Tesla Motors Inc.

Tesla Motors

Tesla is currently situated in the introduction phase of the industry life cycle. While considering it is uncommon for new car manufacturers to emerge in this century, it now faces obstacles appearing in various forms. The first, is the need to scale production to meet the demand for its Model S, while driving down costs significantly and maintaining the same high-quality Tesla has been praised for. Secondly, Tesla must evaluate the options of reducing these costs internally or by partnering with established car manufacturers that already have an equity stake in the company (i.e. Toyota, Daimler). Lastly, Tesla needs to be able to disrupt the market enough with its electric vehicles to become a major player in this defining period of emerging fuel alternatives and the race for a standard.

External Analysis

General Environment Condition (PEST Analysis)

Environment Condition Analysis Effect

Political • Increased government incentives for EVs

• International expansion opportunities through free-trade agreements Positive

Economic • 2008 financial crisis recovery

• Oil price increase

• Decreasing battery/renewable energy costs Positive

Social • Increased environmentally-friendly attitude

• Increased performance in renewable energy sector

• Higher demand for fuel-efficient vehicles Positive

Technological • Increased business processes automation

• Decreasing costs of new technologies Positive

Industry Overview

The domestic car industry in the US is led by three major players: GM, Ford, and Chrysler, altogether making up nearly half of the market. During 90s, SUVs trended and were heavily produced, but sales declined from 2004-2008 because of the cost of oil, dropping sales to 11 million (2008) from 18 million (2000).

Consequently, an increase in demand for cost- and fuel-efficient vehicles became evident, and was fulfilled by foreign manufacturers from Germany, Japan, and Korea, subsequently decreasing American manufacturers’ market share.

Industry Driving Forces

Factors affecting entire automotive industry revolves around cost of oil and production efficiency. Therefore, the oil price increases post-2008 required manufacturers to rethink their entire production strategies to make way for cost- and fuel-efficient models, also leading to increased development in