maintenance
● Constant evolution of the product with
unique software engineering with
advanced software for battery
management, motor control, diagnostic,
touchscreen and traction and stability
control = customizable and upgradable
Image 9: Tesla Mobile Application

5.2 Purpose and Value

Tesla’s purpose is essentially to create and mass produce zero emission and zero noise cars,
allowing for clean and quiet streets.

Coupled with that, Tesla also aims to allow people to produce their own electricity in their
homes and store it for later consumption. This can be attained through Tesla’s solar roof and
power walls.

69
In terms of its corporate values, Tesla focuses on sustainability as one of its core values. For
example, Tesla’s gigafactories produce their own electricity through a vast number of solar
panels installed on the rooftop of the factory.
Tesla describes its corporate culture as accelerated, energetic and innovative. They also aim
to provide an all-inclusive working culture, ensuring that everybody can do its best at the job
regardless of sex, race, religion or each worker’s past91.

5.3 Objectives

Relevant and
Specific Measurable Attainable Timely
Produce 500,000 cars in 2020 x x x x
Produce an entry-level car for $25,000 by
x x x x
2022
Develop and sell fully autonomously driven
x x
cars
Set up autonomous ride-hailing network x x
Table 27: Objectives SMART

In Tesla’s public reports, the company’s objectives are typically described in broad strokes
rather than through quantified targets or goals. Therefore, it is not easy to point out measurable
objectives as this kind of information is generally absent from public reports.

In any case, as of today, it is possible to highlight some of the company’s objectives by

distinguishing between short- or medium-term objectives and long-term objectives.

Short and medium term

Based on Tesla’s 2019 form 10-K92, it is expected that vehicle deliveries should comfortably
exceed 500,000 units in 2020. Due to ramp of Model 3 in Shanghai and Model Y in Fremont,
production is also likely to outpace deliveries in that year.

With regards to capital investments, considering the expected pace of the products’
manufacturing ramps, construction and expansion of factories, and pipeline of announced
projects under development, and consistent with the company’s current strategy of using
partners to manufacture battery cells, as well as considering all other infrastructure growth,
Tesla is currently expecting the average annual capital expenditures in 2020 and the two
succeeding fiscal years to be from $2.5 billion to $3.5 billion.

Alongside with capital investments, the company expects operating expenses as a percentage
of revenue to continue to decrease in the future. This should be attained both by increasing
operational efficiency and process automation, and by increasing expected overall revenues
from sales. In particular, Tesla’s efforts to scale down and optimize the cost structure relative
to the size of the business have already manifested in total operating expenses decreasing
from $4.4 billion to $4.1 billion from fiscal year 2018 to fiscal year 2019, including restructuring
and other charges. Meanwhile, total revenues increased from $21.5 billion to $24.6 billion in
the same period.

91
https://www.tesla.com/pt_PT/careers.
92
Section regarding Management Opportunities, Challenges and Risks and 2020 Outlook.
70
At the end of fiscal year 201993, Tesla expected both positive quarterly free cash flow going
forward as well as positive GAAP net income going forward, with possible temporary
exceptions, particularly around the launch and ramp of new products. Underlying these
scenarios is the belief that the company has grown to the point of being self-funding. It remains
to be seen whether the COVID-19 pandemic is going to adversely impact these objectives
and, if so, to which extent.

In a nutshell, Tesla is directing its focus to continuous volume growth, capacity expansion and
cash generation. At the same time, it is expecting to start making profits as the volume of sales
increases and as operating expenses as a percentage of revenue decline.

Long term
As the time window lengthens, it becomes harder to define measurable targets. In any case,
in the long run, Tesla plans to develop a more affordable, high volume car, that may lead to
greater demand for the company’s products. In particular, Tesla may be in condition to develop
an entry-level car at a $25,000 price-point by 2022, which, if successful, would increase its
annual demand to 1,1 million cars by 202894.

On a different topic, Tesla is also aiming to develop fully autonomously driven cars. However,
the timing to achieve this milestone is hard to pin down given the regulatory constraints that
self-driving is subject to, as well as the technological hurdles that this type of offering
necessarily involves. At the moment, Tesla already offers its customers an Autopilot feature
that helps the vehicle navigate highways, change lanes and park with reduced driver
intervention. This app currently costs $7,000 for customers who purchase it upfront but may
become available through a subscription plan, according to what was announced by Elon
Musk in the 2020 first quarter earnings call95.

Finally, in connection with self-driving technology, Tesla is planning to roll out an autonomous
ride-hailing network. This network would include the company’s own fleet of vehicles and
would allow Tesla to access a new customer base96.

5.4 Strategy

From an early stage, Tesla’s basic strategy as documented in its Master Plan was divided into
three stages whereby:
• On stage 1, Tesla makes a small number of high value cars, in order to prove the
concept and show that electric cars are a viable alternative to traditional gasoline cars
(in other words, electric cars can be fast and long-range, thus they can be widely
adopted in the market);
• On stage 2, Tesla produces a car that costs half as much (model 3); this way Tesla
starts expanding its customer base towards a more traditional type of customer, though
still at the entry level of the luxury level it had been focusing on;
• On stage 3, Tesla produces a very high volume, economy price model, whereby
vehicles are now affordable for the average household; in the long run, Fremont factory
is meant to produce this low cost, stage 3 car.

In a nutshell, Tesla’s strategy is to first focus on a premium segment in order to gain traction
and start increasing volume and capacity as new offerings are introduced for lower customer

93
In the Q4 and FY 2019 Update.
94
www.forbes.com/sites/woodmackenzie/2020/01/20/when-will-tesla-make-a-profit/#d65e1cb1ba9c
95
www.businessinsider.com/tesla-elon-musk-monthly-subscription-full-self-drive-autopilot-2020-4
96
See Tesla’s 2019 form 10-k, p. 13.
71
segments down in the social pyramid. Each stage serves as an anchor for the next one,
allowing the company to gradually prune its technology and scale its operations in the face of
an expanding demand.
At this moment, Tesla is still on stage 2 and looking to expand its production capacity, namely
through the construction or expansion of its GigaFactories.

According to Tesla’s 2019 form 10-K97, a key focus in 2020 will be efforts towards establishing
and expanding capacity for vehicle production at volume across three continents.

