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Going FutureA CASE STUDY FOR TESLA MOTORS COMPANY

Presented By: Abid & Roba

Executive Summary The purpose of this assignment is to determine Tesla Motorsfuture growth with regards to technological innovationsand market factors. Analysis on external and Industry willbe followed by an internal analysis of the company inorder to identify the determinants of value creation.Tesla Motors is an innovative manufacturer of premiumelectric cars and electric powertrains, with thecharacteristics of a disruptive company. Their currentproduct portfolio includes Model S luxury sedan with ModelX already launched and will be available soon in themarket. Upcoming product is electric 3 series fighter, theModel 3.

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Table of Content1. Company History 2. Tesla Vehicle Key Features3. Industry Analysis 4. Five Forces Analysis5. Strategic Goals & Competitive Advantage 6. Competitors Analysis 7. Environmental Analysis 8. SWOT Analysis 9. Challenges/Recommendations

1. How to keep up with increasingly demand of Tesla Motors?2. What different Tesla does to maintain its competitive advantage?3. Does Tesla requires to operate globally or just to focus on one market?4. Does Tesla have to see other KPI other than its Battery technology?5. How Tesla maintains its customer’s loyalty?

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COMPANY HISTORY1

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Tesla Motors, Inc. is an American company that designs, manufactures and sells electric cars and electric vehiclepowertrain components.

Named after the scientist Nikola Tesla. Founded in 2003 by a group of intrepid Silicon Valley

engineers Martin Eberhard, Marc Tarpenning, and Ian Wright.

Their goal was to build an electric vehicle with the same performance as a Porsche and more environmental friendly than a Toyota Prius.

5History

2003 2006 2007 2008 2009

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• Founded • Prototype of the Roadsterintroduced to the public.

• Two batches of 100 Roadsters sell.

• Opened first retail store in Los Angeles.

• Unveiled the Model S.

Milestones

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2010 2011 2012 2013 2014

• Partnership with Toyota.

• Initial public offering opened.

• Stopped taking Roadster orders.

• Unveiled Model X.

• Began building Supercharger stations.

• Announced as Best 25 Inventions of 2015 by Time Magazine

• 80% of US covered by Supercharger stations.

• Model X will enter production.

Milestones

• Shipping since 2008• Over 1,800 sold in over 30 countries• Over 13 million miles driven

• Available mid 2012• 20,000 units per year, pricing starting at $49,900• World’s first, production intent all-EV platform design

• Revealed by end of 2011 - Available late 2013• 10,000 –15,000 units per year• Based on Model S platform

• Smaller vehicle platform; pricing starting at $30K• Positioned for “mass-market” appeal and volume

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Tesla Roadster

Tesla Model S

Tesla Model X

Tesla Gen III

Roadmap

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9Model Roadster Model S Model X

Model year 2008 2012 2016

Class Roadster Full-size Luxury Full-size crossover SUV

Body style 2-door 5-door liftback 5-door SUV

Electric motor 1.5, 2.0 : 248 hp (185 kW), 200·lb·ft/s (270 N·m), 3-phase 4-pole;2.5 Non-Sport : 288 hp(215 kW), 273·lb·ft (370 N·m), 3-phase 4-pole;2.5 Sport : 288 hp (215 kW), 295·lb·ft (400 N·m), 3-phase 4-poleAC induction motor

416 bhp (310 kW), 443 ft·lb (600 N·m), Three-phase AC induction motor

Dual Motor AWD90D; 259 hp (193 kW) front and rearP90D; 259 hp (193 kW) front, 503 hp (375 kW) rear

Transmission Single speed BorgWarner fixed gear (8.27:1 ratio)

Single speed fixed gear (9.73:1)

Single speed transaxle gearbox

Electric range 244 mi (393 km) using EPA combined cycle

70 kWh240 mi (390 km) (EPA)85 kWh265 mi (426 km) (EPA)310 mi (500 km) (NEDC)

90D; 90kW·h257 mi (414 km) (EPA)P90D; 90kW·h250 mi (400 km) (EPA)

Battery 53 kWh Lithium-ion battery at the pack

40, 60, 70, 85 or 90 kWh lithium-ion

90 kWh battery pack

Wheelbase 92.6 in (2,352 mm) 116.5 in (2,959 mm) 120.5 in (3,061 mm)

Length 155.4 in (3,946 mm) 195.9 in (4,976 mm) 197 in (5,004 mm)

Width 73.7 in (1,873 mm) 77.3 in (1,963 mm) 82 in (2,083 mm)

Height 44.4 in (1,127 mm) 56.5 in (1,435 mm) 64 in (1,626 mm)

Prices $109,000 - $128,500 $71,100 - $106,200 $132,000 - $142,000

FINANCIAL ANALYSIS – Last 5 years 10Year on year Tesla Motors Inc had net income fall from a loss of 74m to a largerloss of 294m last year and this year YTD they posted 229.9M losses despite a58.85% increase in revenues from 2bn to 3bn last year and stable this year.

