Tesla

Jane(Jinyuan) Wang Kane(Kun) Yuan

Emma(Hang) Hoa Manh 13 May, 2020

Agenda

Industry Analysis Market Segmentation Situation Analysis Current Strategy Recommendation Summary Works Cited

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11 13 19 23 24

Introduction

● Tesla Motor Incorporated● An American electric car, powertrain designer, developer, manufacturer ● Distributor headed by CEO Elon Musk ● The company was founded in 2003

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Industry Analysis - How big is the industry?

Tesla’s factory in Fremont, California is one of the world’s most advanced automotive plants, with 5.3 million square feet of manufacturing and office space on 370 acres of land.

Tesla markets and sells its cars through its own network of retail stores located in North America, Europe, and Asia. For the full fiscal year 2019, the company reported gross revenues of $24.57 billion. Tesla has a market capitalization of $88 billion as of Apr. 2, 2020.

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Market

Share

Industry Analysis - How different between other competitors and Tesla?

● Who are Tesla’s competitors?○ Traditional car manufacturer like General Motors and Ford Motor Company ○ New energy automobile that traditional manufacturer change oil to electricity like F-150 in Ford

Motor Company

● How different between Tesla and Ford?

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Tesla Ford

● Only sell automobile ● Different car structure

● Sell both traditional and electric car● Replace traditional engine

Industry Analysis - 4Ps for Tesla

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Products Place Promotion Price

Automobiles

Electric vehicle

powertrain

components

Batteries, energy

storage

Solar panels

Company-owned

Stores and

Galleries

Official Company

Website

Company-owned

Service Centers

Charging stations

Viral marketing

Personal selling

Public relations

Sales promotions

Direct marketing

Premium pricing

strategy

Market-oriented

pricing

Industry Analysis - SWOT for Tesla

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Strengths Weaknesses Opportunities Threats

Uses Tesla Stores

to have direct sales

rather than through

dealers

The number one

new energy vehicle

company

Proprietary

technology

CEO has multiples

jobs not only in

Tesla company

Inadequate public

facilities for electric

cars

High price

Large international

market demand

Develop a new

model to occupy

the potential low-

end market

Innovation on

increasing battery

life

Competition from

other electronic

company

A higher price if the

government stop

funding

Lawsuits distract

develop and

innovations

Industry Analysis - Porter’s 5 for Tesla

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Threats of Substitute

● Numerous alternatives to buy a fully electric car

● Majority of people tends to use public infrastructure

The Bargaining Power of Supplier

● Limited number of suppliers

● Requires high knowledge of technology

● Possible alliance along the value chain

Threats of Competitors

● Number of competitors increases bargaining power

● Changer networks in order to extend the range of their cars

● Substitutes towards Hybrid

Threat of New Entrants

● EV* industry has high entry barriers

● Large capital investments

● Current producer extend their production capabilities

Intensity of Rivalry In the Industry

● Tesla remains market holder in luxury electric cars

● Trends can be easily adapted in automotive industry

● Higher success in alliance with a local Chinese

manufacturer

*EV means electric vehicle market

Market Segmentation - Primary and Secondary audience & Relevant Behaviors

● Primary Target Market○ Demographics■ Age Range: 30-60■ Upper Middle Class Families■ Household Income Of $80,000+

○ Psychographics■ Concern about gas consumption, economic value in car■ Desire for an affordable luxury car with high safety value

● Secondary Target Market○ Demographics■ Age range: 18-24■ College Students■ Income is negligible

○ Psychographics ■ Well education future prospects of having a specialized profession■ Going to a prestigious, well-know, university

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Market Segmentation - Niche audiences

● New marketThe low-income group in America, untapped markets in some cities in European and China, and unexplored markets in other countries such as Saudi Arabia.

● Car rental market

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Situation Analysis - Model 3

● Competencies ○ Technology

■ Dual motors ■ Improved battery standard ■ Autopilot with fail-operation capability ■ Constantly improving software updates

○ Pricing - 35000 USD (vs. 89000 USD of original Roadster) ○ Timing - use the funds from previous productions to develop affordable EV models ○ Internet-based business

■ Internet announcements + offline showrooms ■ Direct-to-customer sales & service

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Situation Analysis - Model 3

● Model 3 Comparables ○ Automobiles

■ Best selling among competitors (by revenue, Feb. 2019) - Toyota Camry, Honda Accord/Civic, Nissan Altima, Ford Fusion ■ Outselling direct competitors (by units, Feb. 2019) - MB C-class, BMW 3 series, Audi A4/S4, Lexus IS