At the Fremont factory, Tesla commenced Model Y production earlier than anticipated and
combined with Model 3 the company has installed annual production capacity for 400,000
vehicles. They expect to further increase that capacity to 500,000 vehicles through the
installation of additional equipment.

At Gigafactory Shanghai, Tesla has installed annual production capacity for 150,000 Model 3
vehicles. They have also started the construction of the next phase of that Gigafactory to add
Model Y manufacturing capacity at least equivalent to that for Model 3.

Finally, Tesla has selected Berlin as the site of their next factory for manufacturing vehicles
for the European market, due to its strong manufacturing and engineering presence. They are
still at the very early stages of the construction of that new Gigafactory.

Regarding Tesla’s sales objectives, the company’s operations in the Chinese market are a
key strategic element to ensure the envisaged expansion of demand. Indeed, production at
Gigafactory Shanghai allows Tesla to offer Model 3 in China at competitive local pricing and
more quickly, which should drive further demand and opportunity in the world’s largest market
for mid-sized premium sedans, and they expect a similar impact in China for Model Y when
they begin production there of this offering in the popular compact SUV segment.

Another key element has to do with technological improvement and product differentiation.
Over time, Tesla has been making its vehicles incrementally more compelling, including
through a planned software update for FSD-enabled vehicles to react to traffic lights and stop
signs and navigate city intersections, and additional functionality of both in-vehicle software
and the Tesla mobile app.

Lastly, Tesla has also been looking to expand and invest in its servicing and charging locations
and capabilities to keep pace with customer vehicle fleets and ensure a convenient and
efficient customer experience. Without an adequate servicing and charging infrastructure,
there will be no conditions to sustain an increasing product demand.

97
Section regarding Management Opportunities, Challenges and Risks and 2020 Outlook.
72
 5.5 Business Model

In order to provide an overview over Tesla's business model of the automotive business, we
created a business model canvas.

Figure 37: Business Model Canvas

73
6 Strategic Dimensions

6.1 Products-Markets Strategy

In order to have closer look at the status quo of Tesla’s products markets strategy, we set up
a products markets matrix, where we have the segments that are served by the current car
offering in the horizontal line and the potential demographics in the vertical line.
6.1.1 Products-Markets Matrix

Looking at the different segments, it shows that Tesla already serves (or will serve in case of
the new Tesla Roadster and Tesla Truck) some important income levels per segment – mainly
the higher income levels. So does the model S for the status driven individual and young
professionals, the model X for the status driven family and the upcoming roadster for the car
enthusiast serve the high-income targets. Big gaps we discover in the segment of the young
family that is usually very price sensitive and probably can’t even effort the cheapest model 3
(35k USD) and in the Jeep/ Wrangler Crowd, that is often not as price sensitive but only will
have the Tesla Truck starting at 40k USD available while there’s is a high willingness to pay
more for a luxurious SUV or Jeep.

Luxury Class Mid Class Status-driven Sports Car/ Super

Pickup
Sedan Sedan family car Car

High Income °°° °° °°° ° °°°

Medium
Income
° °° ° °°

Low Income °
Table 28: Product-Market Matrix

6.1.2 Ansoff Matrix

The Ansoff matrix is being applied to Tesla in order to analyze how Tesla is positioned in terms
of the four strategies of market penetration, product development, market development and
diversification.

Existing Products and Services New Products and Services

Market penetration Product development
• Tesla operates in 30+ • developes new cars but very slow (4
countries cars in production, 3 unveiled)
Existing • Sets up a dense network of • also develops outside of automotive
Markets chargers (14k so far) segment
• ca. 100 dealerships worldwide • strong focus on development of
software

Market development Diversification

• opening gigafactory in China • Superchargers
New Markets and Europe • Software
• despite reports, Tesla does not • robotaxis
go to india
Table 29: Ansoff Matrix
74
Market penetration
Tesla is practicing market penetration quite intensely by operating in 30+ countries. Within the
countries Tesla set up a global network of 14k+ charging stations for their cars and operates
nearly 100 dealerships.

Market development
Despite reports that Tesla wants to enter India as the next major car market, Elon Musk put
this project on hold for now due to the high import duties in India, which would make the cars
not affordable in India.98 In order to produce more cost effective and avoid supply chain issues,
Tesla set up a GigaFactory in China and is planning to set up another one in Europe.

Product development
Tesla has a fairly low frequency of releasing new cars. Within their existence they only
produced 5 cars so far while the production of the first roadster has been stopped already. In
the following 2 years there are three more models announced, the new Tesla Roadster, the
Cybertruck and the Semi. But considering that Tesla is not even 20 years old, it’s nothing to
conclude a slow product development from.

Diversification
Already in the early stage of the company, Tesla started to diversify their products, not only
by acquiring SolarCity. Today Tesla is operating in several segments next to automotive. In
energy production Tesla sets up large solar panel fields or sells solar roof tiles to private
households. In energy storage Tesla sets up huge batteries to serve whole regions such as in
Australia in 2018. Due to the Corona crisis in 2020 Tesla even shifts their production towards
ventilators in order to supply hospitals.

98
The Economic Times (2019): https://economictimes.indiatimes.com/industry/auto/auto-news/elon-
musk-explains-why-tesla-cars-may-not-come-to-india-anytime-
soon/articleshow/70492810.cms?from=mdr
75
 6.2 Generic Strategy

In this section, we analyze the nature of the competitive advantage of Tesla in the products-
markets it is active on.
From the outset, a company’s competitive advantage may take the form of either:
• Cost leadership;
• Differentiation; or
• A combination of the above two.
By adapting the generic strategy model, we can see that Tesla’s competitive advantage varies
depending on whether it is considered within the broader automotive industry or specifically
within the BEV/PHEV segment:

Broad automotive sector Cost leadership

Low High

Differentiation Low - -

High X -
BEV / PHEV segment Cost leadership
Low High

Differentiation Low - -

High - X
Table 30: Competitive Advantage

Tesla’s competitive advantage within the broad auto industry clearly lies on product
differentiation, such as on the vehicle’s electric powering, in-car software features and
connectivity, user experience, etc. With no surprise, Tesla’s vehicles tend to be much more
expensive than the average vehicle in the sector.