Source: www.IR.Teslamotors.comwww.Nasdaq.com Source: www.IR.Teslamotors.com

www.Nasdaq.com

0

500

1000

1500

2000

2500

3000

3500

2010 2011 2012 2013 2014 2015

Total Revenue - 5 Years

-400

-350

-300

-250

-200

-150

-100

-50

0

NET INCOME

-154.33

-254.41

-396.21

-74

-294.04

-229.9

2010 2011 2012 2013 2014 2015

$1000M

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FINANCIAL ANALYSIS - YEAR 2015 11Tesla Motors Inc. gross profit margin for 3rd quarter of fiscal year 2015 remains unchanged as compared to same period last year. Even though sales have increased but the net income has decreased. Also Stock holders equity (Net Worth) has increased by 42.03 % from the same period last year

Income Statement ($ mil)

Q3 2015 Q3 2014

Net Sales 936.79 851.8

EBITDA(Earnings before Interest, Tax, Depreciation & amortization)

-73.3 25.84

EBIT(Earnings before Interest & Tax)

-183.66 -39.13

Net Income -229.86 -74.71

Balance Sheet ($ mil)

Q3 2015 Q3 2014

Cash & Equity 1451.26 2388.07

Total Assets 7547.5 5437.53

Total Debt 2553.7 2107.16

Equity 1314.65 911.71Source:IR.Teslamotors.com Source:IR.Teslamotors.com

TESLA VEHICLE KEY FEATURES

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Key Features Battery Technology

Unlike other automakers (particularly Nissan Leaf), Tesla does not use single purpose, largeformat cells but it uses thousands of lithium-ion 18650 commodity cells. 18650 cells are small,cylindrical battery cells, which are normally used in domestic consumer electronic devicesnamely laptops.

Auto Pilot

With their first model came out in Sept 2014 the Model S was equipped with a cameramounted on top of windshield, forward looking radar in the lower grill and ultrasonic sonarsensors in the front & rear bumpers providing 360 degree vision for autonomous driving.

Fast charge network

Tesla motors started building network of 480 volt fast charging

Supercharger stations for faster charging.

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Supercharger Stations

Superchargers are free connectors that chargeModel S in minutes instead of hours. Stations are strategically placed to minimize stopsduring long distance travel and are conveniently located near restaurants, shopping centers, and WiFihot spots. Each station contains multiple Superchargers to help you get back on the road quickly. Until now, Tesla has build 554 Supercharger stations with 3,153 Superchargers all over the global. Superchargers take about 20 minutes to charge halfway, 40 minutes to

charge to 80% range, and 75 minutes to fully charge.

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Tesla Supercharger Stations in USA 15

0

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AL

AZ

CA

CO CT

DE FL GA IA ID IL IN KS KY LA MA

MD MI

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NC NH NJ

NM NV NY

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PA RI SC SD TN TX UT VA VT

WA WI

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# ofsuperchargerstations

16Quick sneak peak

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INDUSTRY ANALYSIS3

Market American Automotive industry consists of major local as well as international auto companies with manufacturing bases here like GM, Ford Motors, Chrysler/Dodge/Jeep, BMW group, Honda Acura, Hyundai/Kia, Toyota, Nissan are major competitors.

For 2015 Year-to-date, new vehicle sales has grown by 621,000 units and auto makers sold around 13M units in US. Till Sept 2015 YTD, first three quarters generated more new vehicle sales volume than all of 2009, 2010 and 2011 [2].