○ Consumer products - Apple Computer Inc. (pre-2017/18) ■ Entry at high-end followed by downwards penetration with affordable options ■ Priced to avoid cannibalization ■ Preannouncements to ramp up market attention

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Current Strategy - Model 3

● Operational Strategy 1 - Disintermediation ○ Reasoning

■ Naturally less service & maintenance necessary ■ Thin profit for intermediaries

○ Advantages ■ Eliminate intermediary risk and cost (inventory, credit, legal,

etc.) ■ Closer B2C relationship (more responsible product education) ■ Simplified procedures

○ Disadvantages ■ Absence of risk mitigation and right protection (consumer

credit, manufacturer warranty) ■ Legal issues against existing state legislatures ■ Surrendered negotiation and polarized control (customization

vs. legal) ■ Potential difficulties at secondary market (heavy

customization and low accessibility)

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Current Strategy - Model 3

● Operational Strategy 2 - Consumerism ○ Reasoning

■ Expected success in penetration rates ■ Self-identifying to be consumer product rather than

automobiles ○ Advantages

■ Quick and easily accepted ■ Blurring the line between “economy” and “luxury” attracts

consumers from various backgrounds and pursuits ■ Consumer zeal for electric vehicles and new design

(network externality)

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Current Strategy - Model 3

● Operational Strategy 2 - Consumerism (cont’d) ○ Disadvantages

■ Consumer zeal for electric vehicles and new design (“fast” culture among uneducated young consumer base)

■ Difficult to anticipate or cure sources of dissatisfactions ■ Only a matter of time before competition ramps up from

traditionally resourceful manufactures with solid consumer basis (long term)

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Current Strategy - Model 3

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● Regional Strategy 1 - China Market ○ Gigafactory Shanghai

■ 10 month from ground breaking to production ready ■ Model 3 now, Model Y expected

○ Potential advantages ■ Young market with few strong competitors on technology ■ Developing regulations reveal breakpoints for easy and

quick entry ■ Current market culture crave for revolutionary and novel

products ■ Unsaturated EV market with growing conversion due to

rapid changes in emission standards

Current Strategy - Model 3

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● Regional Strategy 1 - China Market (cont’d) ○ Potential problems

■ Limited EV infrastructure potential - constrained in metropolises and suburbs, costly for rural areas ■ Limited customer segments due to wealth disparity and polarization ■ Regulation opportunities unstable with cost-efficient local substitutes (need product education) ■ Established public transportation methods leave small competencies for future Tesla expansion ■ Others - potential tariffs and local tax on foreign brands; software compatibility and updating channels (and protections) may

need continuous and tedious efforts; absence of a local secondary market for automobiles; EV does not naturally resolve traffic problems; etc.

Current Strategy - Model 3

● Regional Strategy 2 - Europe Market ○ Gigafactory Berlin

■ Land preparation completed, ready for ground break ■ Model 3, Model Y expected for 2021

○ Potential advantages ■ Close distances increase coverage efficiency of charging stations ■ Traditional automotive cultures imply good consumer adaptations ■ Experience from North America and Asia markets of Tesla

○ Potential problems ■ Various jurisdictions create different regulatory standards and policies ■ High standards of emissions reduce motivation to convert from petroleum ■ Limited land availability for manufacturing facilities

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Europe & Middle East 450+

North America 700+

Asia 350+

Recommendation

● Short-term (2 years)

Demand is decreasing in Covid-19 pandemic → temporary strategy to cover the loss coming from the pandemic and quarantine.

“WHEN-A-POTENTIAL-LOSS-MAY-OCCUR” moment

○ Collaborate with taxi/ rental companies (Uber, Lyft). Launching a new department to work on this service. This way allows Uber

drivers to lease a vehicle through Tesla and use the revenues from driving to make their payments. The advantage of the union is

that Tesla can offer Uber drivers flexible leases tailored to this industry. And while they offer ride sharing leases, they are also

working on new lines of Tesla vehicles. The collaboration covers the spaces in revenue

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Recommendation

● Long-term (in the next 10 years)

○ Focusing more on the 2 markets (China, Europe)

○ Ensuring the adequacy of the charging stations as a vital condition of Tesla. The power usage of Tesla products is different from

other automaker, therefore the batteries as well as charging station are considered as the survival condition.

○ Localizing the point of view of customers on products , switching entirely to local production instead of importing to lower down

the shipping costs and taxes.

○ Expanding the coverage globally. The coming to China and Europe is the starting point giving new impetus to Tesla to go

dominating electric vehicle market worldwide.