The following figure shows the relation between the average price of Tesla’s make and the
average price in the relevant market segment in 2019, globally:

Figure 38: Average passenger car prices in 2019

The situation is different if we consider Tesla’s offerings in the specific context of the EVs
segment. In this case, Tesla’s offerings have been competing with other EVs through a

76
combination of both product differentiation and cost leadership. Regarding differentiation,
Tesla cars stand out for their cutting-edge technologic features as well as for the related
supercharging network. Regarding costs, Tesla has been leading the way in the adoption of
more cost-effective batteries and has recently launched the Model 3 which has greatly
contributed to push down the average price of EVs.

In the long run, each of these competitive advantages do not go without its risks.
Product differentiation raises the risk of other (larger) competing automakers replicating
Tesla’s technology; this risk is, however, mitigated by the fact that Tesla’s competitive edge is
capital-intensive and spans a wide range of business sectors from hardware supplies to
software and connectivity services to power generation, storage and recharging technology.
Legacy carmakers tend to have a much more limited approach which prevents them from
covering such a wide range of business sectors without having to engage other entities in
partnerships.

Cost leadership, in turn, may be harder to keep. It should be noted that Tesla has been relying
on partnerships with third-party suppliers such as Panasonic, LG Chem Ltd and CATL to
achieve its cost advantage on batteries. It is to be expected that the other carmakers will also
ultimately take advantage of the downward trend in batteries production costs.

6.3 Innovation

In Tesla’s Market Conditions we see that Tesla has a global market share of 1% of the global
automotive market, but in its “niche”, Tesla actually has way higher presence than this figure
indicates. This nicht, the EV market, is in the introduction stage and Tesla has used its core
competencies to grow from an innovation leader with medium competitive strength and
medium technological competencies to a leader with high competencies.

Figure 39: Automotive Market and Tesla Core Technologies

Given Tesla’s technological competencies and its efforts on constantly innovating at a high
level, visible for example with their unique hardware and software architecture, i.e. how they
put their car together, Tesla is running an innovation leadership strategy. Tesla’s recent
investments as mentioned in sections before, such as in developing vehicles for the
transportation sector with the Cybertruck and the Tesla Semi, indicate that it is planning to
maintain this strategy.99

99
HBR (2020): https://hbr.org/2020/02/lessons-from-teslas-approach-to-innovation
77
 Competencies in Core Technologies

Innovation Low High

Approach
First Mover Innovation Specialist Innovation Leader

Follower Innovation Streamliner Innovation Follower

Table 31: Innovation Strategy

For Tesla, given an expected near future success, we expect it to build itself up to become a
leader in the maturity stage of the market, with a high competitive strength and high
technological competencies. If Tesla wouldn’t stand the fight with VW and others it might end
up as a Follower.

Introduction Stage Technological Competencies

Low Medium High

Competitive
Strength

High Specialist Leader Leader

Medium Specialist Leader / Follower Leader

Low Streamliner Follower Follower

Table 32: Innovation Strategy reflected in the Introduction Stage

Maturity Stage Technological Competencies

Low Medium High

Competitive
Strength

High Specialist Follower Leader

Medium Streamliner Follower / Specialist Follower

Low Streamliner Streamliner Specialist

Table 33: Innovation Strategy reflected in the Maturity Stage

6.4 Vertical Integration

Today most of the big auto manufacturers are nothing but assemblers. They outsource all of
their production and are just assembling the final parts in their factories. Some car producers
go even further and outsource that process as well, to companies such as Magna.100

But as in many other things, Tesla is different in regard to this. Tesla is known for vertical
integration and for rather making than buying.

Figure 40: Backward and Forward Integration: Tesla

By looking at Figure 40, it shows that Tesla is practicing their vertical integration in both
directions, backward and forward. By practicing vertical integration on such a high level, Tesla

100
Magna Complete vehicle manufacturing: https://www.magna.com/products/complete-
vehicles/complete-vehicle-manufacturing
78
is planning to gain a competitive advantage. This helps, to gain a deep understanding of their
product and knowing how to improve it. Greg Reichow, Tesla’s former VP production was
mentioning in an interview with WIRED, that for Tesla it makes sense to build components
inhouse, that contain “unique intellectual property or that are expected to change quickly.”101
Reichow further states, that outsourcing is connected to intense measures when it comes to
problem solving, while problems in an in-house production can be solved in a matter of days
for a fraction of the costs. It also allows Tesla to make choices more quickly and to increase
the cycle speed of learning and improvement.

Famous examples of vertical integration at Tesla are specific fuses that could be considered
as a commodity on the first sight, or their seats. In both cases Tesla found out that their
suppliers couldn’t deliver products to Tesla’s specific needs, so Tesla decided to produce both
components on their own.102 But Tesla is not integrating all process vertically. Many car parts
are being purchased from other suppliers, like the strategically very important battery, that is
currently supplied by Panasonic.

6.5 Strategic Outsourcing

As mentioned in the section above, does Tesla not do much outsourcing but rather keeps
control over all the development and origin of their components. Disassembling of their Model
3 conducted by for example Nikkei Business Publications showed that most components of
the car are being produced by Tesla. Especially the board computer creates a huge
competitive advantage for Tesla, that is considered as being 6 years ahead of the
competition.103 To get a better understanding of the optimal usage of strategic outsourcing
compared to Tesla’s approach, we are comparing the following tables of the ideal setup with
the setup Tesla is using.
Strategic Vulnerability to Outsourcing
Low Medium High

High Internal production

Competitive
Advantage
Potential

Medium Strategic outsourcing

Low Market purchase

Table 34: Ideal Usage of Strategic Outsourcing

Strategic Vulnerability to Outsourcing

Low Medium High

High Strategic outsourcing

Competitive
Advantage
Potential

Medium Internal production Internal production

Market purchase
Low

Table 35: Tesla's Approach of Strategic Outsourcing

101
WIRED: Teslas secret second floor (2017): https://www.wired.com/story/teslas-secret-second-floor/
102
Reuters (2017): https://www.reuters.com/article/us-tesla-seats/teslas-seat-strategy-goes-against-
the-grain-for-now-idUSKBN1CV0DS
103
CleanTechnica (2020): https://cleantechnica.com/2020/02/18/japanese-tesla-model-3-teardown-
result-tesla-is-6-years-ahead/
79
The comparison of the two tables shows that Tesla produces in many areas internally, where
other companies would make use of outsourcing.

