Electrifying the MarketMaximizing Tesla’s Profits by 2020

MOSAIC

NOVEMBER 7 TH, 2014

Antonio Spina /// Kush Gupta /// Anshul Subramanya

Strong EV Market Growth

Trends /// Strategy /// Next Steps

http://qz.com/179318/teslas-most-disruptive-product-may-not-be-its-cars/

http://evobsession.com/electric-car-sales-increased-228-88-2013/

# of EV units sold per year

Our Strategy for Tesla1. Demographic targeting toward lower-income markets

2. Expansion into public transportation market

3. Shift revenue focus towards battery & credit sales

4. Continue expansion into European markets

Trends /// Strategy /// Next Steps

Demographic Tiering to Increase Sales• 2013 Tesla sales: 8 of the 24 wealthiest ZIP codes

• Population Data (2013):• Atherton: 7,159

• Los Altos: 30,010

• Woodside: 5,481

(Source: U.S. Census Bureau)

http://www.edmunds.com/industry-center/analysis/drive-by-numbers-tesla-model-s-is-the-vehicle-of-choice-in-many-of-americas-wealthiest-zip-codes.html

Trends /// Strategy /// Next Steps

Locking Down Luxury MarketsFirst Quarter 2013 Sales

http://money.cnn.com/2013/05/13/autos/tesla-sales-bmw-mercedes-audi/

Trends /// Strategy /// Next Steps

Supercharger Stations in Wealthy Areas

http://upload.wikimedia.org/wikipedia/commons/9/9e/US_county_household_median_income_2012.png

http://www.teslamotors.com/en_EU/supercharger

Trends /// Strategy /// Next Steps

1. Demographic Strategy Recommendation• Increase sales in lower-income markets, suburban charging stations

Keep Model S pricing and increase additional options

Drop Model X pricing toward more affordable SUV standards

Market Model 3 as affordable green car

• Begin advertisement campaign to target markets

Trends /// Strategy /// Next Steps

3-Tier Model

1. Demographic Strategy ImpactAssumptions:

•3.8 Million EV WORLDWIDE sales 2020

•US will be 47% of new sales

•Tesla market share approaches 25% w/ Giga Factory

•Logarithmic Sales growth model

•Linear growth from 2015 to 2020

Trends /// Strategy /// Next Steps

Prices Until 2017 Until 2020

Model S 73000 40.00% 22.00%

Model X 58000 60.00% 33.00%

Model 3 35000 0.00% 45.00%

2. Entrance to Public Bus Sector• U.S. bus systems: 5.36 Billion passengers annually

• Proterra, Inc. has 58 full-EV buses across the U.S.

• CEO Ryan Popple: former Tesla finance executive

• Recommendation: Partnership with Proterrafor exclusive electric bus battery supply

Trends /// Strategy /// Next Steps

3a. Battery Sales to Manufacturers (2017)• Domestic Gigafactory Location

• Advanced battery market: $5 billion in 2010 to $50 billion in 2020

• DOE grants: $2 billion in 2012

• Tesla batteries: Toyota RAV-4 and Mercedes B class hatchback

• Recommendation: Exclusive partnerships with U.S. EV manufacturers for battery sales

Trends /// Strategy /// Next Steps

3b. Zero Energy Vehicle (ZEV) Credit Sales• 1311 ZEV credits sold in 2013, 650 in 2014 (approx. $51,868 each)

• Mercedes, Honda, and GM are major buyers

• Tesla sold $68 million in credits in 2013 (12% of Tesla sales revenue)

• CA regulation stringency rising 16-fold by 2015

• Recommendation: Sell all ZEV credits. Demand for ZEV will increase, and Tesla will have a larger surplus over the next 5 years (2 new models)

• Total ZEV Credit Sales = 0.36 x 0.25 x 791,650 cars x $51,868/car = $3.69 Billion in revenue by 2020

Trends /// Strategy /// Next Steps

http://www.siliconbeat.com/2014/02/13/are-tesla-sales-slowing-in-california/

http://www.arb.ca.gov/msprog/zevprog/zevcredits/2012zevcredits.htm

4. European Market Expansion

http://thinkprogress.org/climate/2014/08/08/3469177/electric-car-sales-europe/ http://evobsession.com/electric-car-sales-increased-228-88-2013/

Trends /// Strategy /// Next Steps

# of EV units sold per year

Our Strategy for Tesla1. Demographic targeting toward lower-income markets

2. Expansion into public transportation market

3. Shift revenue focus towards battery & credit sales

4. Continue expansion into European markets

Trends /// Strategy /// Next Steps

Possible Risks Associated• Competition from Nissan Leaf & other EV’s

• Poor reception of Model X and Model 3

• Stress on infrastructure & distribution (in Europe & U.S.)

• Improved battery technology by competitors

• Unpredictable market for ZEV credits

Trends /// Strategy /// Next Steps

Next Steps for Tesla1. Partnerships with Proterra, Inc. and U.S. auto

manufacturers

2. Market research into middle-class demographic, begin advertisement campaign

3. Analyze demographics vs. geography for strategic Supercharger station placement

4. Project other manufacturers’ EV sales in CA, predict ZEV market from 2015-2020

Trends /// Strategy /// Next Steps