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Auto Manufacturer Market Share in America - Sep 2015 Luxury Auto Market Share in America - Sep 2015

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Market Market demand for plug-in electric vehicles have seen growth and especially Tesla has been leading on the growth scale

Tesla delivered 11,580 vehicles in Q4, up only 0.4% compared to the second quarter and sales jumped 49% above the same period last year. [3]

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All Plug-in vehicles Market Share in America – Q1 2015 US Cumulative Plug-in Electric Car Sales - Sep 2015

Source: Hybridcars.com

Market The U.S. and China led all countries based on volumes of new EV/PHEVs registered during the quarter, with nearly 15,000 registrations in the U.S. and nearly 13,000 registrations in China. [4]

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Source: Energy.gov

World Sales of Plug-in Vehicles by Country –Sept 2015

World Sales of Plug-in Vehicles by Vehicle Type –Sept 2015

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Market As the market for plug-in electric and hybrid vehicle is growing with the awareness of environmental factors are increasing and being considered in many government decision makings.

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Source: iea.org

FIVE FORCES ANALYSIS4

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Suppliers

Battery Companies• Bargaining power low as Tesla buys Li-ion

cells from various manufacturersEngine: In-houseChasis/Engineering:In-house: Exclusive partnership with Lotus for Roadster Bargaining power: HighTransmission: In-house

Potential Entrants

Threat: low• Not many competing vehicles • Some already collaborating with Tesla• Especially European vehicles developing own

technology

Buyers

B2C• Bargaining Power: Low• Demand gradually increasing

B2B• Bargaining Power: Low• Yet to be compared with other same

technology

Industry Competitors

Competition: Moderate• Major brands already competing• Tesla already in a niche and high entry barrier• Not yet EV in Tesla’s competition

Substitutes

Threat: High• Too many substitutes available • Hybrids & Plug-in vehicles available• Low displacement turbo diesel engines from GM

Five Forces Analysis

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Five Forces Analysis

Complementing Factors

• Low availability of charging stations and home charging facilities

• Tax incentives• Huge scope of battery future development

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Five Forces Analysis

Complementing Factors

• Three top global lithium-ion battery makers• Panasonic (market leader with 39% market

share)• LG Chem• Samsung SDIPanasonic is the primary battery supplier to Tesla.

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Five Forces Analysis - Suppliers

Source: www.moneymorning.com

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STRATEGIC GOALS & COMPETITIVE ADVANTAGE5

Strategic GoalsTesla’s long term strategic goal is to produce affordable electric vehicles forthe mass population.

Tesla is looking to achieve this goal in 3 ways:

Selling Tesla vehicles in a growing number is Tesla owned showrooms as wellas through online. Already Tesla’s models are Roadster, Model S and currentone is Model X.

Partnering with other auto manufacturers in selling electric powertraincomponents. Already partnered with Toyota and Mercedes in order toshare and supply battery and charging technology.

Being on Fore-front of Electric vehicle technology and providing bestexample to other automakers exposing huge demand of customers forvehicles that are highly performing as well as efficient.

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• Already achieved salestarget including Model Xin the range

Expansion Partner with other Auto Makers

• Partnership with TY & Merc• Expansion to other automakers• Process Standardization in EV parts for optimized

manufacturing

New applications of Tech

• Battery & electric motorshave potential for otherapplications

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Strategic Goals - Partnerships 29Partners Date Agreements Approx. Worth

2009• Blackstar Investco (an Affiliate of Daimler)

purchases share $ 50M

2008• Tesla started development of battery pack &

charger for Smart for Two. $ 23.3M

2010• Tesla to develop and manufacture battery packs

for Daimlers A-class vehicles$ 14.1M

2010 • Toyota purchases common shares in a private placement

$ 50 M

2010 • Tesla to develop powertrain for Rav4 prototype $ 9M

2008

• Tesla uses Panasonic battery cells in its advanced battery packs and also collaborated in the development of next generation battery cells for electric vehicles

2010 • Panasonic purchases common shares in a privateplacement

$ 30M

Partners Date Agreements Value

Competitive AdvantageTesla’s main competitive advantage lies in the low cost of Tesla’s battery pack whichallows the best mileage range (up to 300 miles per single charge)

As per Thomas Fisher from his article describes about Tesla’s battery as

”In contrast to every other automaker, which use specialized large format Li-Ion cells,Tesla's battery pack is made up of thousands of inexpensive commodity cells similar tothose found in laptops”. [5]

Tesla Motors may have the lowest rates for electric car batteries; the estimated batterycosts for Tesla Motors is around US$200 per kWh [6]