One major component Tesla is outsourcing is the battery production. The Japanese battery
producer Panasonic is supplying Tesla with the batteries for the cars. But what makes this
outsourcing so special is that Tesla created space for the assembly line operated by
Panasonic in their own Gigafactory. The batteries don’t need to be shipped anymore and
problems can be solved quicker. This close integration of a supplier comes very close to a
vertical integration, why also in this matter Tesla is changing the way car companies usually
outsource their production. It is worth mentioning though, that Panasonic just recently
announced a similar cooperation with Toyota, what eliminates the competitive advantage
Tesla used to have with this cooperation.

But despite all the success stories of vertical integration and insourcing at Tesla, the first
experts are starting to recommend outsourcing more of their production, such as
manufacturing.104 The last few years this has been again and again a bottleneck for Tesla, not
reaching their production goals.105

Due to Tesla’s few outsourcing activities it has a lower level of transaction costs in comparison
to their competitors, such as fewer costs for information collection, selection and financing or
bargaining, contracting and purchasing. There is also fewer need to monitor and control the
compliance of third parties, so litigation or other intangible costs are, relative to competitors,
on the low side. Tesla’s performance costs are dependent on some third parties, but they have
a high level of control over the management of the complexity, coordination and bureaucracy,
also enhanced by their market power.

104
NextBigFuture (2017): https://www.nextbigfuture.com/2017/12/batteries-plentiful-maybe-tesla-
should-consider-outsourcing-manufacturing.html
105
see ibid.
80
 6.6 Internationalization

Since 2011, Tesla has started its internationalisation in 3 majors steps:

• the development of a distribution network in the 3 biggest car markets in the world:
North America, Western Europe and China.
• the extension of its manufacturing capacity in the Fremont factory for product range
expansion, then the built in 2019 of a first Gigafactory in China and the plan to build a
replica in Germany in 2020.
• the expansion of the charger infrastructure network in key market accelerated by the
acquisition for home charger of SolarCity

All 3 steps have contributed to the company internationalisation and influenced the four
dimensions of the model as described in the Table 36 below.

Image 10: Tesla Sites

Image 13: GigaFactory Shanghai Image 14: GigaFactory Europe

81
 Component
IMPACT
• Target 3 major regions for internationalisation: North America, Asia/China, Western Europe to reach the
largest and most profitable customer pool
• Base camp market in North America with leardership in EV and high speed charger network
• Expand to China growth market and high growth customer
G • Build Gygafactory in China to acquire knowledge on latest factory capabilities and template for Europe
GROWTH Gigafactory
• Europe, heavy presence in EV incentivise countries Norway, Netherland
• Gygafactory in Europe confirmed in Germany biggest premium car market

• Developped concept of Gigafactory to gain scale

• Deployment in China to gain labour cost, scale in battery cost
M • Devlopment of powertrain for other brands to gain scale
MARGIN • Higher bargaining power with Manufacturing and distribution presence in biggest car markets: NA, EU,
China

• Investment in China and Europe allow diversification of risk vs NA only manufacturing resource
• Diversification with solar city to gain synergies on electric energy access
R • Guaranty access to key markets US, China, Germany to balance individual market risks
RISK • Presence in China to get access to latest EV technology and manufacturing innovations

• Car Market share leaders in Norway, Netherland as "role model" market for other countries in favor of
SU incentivise EV
SUSTAINABILITY • Devleopment of model Y SUV to attack a 3x bigger segment than model X
• Acceleration of the densification of the charger infrastructure in key regions
Table 36: Value Creation through Internationalization

6.7 Competitive Advantage of Nations

We conducted a full analysis of the competitive advantage of nations, clustering the key
regions for the automotive industry and assessing the attractiveness of each country/region
under the consideration of the company.

Regarding the result in Table 37 below the results are comforting the choices made by TESLA
in terms of internationalization expansion.
Sales:
First, sales are generated mainly by North America and Western Europe for the time being
followed by the huge volume potential offered by China. Despite being a volume market, Japan
and Indian scored low in our assessment due to the difficulty to have access to distribution in
Japan and India with dominant local players and specifically for India a poor charging
infrastructure. The other regions important in terms of car sales (Russia, Brasil) don’t
represent a strong benefit from a sales perspective vs the other regions and are served only
in major capital cities.

Growth:
The location of the first Gigafactory of TESLA in China is strategically aligned with the growth
potential of the country in term of volume sales and fast pace evolution of the high/middle
class. TESLA’s EV market share leadership in North America with double digit market growth
will provide sustainable source of growth, despite a low population growth rate. Europe
benefits from an important market growth rate for EV’s, with markets local incentives in
countries like Norway, Netherlands, Germany, France offering a growth potential in premium
car segment. Western Europe is also leading the way for the development of charging
infrastructure, a key enabler for the development of EV’s and TESLA in particular.

Margin:

82
At the end of 2020, TESLA will manufacture from 3 locations worldwide US Fremont California,
China Shanghai, West Europe Berlin. They represent the best ratio in terms of labour cost,
access to technical talent and ability to minimise distribution cost being in the top 3 car markets
in the world. TESLA benefit from a “green field” approach vs competitors which need to invest
billions to transform their current factories impacting their margin.

Risks:
As seen in China, Political risks on EV’s policies is high with a lot of volatility, recent incentive
measures where suppressed to force the local EV makers to improve the quality and
sustainability of the cars. TESLA can count on the US government to continue to support the
“most American car” together with some of the European Markets which don’t have local car
industry champions to defend but rather would like to drive the adoption of EV’s for
environmental reasons (Norway, Netherlands, Switzerland).

Sustainability:
With current oil prices, doubts can be casted on the sustainability factor. Although the EV’s
adoption trend will continue, during the next years, we will probably see a slowdown of general
consumption of cars not being a priority good during time of crisis. Furthermore, the arbitrage
between EV and thermic motors will be further biased by low oil prices.

