MARKETING PLAN FOR Tesla Company

Tesla Motors Inc. Company Analysis 1

Tesla Motors Inc. Company Analysis [Group C]

Situation Analysis

Tesla Motors Inc. Company Analysis 2 Table of Contents Table of Contents.............................................................................................................................2 Executive Summary.........................................................................................................................4 Tesla Motors....................................................................................................................................5 Company history..........................................................................................................................5 Company Financial Resource......................................................................................................5 Product Portfolio..........................................................................................................................5 Mission.........................................................................................................................................6 Company Goals............................................................................................................................6 Company Core Competency and Sustainable Strategic Analysis................................................7 Industry Review...............................................................................................................................7 Industry General Outlook.............................................................................................................7 The High End Segment................................................................................................................8 The Electric Vehicle Market.........................................................................................................8 A green vehicle: Within the “green vehicle” market, there are four types:..................................9 Bargaining Power of Customers...............................................................................................9 Bargaining Power of Suppliers...............................................................................................10 SITUATIONAL ANALYSIS.........................................................................................................10 Tesla SWOT Summary..................................................................................................................10 SWOT Analysis..........................................................................................................................10 Description of SWOT analysis......................................................................................................13 Strengths.....................................................................................................................................13 Weaknesses.................................................................................................................................14

Tesla Motors Inc. Company Analysis 3 Opportunities..............................................................................................................................14 Threats........................................................................................................................................14 Assessing Competitors Viability....................................................................................................15 Toyota Motor Company.................................................................................................................15 Toyota Motor Company SWOT Summary................................................................................15 Toyota’s Competitiveness in the EV industry............................................................................16 GM.................................................................................................................................................17 GM SWOT Summary................................................................................................................17 GM’s Competitiveness in the EV industry.................................................................................18 BMW.............................................................................................................................................19 BMW SWOT analysis................................................................................................................19 BMW’s Competitiveness in the EV industry.........................................................................19 Intensity of Existing Competition..............................................................................................20 Customers and Competitors.......................................................................................................20 Tesla Market Analysis....................................................................................................................22 Market Segmentation.................................................................................................................22 Tesla Product Targeting and Positioning....................................................................................22 New Markets..............................................................................................................................23 New Products.............................................................................................................................24 Tesla’s Marketing Strategy and Current Customers by Segments.............................................24 Product Mix and Marketing Activities.......................................................................................27 The 4 Ms of Advertising............................................................................................................28 Conclusion.....................................................................................................................................29

Tesla Motors Inc. Company Analysis 4 Works Cited...................................................................................................................................31 APPENDIX I.................................................................................................................................32

Tesla Motors Inc. Company Analysis 5 Executive Summary The attractiveness of any industry is often determined by the ease of entry to the industry, governmental regulations, capital requirements, and the possible earning returns from capital invested. Equally, the more competitive industry is, the more complex it becomes for new entrants to enter the industry. This essay uses Tesla Motors to discuss Situation Analysis of this company, its threats opportunities, weakness, and strengths, in a bid to realize the possibility of inclusion of a new product that might be much cheaper in the market, than the currently available and future proposed products. Tesla operates at the premium segment of the automobile industry, where it focuses on the product of electric vehicles (Tesla Motors 12). Most major incumbent automobile manufacturers have engaged in the production of both internal combustion engines vehicles and power-train electrification vehicles. The industry is experiencing significant changes with the impact of new regulation being felt by existing manufacturers. Tesla competes with manufacturers in the ICE vehicle, electric vehicle, hybrid electric vehicle, and plug-inhybrid section (Bloomberg News 2). However, the company faces major strategic challenges. Key among them is the ability to guarantee sufficient battery supply as customer demand balloons. The huge shortage of lithium-ion cells is a major challenge to the company production. While the company has the merits of strategic partnership, the sustainability of lithium-ion batteries remains a major challenge to the company.

Tesla Motors Inc. Company Analysis 6 Tesla Motors Company history Tesla Motors is a high-end car manufacturer founded in 2003 by Palo Alto (Brenan 2). The company focuses on the production of electric vehicles and EV power train components. The company first EV was launched in 2008 under the Tesla Roaster. Currently, the company sells the Model S luxury sedan in North America, China, and European markets (Tesla Motors 13). According to consumer reports, the Tesla Model S received the highest customer satisfaction score of any car in the world. Currently, the company has a capitalization of 27.98billion with an operating income of around 61 billion USD (Yahoo Finance, n.p). Company Financial Resource Tesla is a publicly traded company that trades at NASDAQ under TSLA. The company total assets have continued to increase since 2012, $1,114,190 to $2,416,930 in 2013 and the $5, 849, 251 (Little 13). Equally, the company total liabilities have experience an equal measure of increase with 2014 recorded as the highest year with high levels of liabilities ($4,879,345). The company total stockholders’ equity has risen from $124,700 in 2012, to $667,120 in 2013, and then $911,710 in 2014 (Brenan 3). The company gross margin for 2014 was 27.57, operating at a margin of -6.89%. While the gross margin was high, the net margin was very low -9.19%. The return on investment has remained low at -14.60% (Yahoo Finance, n.p.). The intensive capital nature of the company investment has been associated with the observed figures. Product Portfolio The company products fall into three categories: electric luxury cars, automotive components, and rechargeable energy storage systems. Under the electric luxury brand, the company has offered various product lines. Of significant importance under this burner is the