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0 50 100 150 200 250 300

Ford Focus EV

Chevy Spark EV

Nissan Leaf

Tesla Model S

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82

84

270

Maximum Miles per single charge

Source: www.cheatsheet.com/ www.teslamotors.com

$0

$200

$400

$600

$800

2008~2010 2015 2020

$700

$200 $175

Tesla leads on Battery cost (Cost in $/kWh)

Source: www.autonews.com

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COMPETITOR ANALYSIS6

32By Company

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Premium Vehicles

By Product

Small Premium Vehicles

Tesla Model S Mercedes SLS amg e-cell BMW i8

Tesla Model X Gen III Mercedes B Electric Class BMW i3

ENVIRONMENT ANALYSIS

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Political & Legal US government supports in advanced vehicle technologies with $8 billion worth of

program especially in engineering and manufacturing of Tesla Model S as well theirpower train.

Several states in US do not support Tesla’s business model of B2C and hence don’tallow to operate directly within those states.

Dept. of Energy has granted an enormous amount of $465 million to Tesla back in2009.

US government also supported in investing almost $5 billion in EV Project to buildElectric charging stations to facilitate consumers having EV vehicles.

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Technological Developments

Till to date Tesla vehicle max range on single charge is 300miles.

It is required from the government to invest in developing EV friendly infrastructureswhere charging stations can be easily available particularly on highways.

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SWOT ANALYSIS8

SWOT ANALYSIS 38

• 1st Company to produce fully electric sports vehicle

• Technology is completely proprietary• Strong & well known CEO with having good

management reputation. • General Perception about the product is

innovative • Strong Strategic partnerships• Upcoming Gigafactory with Panasonic

partnership to produce electric batteries.

• Infrastructure is not yet developed for electric vehicles.

• Customers still not very educated and wary of such new electric products

• Prices are high • Worldwide presence is not strong

• Potential of global electric market where electric vehicles infrastructure is being developed.

• Various model range can cover range of customers.

• More R&D can lead to more innovative technologies especially in battery life.

• Already established auto market plus other plug-in electric and hybrid brands

• Lower gas prices • Other technologies like Fuel cell • Safety concerns • Economic slowdown

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

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CHALLENGES/RECOMMENDATION

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How to keep up with increasingly demand of Tesla

Motors

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RECOMMENDATION 1

What different Tesla does to maintain its competitive

advantage?

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RECOMMENDATION 2

Tesla is already doing exceptionally out of box to create big gap in hiscompetitive edge like: In 2015, Tesla entered into Energy market by introducing and providing low-

cost solar batteries for domestic, commercial and utility uses. Superchargers are Tesla charging stations which can charge one Model S

in minutes instead of hours in other EV charging stations. Moreover, supercharger will be free in the future for not only Tesla vehicles

but other vehicles using Tesla technology as superchargers uses solarenergy and as per Elon Musk said at BTA 2012 “It'll have enough solarpanels to generate electricity back to the grid on an annual basis. That'show we're sizing them, so they'll be slightly energy positive. Then we're alsomaking it free. Well, it's not entirely free. There's obviously the cost of it isbuilt into the cost of the Model-S but the cost of it was so low that welooked at it and said, well, we could charge some small amount for this orwe could really make it free for the Model-S.”

Does Tesla requires to operate globally or just to focus on one

market?

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RECOMMENDATION 3

To be on the forefront of EV industry, Tesla has to aggressively focus on its global operations especially in China as Tim Mullay describe as “China now has more millionaires than the top eight European nations combined”

Tesla’s global operations are healthy and growing while Tesla US operations are responsible for about half of Tesla’s sales. Strong sales have seen in Norway (thanks to strong government incentives), followed by China. Japan, with the highest adoption of electric vehicles (EVs) and plug-in electric vehicles (PEVs), should also be a strong market for Tesla, although the company opened its sales operations in Tokyo’s swanky Aoyama district only in September.

Does Tesla have to see other KPI other than its Battery technology?

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RECOMMENDATION 4

Tesla’s competitive advantage is its low cost battery pack technology. Low cost of the battery pack allows Tesla to not only design cars with higher battery ranges than competitors but also introduced battery pack solutions in to home use also.

Electric battery manufactures rarely release exact battery pack costs, but more estimates range from $500 and over per kWh () $33,000 for 100 mile range) depending upon chemistry and cell-form factor. Competition especially Nissan reporting the battery pack in its Nissan Leaf costs only $375/kWH.