83
 North Western Other
Factor Weight China Japan India
America Europe regions
Sales
Market Size in Volume 6% 7 10 5 7 5 5
Average Price Level 4% 7 5 7 7 4 4
Access to the Distribution Network 2% 8 5 2 6 2 2
Cultural Proximity 2% 9 6 7 9 2 3
Other Sales Factors (Charging Infrastructure) 1% 8 7 7 8 2 4
Sales Assessment 15% 1,12 1,09 0,83 1,08 0,56 0,6
Growth
GDP Growth Rate 7% 4 7 1 3 7 1
Population Growth Rate 8% 3 2 1 2 5 5
Market Growth Rate 8% 7 8 2 7 2 4
Openness to International Trends 4% 7 7 2 7 4 5
Other Growth Factors 1% 4 5 2 3 3 4
Growth Assessment 28% 1,4 1,62 0,41 1,24 1,24 1,03
Margin
Access and Cost of Labor 5% 5 8 2 5 8 9
Access and Cost of Qualified Technicians 10% 5 6 5 6 5 3
Cost of Land, Materials and Equipment 3% 6 8 2 5 7 5
Distribution Margin 3% 5 6 4 5 3 7
Financial Costs 2% 9 4 3 6 3 3
Low barriers to Imports 2% 10 4 2 6 2 3
Legal Regulation 2% 6 5 4 5 4 5
Bureaucracy 2% 7 3 4 6 3 4
Other Margin Factors 1% 5 4 4 4 3 3
Margin Assessment 30% 1,77 1,78 1,08 1,65 1,47 1,44
Risk
Foreign Exchange Risk 3% 6 4 2 6 3 4
Political Risk 8% 7 2 2 5 2 3
Competitive Risk 3% 4 2 2 2 2 6
Other Risk Factors 1% 6 3 2 4 4 4
Risk Assessment 15% 0,92 0,37 0,3 0,68 0,35 0,58
Sustainability
Environmental Sustainability 5% 6 4 6 7 3 3
Social Sustainability 4% 8 7 7 7 3 3
Governing Sustainability 2% 5 7 6 6 4 3
Other Sustainability Factors 1% 6 6 6 5 3 3
Sustainability Assessment 12% 0,78 0,68 0,76 0,8 0,38 0,36
Global Assessment 100% 5,99 5,54 3,38 5,45 4,00 4,01
Table 37: Competitive Advantage of Nations Assessment

84
Following sectors do and can give more potential to internationalization for Tesla:

Figure 41: Sector Cluster

For Tesla’s Internationalization it refrains from transactional means and is mainly working
through own subsidiaries to market and distribute their vehicles, thus invests itself. For some
expansion endeavors Tesla sets up projects or integrated joint ventures such as with Toyota
for the setup of a factory.

Tesla is currently in a multinational stage on the way to become truly global, meeting customer
needs in each region with interconnected crossflows of products, information, money and
people.
Integratio

Local Responsiveness
Global

Low High
n

High Global Company Transnational Company

Low Local Company Multinational Company
Table 38: Tesla’s Internationalization

Having become a multinational and becoming a truly global company has and can be achieved
through adaption and standardization as per following matrix. Marketing could so far be
extraordinarily well standardized, but it is most likely required to be adapted considering that
in some countries a simple social media marketing combined with WOM, user-interaction and
user-involvement will not have the same effect as in others or might simply be restricted, a
problem that Tesla encounters in China for example.

85
 Adaption Factor Standardization

Culture / Size / Technical Customer /

Design Language None
Habits Packagin System Application

Concept

Marketing

Technology

Product

Requires local
adaption
Can be
standardized
Table 39: Adaption vs. Standardization

6.8 Diversification

Tesla is considered as a highly diversified company. The change of the company name in
2017 from Tesla Motors to simply Tesla underlies this.106 If we compare Tesla with other car
manufacturers, it shows that Tesla is operating in several more business segments, which
make Tesla’s product range and revenue streams more diverse and therefore the whole
company better prepared for any crisis. The diversification matrix below gives an overview
over Tesla’s measures.

Current commercial performance New commercial performance

House Batteries
Current technology Real Life Driving Data Solar Panels
Glass Roof Tiles

Over the Air Software Upgrades

New technology Autonomous driving systems Ventilators (Corona Crisis)
Robotaxis

Table 40: Diversification Matrix Tesla

The benefit of Tesla compared to other car producers is that Tesla is not as dependent on the
market development of the car industry as others since they created several extra revenue
streams. Even the cars themselves still produce revenue when they are on the road by for
example subscription models for software services or software updates that are not for free
for the user. Especially remarkable is Tesla’s product portfolio if it is being combined. Tesla
offers not only the car to their customers but also the whole infrastructure around it, such as
home chargers and solar panels to generate the electricity.107

106
The Drum (2017): https://www.thedrum.com/news/2017/02/01/tesla-motors-changes-its-name-it-
looks-diversify-business-model
107
Cleantechnica (2020): https://cleantechnica.com/2020/04/06/7-reasons-why-tesla-will-benefit-from-
the-crisis-2-diversification/
86
 6.9 Conglomerates

Figure 42: Evolution of Tesla Conglomerate

Conglomerate – The acquisition of SolarCity to create a unique integrated sustainable energy

company.

With the acquisition of SolarCity in 2016, TESLA created a unique vertically integrated
sustainable energy company from energy generation to energy storage to transportation. With
this strategic move TESLA is in capacity to propose a fully integrated offer to its consumers
globally.

Combined with a full range of EV’s with the latest model Y targeted to mass market, TESLA
is the only global company with the potential to offer such an ecosystem to its consumers. The
company growth should enter in an high growth period driven by the large adoption of EV’s
globally but also the development of integrated sustainable energy solutions offered by
SolarCity.

Following the acquisition of SolarCity, TESLA remained focussed on EVs geographic growth,
manufacturing capacity extension and delivery of its mass market EV production proven to be
challenging for Model 3.

Looking at investors’ recent reports, the conglomerate expansion to integrated sustainable

solutions seems to be challenging to manage as the company is facing challenges in multiple
front. First, the core business of EV’s remains in its infancy compared to the global car market
and the ambitious plans to expand geographically and in mass market EV range seems to be
at the expense of the other branch of the conglomerate.

SolarCity roof panels are confronted to a much bigger competition, a large number of local
electrical companies are already present in the market with low cost product (mainly produced
in China) putting high pressure on cost competitiveness.

Was SolarCity a wrong bet? From a strategic perspective, the integration fully make sense,
the oversupply of solar solutions driven by China could have been anticipated. This will
certainly impact the overall financial result of the firm in the future.

87
In the current context, TESLA still remains one of the key players and its market valuation
reached groundbreaking records during the pandemic period with its stock price reaching $
900 in February hand $100 billion valuation.

