Tesla Case Analysis

Introduction

        Tesla was founded in 2003 by Elon Musk (Current CEO) and JB Straubel (CTO), Martin Ebehard, Marc Tarpenning, and Ian Wright. Tesla is the first American car company to go public since Ford (F) in 1956. Their IPO was January 29, 2010, which raised $226 million. Tesla Motors designs and sells high performance, efficient sports cars. Tesla combines style, acceleration, and technology to create a one of a kind electric car to be the most energy efficient vehicles on the road. Elon Musk took over the lead engineering and managerial roles after discovering that Tesla was losing $50,000 on each Roadster (its electric sports car model) it sold in December 2006. The redesigned Roadster then sold for $109,000 before it was later discontinued in favor of the Roadster 2 and Roadster Sport, as well as designs targeted at larger markets. The Model S (family sedan) prototype was unveiled in 2009, and it received over 2,000 orders, with customers putting a $5,000 minimum down payment (Van den Steen). The Model S received approximately 12,000 orders by 2012 when deliveries began. It is manufactured in a California factory purchased from Toyota. The Model X (family SUV) began arriving for customers in September 2015. The Tesla Model 3 was announced on March 31, 2016, pitched as an affordable electric car. Pre-orders hit 276,000 in the first three days.

Problem/Issues

        Issues for Tesla within the case is its fueling network and their car dealerships. Tesla sells only all electric vehicles that can deliver distance that competes with gas powered cars. In order to do so, high-speed charging is vital. Tesla has developed its own supercharging network which charges a Tesla battery to 80% in under an hour. These charging stations have been set up around the world. The cost to set up these charging stations is very expensive and it is a burden on Tesla to monitor. This adds a whole second business onto Tesla’s plate.

        A second issue within the case is that Tesla does not want typical franchise car dealerships. Tesla wants to sell cars directly to consumers. They want to set up many stores around the U.S. where consumers can check out vehicles, take test drives, order cars and get service. The problem with this is these stores are very expensive to run and maintain (Debord). A car dealership takes up a lot of land, and they would each need service bays, chargers, and trained sales people. The cost of setting this up and maintaining is usually been offloaded to dealers because of the hardship.

        Now, today Tesla has 2,636 Superchargers at 373 locations across North America and plans to have more by 2017. Tesla also has 110 stores located in the United States. By sticking with Tesla’s mission and the original views they were able to create the image they imagined for the brand.

Pestel

Political: Political forces play a major role for Tesla because the company relies on subsidies and positive policies of the government to make its product more affordable for the customers. Tesla requires incentives and benefits from politicians and policy makers to drive its effort to make alternative energy conventional. For example, a small business owner with substantial federal tax exposure could place an order for Tesla’s new Model X and collect up to $35,000 in tax and government rebate benefits. That is also on top of the $7,500 federal tax credit and a $2,500 California rebate given to buyers of battery-electric vehicles. Also, if Tesla could expand free trade agreements it could help grow its operations internationally because there are some trade barriers on bio fuel. However, there are also countries that are unsupportive like oil producing countries. The U.S. even provides higher tax breaks for truck drivers.