Tesla has to focus more on R&D of its unique battery pack rather than focusing other KPI’s as a competitive advantage. With more R&D and innovation in this technology, Tesla can not only lead in automotive industry but also in domestic and commercial home-use battery packs too.

How Tesla maintains its customer’s loyalty?

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RECOMMENDATION 5

Make an enemy: Tesla's enemies are vehicles with internal combustion engines and big

automakers. Another advantage for Tesla is the fact that it offers customers something different: new technology from a new company.

Tesla has also created an enemy out of auto dealer associations, which are fighting Tesla's disruptive model of selling its cars directly to consumers through its own company-owned retail stores

Establishing an emotional connection:Many Tesla drivers have launched meet-ups or social gatherings for fellow owners and enthusiasts to connect with one another.

Transparency:Communicating with consumers on social media. For example, Last year, when Tesla was hit with negative publicity involving a Model S fire, CEO Elon Musk was quick to address the issue in Tesla’s blog and via social media channels, such as Twitter and Facebook, so the public might better understand what happened. Because of this transparency, customers feel like they have a personal relationship with Tesla.

PROJECT SCHEDULE10

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51Project Schedule

52Project Schedule (Contd.)

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PROGRESS REPORT11

Progress Report

Company History Major Milestones Roadmap SWOT Analysis

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Progress Report

Competitor Analysis Industry Analysis including Porters Five Forces Model

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Progress Report

Strategic Goals Core Technologies Core Competencies Main Case Study Questions

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Progress Report

Authenticity of related material (online articles) Start-up business (limited resources & no previous data)

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REFERENCES12

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References [1] Ccbldg. Tesla Timeline. March 2014 http://my.teslamotors.com/forum/forums/tesla-timeline-0 Accessed on 10/25/2015

[2] Timothy Cain (Oct,2015). USA Auto Sales Brand Rankings - September 2015 YTD. http://www.goodcarbadcar.net/2015/10/september-2015-usa-auto-sales-brand-results.html. Accessed on 10/22/2015

[3] Isidore Chris (October 2, 2015) Tesla posts another strong sales quarter

<Online> http://money.cnn.com/2015/10/02/autos/tesla-sales [Accessed on 11/8/2015]

[4] Culver M (Tuesday, July 7, 201). “Norway Leads Global Electric Vehicle Market, IHS Says” <Online> http://press.ihs.com/press-release/automotive/norway-leads-global-electric-vehicle-market-ihs-says [Accessed on 11/7/2015]

[5] Thomas Fisher (Jun 11, 2013) What Goes Into A Tesla Model S Battery--And What It May Cost, <Online> http://www.greencarreports.com/news/1084682_what-goes-into-a-tesla-model-s-battery--and-what-it-may-cost/page-2 [Accessed on 11/27/2015]

[6] Richard Truett (March 30th, 2015) LG Chem exec: Tesla's gigafactory to cut EV costs <online> http://www.autonews.com/article/20150330/OEM10/303309992/lg-chem-exec:-teslas-gigafactory-to-cut-ev-costs [Acceseed on 11/24/2015]

[7] Julia Pyper (Aug 26th 2015) How LG chem can dethrone panasonic as the world’s leading EV battery supplier, <Online> http://www.greentechmedia.com/articles/read/How-LG-Chem-Can-Dethrone-Panasonic-as-the-Worlds-Leading-EV-Battery-Suppli [Accessed on 11/20/2015]

[8] Tim Mullaney (18 Nov 2015), Tesla’s global business will boom — but not soon <Online> http://www.cnbc.com/2015/11/18/teslas-success-depends-on-china.html [Accessed on 11/27/2015]

[9] Quarterly report pursuant to section 13 or 15(d) of the securities exchange act of 1934 <online> http://ir.teslamotors.com/secfiling.cfm?filingid=1564590-15-9741&cik=1318605#tsla-10q_20150930_htm_item1_financial_statements [Accessed on 12/1/2015]

[10] Berzon, Alexandra; Sweet, Cassandra (1st April 2015). "Tesla CEO Elon Musk Unveils Line of Home and Industrial Battery Packs". Wall Street Journal. [Retrieved on 11/24/2015]

[11] Thomson Reuters, (Dec 3rd 2015) <online> http://markets.ft.com/research/Markets/Tearsheets/Financials?s=TSLA:NSQ&subview=Overview[Accessed on Dec 3rd 2015]

Websites:

https://www.teslamotors.com

http://energy.gov

http://www.hybridcars.com

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