6.10 Business Portfolio Planning

Business portfolio planning models contribute to decision-making in four distinct areas:

• Formulation of corporate and business strategy
• Establishment of general performance objectives for each business
• Balancing of business portfolio
• Resource allocation

The following are the two main widely used business portfolio planning models:
• The General Electric/McKinsey matrix, which relates the industry’s attractiveness with
the company’s competitive strength
• The Boston Consulting Group matrix, which relates the market growth rate with the
company’s relative market share

Here we look into Tesla’s automotive activities using each of the above matrices.

GE/McKinsey model
This model clusters certain areas Tesla is operating in into a matrix of competitive strength
and industry attractiveness.

Figure 43: GE/ McKinsey Matrix

Remarkable about the GE/McKinsey model applied for Tesla is in particular, that Tesla as a
young company is not operating in many fields with a low attractiveness. Tesla is very selective
about the strategic areas they are operating in. Only some decisions to integrate some
verticals for their productions such as car seats might not bring the competitive advantage
compared to the effort, why it would make sense for Tesla to monetize such components.

BCG model
This model classifies companies or their activities in four different ways based on the relation
between the market growth rate and the company’s market share:
• Question marks - low market share in a fast-growing market; the company should
monitor its position closely and frequently, as the market’s high growth rate may end
up consuming the company’s position and resources;
• Stars - large market share in a fast-growing market; star-segments should be invested
in continuously in order to keep their growth and fight competitors;
88
 • Pets/dogs - low market share in a slow-growing market; dog-segments are prime
candidates when divesting;
• Cash cows - large market share in a slow-growing market; these segments are the
most mature and contribute growth without additional investments.

Given this framework, Tesla has been pivoting several high-growth industry sectors, as
illustrated in the following graph:

Figure 44: BCG Matrix for Tesla

Tesla’s classification as a star in the above sectors helps explain both the company’s rhythm
of capital expenditure (which has been increasing over the years) and the company’s market
cap (which has already surged past the combined market cap of Ford and GM). It looks as
though both the company’s managers and the company’s shareholders have been
considering Tesla as a star in its own (fast-growing) segments.

Particularly noteworthy is the positioning that Tesla has since early been assuming in the EVs
segment of the auto industry.

To begin with, this segment is unequivocally a fast-growing one, as illustrated in the following
graph from the International Energy Agency where passenger light-duty cars (battery electric
vehicles) show up as the fastest-growing sub-segment amongst the other EVs108:

108
IEA, Electric vehicle stock in the EV30@30 scenario, 2018-2030, https://www.iea.org/data-and-
statistics/charts/electric-vehicle-stock-in-the-ev3030-scenario-2018-2030
89
 Figure 45: EV Stock in IEA's

Against this backdrop, Tesla stands out as the global market leader in the manufacturing of
EVs, as illustrated in the following graphs:

Figure 46: Global plug-in EV market share in 2019, by main producer

Figure 47: Estimated plug-in EV sales worldwide in 2019, by brand (units)

7 Corporate Development

7.1 Value Creation in Corporate Development

With Tesla’s activities, ongoing and in the past years, in strengthening competencies by
developing, acquiring or establishing alliances we can see the following value creation:
90
 Component Impact
• acquisition of existing manufactury (Nummi, formerly from Toyota) to turn into
Gigafactory
• acquisition of Maxwell for vertical Integration of battery parts production
• acquisition of SolarCity for product line extension (solar panels)
G
• opening of Gigafactory Berlin-Brandenburg for intensifying geographical presence and EU
Growth
market penetration
• opening of dealerships around the world (B3, Europe, Asia, etc.) for geographical
expansion
• development of own supercharger network for vertical integration
• Research and Development for own battery production to decrease supply costs &
increase product attractivity
• Strategic Alliance with Air Alliance, one of Chinese biggest Airline Groups, to Market
M Model 3 decreased marketing costs
Margin • Partnership with Athlon Car Lease for establishment of leasing options for several models
increased distribution scale
• Partnership with Toyota to set up Gigafactory decreased fixed variable costs for
manufacturing
• Increase in share of cars leased vs. cars sold decreases dependency on sales only and
reduces revenue & income risks
• Diversification by developing business models in energy generation, storage and
R
distribution
Risk
• High investment on staying technological leader for EVs including battery capacity to
maintain longest range increases risk on profitability due to innovation failure but
decreases risk on marketing & distribution side due to brand perception as "best in class"
• Development of company-owned solar fields for energy generation increases
environmental sustainability contribution
• Development of company-owned supercharger network to increases environmental
SU
sustainability contribution
Sustainability
• Acquisition of SolarCity increased environmental sustainability contribution +
• Acquisition of SolarCity increased economical sustainability of Tesla by entering another
growing market (renewable energies)
Table 41: Value Creation in Cooperation

7.2 Mergers and Acquisitions

Especially in the past 5 years Tesla has been very active when it comes to acquisitions. Even
though Tesla does not enclose information about every acquisition in their yearly reports109,
there have been at least five acquisitions since 2016 that are public.

2016
SolarCity - A producer of solar panels and roof tiles for commercial and private purpose. The
acquisition of SolarCity is probably one of the most famous acquisitions that Tesla did so far
and clearly underlines Tesla’s ambitions to diversify their product portfolio in the field of
production and storage of electricity.110

Grohmann Automation - Grohmann Automation is a 1963 in Germany founded company

that is specialized in automated manufacturing systems. Purpose of this acquisition was to
acquire knowledge in automated production as well as to produce key elements for Tesla’s

109
Electrek (2019): https://electrek.co/2019/10/29/tesla-acquisitions-worth-96-million/
110
Tesla (2016): https://www.tesla.com/de_DE/blog/tesla-and-solarcity?redirect=no
91
factories in the Grohmann factory in Prühn (Germany) in order to make Tesla’s factories as
productive as possible.111

2017
Perbix - Perbix is an American company that is specialized in producing automated production
equipment and which has been a supplier of Tesla for several years before the acquisition
already. With the acquisition of Perbix is Tesla supporting the strategy of vertical integration,
which they are following since day one already. Tesla often states that their factories are a
product on its own and are supposed to be a machine that produces the machine. The
acquisition of Perbix is bringing Tesla one step further towards that goal.112

2019
Maxwell Technologies - Maxwell Technologies is a manufacturer of energy storage and
power delivery products for automotive, heavy transportation, renewable energy, backup
power, wireless communications and industrial and consumer electronics applications.
Though it is obvious that Maxwell Technologies fits into Tesla’s profile in terms of product
range, does Tesla not share much information about the acquisition and was only doing a
vague announcement for their shareholder in 2019.113

Deepscale - Deepscale is a technology company, that is focused on the development of

perceptual system technologies for automated vehicles and was acquired by Tesla in October
2019. Even though Tesla did not publish any statement on their website, it can be expected
that this acquisition helps Tesla to improve their technology for self-driving cars.