○ Budgeting fund for incentives on price in some new countries and regions (without violating legal and international trade

regulations)

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Recommendation - Timeline

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2020

Start production in 2 Gigafactories in China and Europe, bringing the product to market

2025

Focusing on charging stations, ensuring that there are enough stations corresponding to the level of sales and meeting the demand of customers

2030

Complete localization process, expecting revenue in China and Europe to increase

203X

Expanding scope to other market, start going global

Taxi/car rental company collaboration ends, thoroughly addressing losses caused by Covid-19 pandemics

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Recommendation - Brand Communication

● The differences between Tesla and the other automotive companies are even starker when comparing advertising strategies. Since it was founded, Tesla has spent $0 on traditional advertising

● Elon Musk’s social media channels ● Start investing in some paid marketing channels ● After 12 months of operation, we will do an email survey of everyone who purchased a Tesla during the first operation, to gauge their

satisfaction with the vehicle as well as interest in new models, in which we hope to get a 40% rate of people who are interested in future Tesla models

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Summary

● Tesla leads an industrial innovation by disintermediation and a direct-to-customer approach in marketing, distributing, and servicing EVs to reach established middle class households who accept and appreciate the environmental benefits of clean-energy technologies with an affordable premium

● In the face of global rivalry against conventional automobile manufacturers with substitutable products and local challenges of entrant incentives (E.g. emission standards, market absence) or barriers (E.g. infrastructural, cultural, regulatory), Tesla needs to quickly devise new branches of strategies to adapt in new markets (short-term) and develop collaborative programs with complementary industries (E.g. joint ventures with other manufacturers or public transportation service providers) in the long-term

● The disintermediation and absence on social network marketing does not mean that Tesla could be eternally indulged in the privilege of market share capture as a first-mover; rather, Tesla should emphasize on educating customers of new technologies in the pre-sale stage and on continuous tracking of customer satisfaction in the post-sale stage – continuations on the journey of closing the gaps along the spectrum of various elements of clean-energy living

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Works Cited (1/3)

Atiyeh, Clifford. “Tesla Driver Was on Autopilot Eating a Bagel When He Smashed into a Fire Truck”. Car and Driver, 4 September, 2019, www.caranddriver.com/news/a28911259/tesla-crash-california-autopilot-driver-ntsb. Accessed 6 May, 2020.

Barry, Keith. “Does Car Buying Make Your Head Spin?” Consumer Reports, Cars, 29 November. 2018, www.consumerreports.org/buying-a-car/does-car-buying-make-your-head-spin. Accessed 20 April, 2020.

Coren, Michael J. “Tesla may get into the lithium business in Chile as the price of battery ingredients soar.” Quartz, 29 January. 2018, qz.com/1191964/tesla-tsla-may-get-into-the-lithium-business-in-chile-as-the-price-of-battery-ingredients-soar. Accessed 20 April, 2020.

ESCN. “Shenzhen Bus Group Co., Ltd. (SBG) becomes the Largest Operation Group of Battery Electric Vehicle (BEV) taxis in China.” ESCN.com, 2018, www.escn.com.cn/news/show-650946.html. Accessed 10 May, 2020.

---. ESCN. “深圳巴士集团成为全国最大纯电动出租车运营集团.” ESCN.com, 2018, www.escn.com.cn/news/show-650946.html. Accessed 10 May, 2020.

Fehrenbacher, Katie. “7 Reasons Why Tesla Insists on Selling its Own.” Fortune, Tech, 19 January. 2016, fortune.com/2016/01/19/why-tesla-sells-directly. Accessed 04 November, 2019.

Gilani, Saahil, Barsbold Darmabal, Ali Khan. Teslamotorsdeca.weebly.com, February, 2014, teslamotorsdeca.weebly.com/primary1.html. Accessed 6 May, 2020.

“History of Tesla, Inc.” Wikipedia.en.wikipedia.org/wiki/History_of_Tesla,_Inc. Accessed 20 April, 2020.

Investopedia. “Who Are Tesla's (TSLA) Main Competitors?” Investopedia, Stocks, Top Stocks, 2 April, 2020, www.investopedia.com/ask/answers/120314/who-are-teslas-tsla-main-competitors.asp. Accessed 6 May, 2020.

Itoga, Dice. Tesla Motors – Cross Border Strategy. SlideShare, Automotive, 17 November, 2015, www.slideshare.net/DiceItogaPMPITILFoun/tesla-cross-border-strategy11-122015final. Accessed 6 May, 2020.

Kissinger, Daniel. “Tesla, Inc.’s Marketing Mix (4Ps) Analysis.” Panmore Institute, Business, Management, 25 June, 2018, panmore.com/tesla-motors-inc-marketing-mix-4ps-analysis. Accessed 6 May, 2020.