7.3 Strategic Alliances

Despite the high vertical integration, does Tesla also have strategic alliances with other
companies and even with competitors. Especially remarkable is, that Tesla is able to attract
major global players for their partnerships, even when Tesla was still a startup sized car
producer from the Silicon Valley.

Daimler in 2009 - In 2009 Tesla and Daimler started to partner with a capital participation of
Daimler in Tesla. Daimler acquired 10% of Tesla’s shares and got batteries for the soon to be
released electronic Smart Car. Tesla got in return needed cash and engineering expertise for
their back then planned Model S sedan.114 The partnership resulted in further development of
battery technology and further individual EV projects, such as the Mercedes Benz B-class
electric car. The alliance ended it 2014 by Daimler selling its stake in Tesla and making a
800m USD gain.115

Toyota in 2010 - In 2010 Toyota bought 3% of Tesla’s shares for roughly 50m USD. The deal
enabled Tesla to buy the former New United Motor Manufacturing, Inc. (NUMMI) factory in
Fremont, California which was created as a joint venture between Toyota and General Motors
Corp. in 1984.116 Toyota expected from the partnership to learn from the flexibility and quick
decision making that Tesla has and to get some of Tesla’s startup spirit into the corporate

111
Tesla (2016): https://www.tesla.com/de_DE/blog/formation-of-tesla-advanced-automation-
germany?redirect=no
112
CNBC (2017): https://www.cnbc.com/2017/11/08/tesla-buys-perbix-for-factory-automation.html
113
Tesla (2019): https://ir.tesla.com/news-releases/news-release-details/tesla-completes-acquisition-
maxwell-technologies
114
WIRED (2009): https://www.wired.com/2009/05/daimler-tesla/
115
Forbes (2018): https://www.forbes.com/sites/jeanbaptiste/2018/10/29/mercedes-benz-could-
partner-with-tesla-again-says-daimler-ceo/#7987dd6a4580
116
Sloan Review (2016): https://sloanreview.mit.edu/article/how-to-manage-alliances-strategically/
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structures of Toyota. The partnership ended in 2016 with Toyota announcing to develop their
own EV and selling their Tesla shares, while Tesla grew from a producer of a small-batch
sports car to the leading EV car producer in the world.117 Therefore Tesla became a serious
competitor for Toyota.

Panasonic in 2014 - The partnership with Panasonic is the one partnership that is still ongoing
and resulted in a jointly 5bn USD investment into a lithium-ion battery plant in Nevada. As
already mentioned in this report, do Tesla and Panasonic have a very close relationship, by
having a battery production line operated by Panasonic within the Tesla Giga Factories.118 But
as of 2020 is Panasonic partnering with Toyota too by starting a joint venture for electric car
batteries. This means that Panasonic can become a threat for Tesla, by joining forces with
other car producers and using knowledge gathered in the Tesla Partnership.119

117
Financial Times (2017): https://www.ft.com/content/130a937a-48fd-11e7-919a-1e14ce4af89b
118
Sloan Review (2016)
119
Teslarati (2019): https://www.teslarati.com/toyota-panasonic-tesla-partner-ev-battery-2020/
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8 Planning

8.1 Organizational Structure

A company’s organizational structure is the human resources framework that defines how
activities are allocated and how tasks are supervised. Currently, Tesla has a loosely functional
structure with CEO Elon Musk as top management with all the control, and with some functions
such as Sales or Finance defined. This functional structure is suited for a company focused
on one industry and one that is active in a limited amount of markets.

With Tesla’s massive growth and expansion throughout the world, their structure would need
to grow with them. For each new region entered, they should have a team on the ground
concentrating on production, sales, legal and finance, and human resources. Tesla is also an
energy company and should have a clear definition of its two divisions – electric vehicles and
energy. These two divisions complement each other and interact, but as this is a minimal
interaction, there is no need to develop Tesla’s organizational structure to a full network
structure.

One possible future for Tesla’s organizational structure is an advanced macrostructure with
strategic business units, indicated below:

Figure 48: Macrostructure Tesla

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 9 Implementation

9.1 Functional Management

With every new strategy, Tesla would need to translate that strategy into functional policies
that could be undertaken by each function in the organizational structure: Engineering &
Production, Sales, Legal & Finance, HR & Safety, and Research & Development.

The table below indicates where new functional policies are needed or where corporate
developments should be targeted if Tesla tries to take advantage of the opportunities outlined
in the New SWOT.

ENGINEERING
LEGAL & HR & RESEARCH &
OPPORTUNITIES FROM NEW SWOT & SALES
FINANCE SAFETY DEVELOPMENT
PRODUCTION
Target new customer segments with recently launched and upcoming models:
Recently launched Model 3 for lower-income customers, and upcoming Yes
Cybertruck & Semi for cargo transportation businesses
Internalize battery production to have the technology as an asset and expand
on it for the vehicle production as well as the own energy supply & storage Yes Yes Yes Yes

Expand solar energy production market by increasing sourcing & marketing

efforts, e.g. buying another smaller company in the field Yes Yes Yes

Put high marketing effort on Cybertruck distribution in the US: 17,6% of total
car sales in the US automotive market are made up by Pickup trucks Yes

Expansion of Product-Line: Create, design & Innovate to produce and distribute

new models to serve low-income customers as well as cargo transportation Yes Yes
customers
Increase cross-selling activities: also for supercharger-networks, solar panel
distribution to Tesla-customers as well as the batteries Yes Yes Yes

Expansion of super charger networks to other countries and increase of density

in the US, partnering with / acquiring of other operators of such networks Yes Yes

Sales Expansion into untapped markets, especially Asia with existing models
Yes Yes Yes

Put high marketing effort for Semi Truck for cargo transportation to conquer a
small share of that market segment Yes

Keep investing in in-house technology for product-line and product-breadth

expansion as well as new business development in the energy sector Yes Yes Yes

Invest in sourcing as well as in R&D on resources in order to become expert in

the supply chain + reducing production costs or keeping them on the same Yes Yes Yes
level
Get more market power in the supply chain by diversifying suppliers even more
and contracting with financial options counter highly volatile resources needed Yes Yes
for production
Optimize distribution network for customer services by investing into repair
services and sparepart availability in/around Tesla distribution centers Yes Yes

Continuously distribute the Semi Truck and innovate to expand in the cargo
transportation segment and get a significant market share Yes

Table 42: Opportunities from new SWOT

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 9.2 Process & Project Management

Henry Ford revolutionized the transportation industry when he introduced the moving
assembly line into his factories. It wasn’t the introduction of a new car, but the increase in
production efficiency that changed the industry dynamics. It seems unimaginable that vehicle
production efficiency has barely improved in the last 100 years. Musk, like Ford, wants to
revolutionize the machine which builds the machines; and this has the potential to drive
humanity forward.

When Ford introduced the

moving assembly line,
production efficiency increased
by roughly an order of
magnitude. As shown in Figure
49, Ford’s innovation left the rest
of industry in the dust and is
arguably the tipping point that
led to tremendous consolidation
in the auto industry. While the
moving assembly line is
innovative, with few barriers to
entry the rest of the auto industry
was able to adopt the
Figure 49: Vehicle per worker 1914 technology.

Tesla is not the first auto manufacturer to aim for an improvement in productivity. Toyota has
its “New Global Architecture”, BMW its “Value-Added Production System”. Yet, as we see it,
most efficiency-driven programs today are focused on less customization and more
modularity.

In contrast, Tesla’s approach could cause a step-function to increase in productivity. Currently

Tesla’s productivity is low relative to the competition, as shown below, but the comparison is
not life-for-like. Tesla is more vertically integrated than the other manufacturers. Instead of
simply assembling out-sourced parts in a plant, it is turning raw materials into cars, much like
Ford did in its plants in 1914.

While automotive
manufacturing has the highest
industrial robot density of any
industry, Tesla is unique in the
industry as robotics has
become part of its vertical
integration. Traditional auto
manufacturers are
constrained during production
by the quality and timing of
parts received from suppliers.
A fully automated factory,
building vehicles from scratch,
can optimize the process
based on first principles,
Figure 50: Vehicle per worker 2018
Musk’s preferred method of
operation.

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If Tesla realizes a step-function increase in productivity that it anticipates at its Fremont
factory, its production could approach one million units, without an increase in the number of
people it employs. Musk notes that employees will be “maintaining machines and upgrading
the machines and dealing with anomalies. And the output per person will be extraordinarily
high.” We think robots will be key to the turbocharging of the productivity. As shown in Figure
51 below, if Tesla realizes its goals, Fremont’s productivity would increase roughly ten-fold,
topping the most productive auto manufacturing plans in place today by nearly three-fold.

Though Tesla haven’t

been hitting all their
production targets during
their relatively short
lifetime, Elon Musk
doesn’t seem too worried.
The new automated lines
for the Fremont factory
are not just a one of
addition to the factory.
These automated lines
are part of a larger project
which is possibly more
ambitious than any of his
other quests.
Figure 51: Vehicle per Worker Forecast Tesla

Musk’s Gigafactory aims to automate and optimize the production process to new levels;
reducing human involvement and maximizing the speed of output. In November 2016, Tesla
completed the purchase of a German company called Grohmann Engineering. This obscure
German firm are specialists in the development of automated technologies for manufacturing.
Some of their legacy clients include Daimler (parent of Mercedes-Benz) and BMW. Tesla’s
plan was to add a further 1000 jobs to Grohmann’s existing workforce of 700; a massive
increase in production potential now focused solely on one company.

Musk wants to work on the machine which builds the machine; to create a production system
so advanced we’ll think of it as an “alien dreadnought”.

For Musk, the way to approach and improve the issue lies in the machine which builds the
machine. Like for the car operating system able to adapt and learn new things with the
objective of autonomous driving, Tesla has been populating its factories with robots that
should be able to learn and improve over time.

Image 11: Tesla Production Image 12: Toyota Production

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10 Conclusion and Outlook

As we have seen in the report, TESLA is one of the most energising car company of the last
decade. Through the execution of a clear vision to lead the world’s transition to electric mobility
by bringing a full range of increasingly affordable electric cars to market. Under Musk
leadership, the company achieved the build up phase to become a recognised, high quality
producer of EV’s with a high brand awareness targeting high income customers. More
important the company achieved unprecedent valuation on the stock market, sending a strong
signal to the competition in the car industry that investors believe in the company long term
growth.

Pure speculation or real confidence? And now with the challenge of the “hypergrowth phase”
some key questions remain for TESLA to become a sustainable leader of the car industry. Will
the company be capable of delivering on its promises to mass produce EV’s for customers
with mid-level income globally including succeeding in China and India and up-pace the
competition ? Will the company win the debate of autonomous driving to become the first self-
driven car fleet or new entry in the semi and cybertruck segment ?

We believe that the following 3 strategies could enable TESLA to further disrupt the market in
a sustainable manner:

#1 Win in robotics to build scale in key markets

To win in China the biggest car market in the world,

surpass BMW in Germany with the new European
Gigafactory and continue to lead in US, TESLA must
deliver the machine which teach the machine to achieve
unprecedent automation levels and operate its 3
gigafactories with a minimum man involvement. This will
result in increasingly low cost of production, delivering on
its promises for the increasing EV customer demand and
will take years for the competition to obtain.

#2 Lead the world transition to sustainable energy

Using the showcase example of Norway (55% penetration of EVs

with 90% renewable energy source), the Netherlands and to a
certain extent China with recent regulations, the company can
leverage the country examples and its SolarCity branch to
influence politicians to embrace the sustainability agenda.

#3 Transform passenger urban transportation

Demonstrate the feasibility of autonomous driving: this will

open a huge market for TESLA cars, already containing the
necessary technology to replace Diesel buses for public
transport. The plan is to develop a self-learning fleet which will
be safer and more effective than the existing ways of
transportation.

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