Mitchell, Russ. “Tesla has a huge incentive to deploy self-driving tech. But is the world ready?” Los Angeles Times, Business, 9 August. 2019, www.latimes.com/business/story/2019-08-08/tesla-full-self-driving-fsd-technology. Accessed 20 April, 2020.

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Works Cited (2/3)

Muoio, Danielle. “Tesla just deployed a new marketing strategy to avoid misperceptions about its long awaited Model 3.” Business Insider, 26 May. 2017, www.businessinsider.com/tesla-model-3-marketing-strategy-2017-5. Accessed 20 April, 2020.

Musk, Elon. “Master Plan, Part Deux.” Tesla, Blog, 20 July. 2016, www.tesla.com/blog/master-plan-part-deux. Accessed 20 April, 2020.

Musk, Elon. “The Mission of Tesla.” Tesla, Blog, 18 November. 2013, www.tesla.com/blog/mission-tesla. Accessed 20 April, 2020.

Musk, Elon. “The Secret Tesla Motors Master Plan (just between you and me).” Tesla, Blog, 2 August. 2006, www.tesla.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me. Accessed 20 April, 2020.

Musk, Elon. “The Tesla Approach to Distributing and Servicing Cars.” Tesla, Blog, 22 October. 2012, www.tesla.com/blog/tesla-approach-distributing-and-servicing-cars. Accessed 20 April, 2020.

O’Kane, Sean. “Tesla’s latest challenge is finding new customers for the Model 3.” The Verge, Report, Business, Transportation, 15 February, 2019, www.theverge.com/2019/2/15/18213953/teslas-moder-3-new-costumers-europe-china. Accessed 6 May, 2020.

Tesla. 2019 Annual Shareholder Meeting Presentation. Tesla Investors Relation. 2019. PDF File.

Tesla. Q3 2019 Update. Tesla Investors Relation. 2019. PDF File.

Tesla. Q4 2019 Update. Tesla Investors Relation. 2019. PDF File.

Tesla. Q1 2020 Update. Tesla Investors Relation. 2020. PDF File.

Tesla. Tesla Factory. Tesla Factory, www.tesla.com/factory. Accessed 6 May, 2020.

“Tesla, Inc. Form 10-K.” Tesla. Securities and Exchange Commission, 2019, ir.tesla.com/static-files/15df7636-8cd8-4b18-989b-4badeeda806c. Accessed 20 April, 2020.

Viskar90. BCG Matrix in the marketing strategy of Tesla Model 3. Course Hero, Ningbo University, Business, BUSINESS 2435, 2016, www.coursehero.com/file/p3uosq8s/BCG-Matrix-in-the-marketing-strategy-of-Tesla-Model-3-is-the-combination-of. Accessed 6 May, 2020.

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Works Cited (3/3)

Willis, David P. “NJ gives Tesla special treatment, and that hurts consumers, car dealers say.” Asbury Park Press, 20 September. 2019, www.app.com/story/money/business/consumer/press-on-your-side/2019/09/20/nj-tesla-car-dealers-lawsuit/2373245001. Accessed 20 April, 2020.

Xinhua News Agency. “2018 Annual Xinhua Photographs.” Wenweipo.com, 2019, news.wenweipo.com/2019/01/05/IN1901050026.htm. Accessed 10 May, 2020.

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Zhang, Shengli. “Solicitation of Public Opinions Begins Today for 5 of the 6 Exterior Designs of Metro Line 1” Changsha Wanbo (ICSWB), 25 March, 2014, hn.rednet.cn/c/2014/03/25/3305811.htm. Accessed 10 May, 2020.

---. 章, 盛莉. “地铁1号线6套内饰设计5套外观设计今起征求意见.” 长沙晚报, 25 March, 2014, hn.rednet.cn/c/2014/03/25/3305811.htm. Accessed 10 May, 2020.

Zhu, Wei. “Well Deserved! Nanjing Awarded the Title of ‘National Model City of Public Transport.’” Nanjing Daily, 27 November, 2017, js.xhby.net/system/2017/11/27/030768945.shtml. Accessed 10 May, 2020.

---. 朱, 威. “当之无愧！南京拟被授予“国家公交都市示范城市”称号.” 南京日报, 27 November, 2017, js.xhby.net/system/2017/11/27/030768945.shtml. Accessed 10 May, 2020.

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Jane (Jinyuan) Wang Kane (Kun) Yuan

Emma (Hang) Hoa Manh 13 May, 2020