Tesla Motors Inc. Company Analysis 7 Model S product line and the other model to be released, Model X. The company has patent right for Electric power trains and other related products. Equally, the company has invested significantly in the production of rechargeable power products and the establishment of Recharging stations. Mission The company mission since its inception has remained unchanged: “To accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.” (http://www.teslamotors.com/blog/mission-tesla) The company goals surround this mission statement. According to the Chairman, the company has focused on accelerating the transition of the world from gasoline dependent vehicles to electric mobility with increased affordability. According to the company website, "they are catalyzing change in the automobile industry." Since the vehicles are fun to drive and environmentally profitable, the company has won the hearts of environmentally sensitive clientele. In making sure that the company achieves its mission, the company has developed more stations and promises to continue this development trend across the world. The aim is to ensure availability of battery technologies to act as competing agents for gasoline-run vehicles. Company Goals According to the company website, the company goal remains the same “To accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible” (http://www.teslamotors.com/blog/mission-tesla) Company Core Competency and Sustainable Strategic Analysis The company has focused on differentiation strategy as the main business level strategy. The company offers high-quality luxurious EVs to its consumers. At the cooperate level, the

Tesla Motors Inc. Company Analysis 8 company has chosen to focus on product enhancement and customer experience. The company focuses on expanding its international markets in the European Union, China, and Japan. According to Price Waterhouse Coopers, the company is strategically position as a high-end market manufacturer and dealer. The company owns its stores and service centers, invests significantly in innovation and high-performance vehicle, and has already acquired its manufacturing plant in Fremont. The company has departed from the traditional business model employed by other players in the industry by exclusively focusing on Electric power train technology and owning their stores and services stations. Unlike other players in the market, the company has developed what most critics have described as a disruptive technology in which owners of such technologies deploy it successfully to a specific niche. Equally, the company has secured strategic alliances with Panasonic cooperate for the development of more efficient and reliable batteries. The company cooperates with companies like Toyota and Daimler in its production process. Industry Review Industry General Outlook The industry is one of the most competitive industries in the world. The industry has 35 players but the 10 largest companies control up to 80% of the market share (Tesla Motors 12). Tesla's current market share is estimated to be 2.6%. The industry has witnessed significant growth rates over the past few years. 106.3 million Vehicles were sold globally in 2014 (Tesla Motors 14). In the U.S where Tesla has its main share of market, the following facts characterize the market: •

US Automobile Industry represents 5% of Private Sector GDP

•

76% of the market is made up of Ford, GM, and Chrysler

Tesla Motors Inc. Company Analysis 9 •

18% of sales are from Japanese car makers

•

6.6m Americans are employed directly or indirectly in the automotive industry.

•

Hybrid sales was noted torepresented 1.2% of the market in 2005, 1.6% in 2006.

•

Forecasts estimate 5% of car sales will be hybrids by 2013 (Yahoo Finance, n.p). The High End Segment Tesla is primarily focused on the high-end market. The main factors determining

competition in the high-end segment of the automotive industry are brand image, quality, and environmental sensitivity. Despite the high levels of competition in the market, the market has not been fully explored. The Electric Vehicle Market The Electric Vehicle market commonly denoted as EV have moved past the infant stage with a number of companies entering the market and gainfully commercializing their electric car products (Tovey 1). The industry has reached profitability levels and competition in the industry is intense. Governments are increasingly recognizing the importance of regulation in boosting the industry and a number of incentive programs have been developed with the intention of augmenting adoption of EV vehicles as the green option of automotive products. A green vehicle: Within the “green vehicle” market, there are four types: •

Electric Vehicles

•

Flexible-Fuel Vehicles

•

Hydrogen Vehicles

•

Hybrid Vehicles

Tesla Motors Inc. Company Analysis 10 Bargaining Power of Customers The bargaining power of consumers is often determined by the sensitivity of prices. Tesla is operating in an industry where the buyers of the produces are households and businesses. The company main consumers are private household consumers: this type of consumers is highly sensitive to price changes. The sensitivity of these clientele means that companies in the automobile industry find it difficult to offset the increasing costs of products by increasing prices (Tovey 3). Furthermore, such an action would mean that the company products would witness a go-slow. As such, companies have to sell at low prices in order to reduce inventory. To counter the impact of high consumer bargaining power, companies have to invest significantly on brand building in order to weaken the customer’s bargaining power. However, the inverse is true in the premium segment where consumers are less sensitive to prices. Companies operating in this section are lowly exposed to economic downturn as evidenced by recent profits earned by premium segment players such as BMW and Audi compared to other players (2). Since the company operates major in the premium segment, the bargaining power of buyers is moderate and slightly lower in this section as compared to the other segment of the automotive industry. Bargaining Power of Suppliers The automotive industry particularly at the premium sector is organized into suppliers of motor parts such as exterior, power train, interior, chassis, body, and electrical, and manufacturers of the materials. The suppliers are auto-specific and have to rely on a limited number of clients to remain profitable. This dependency on the limited number of client makes them limited in terms of the bargaining power. However, the bargaining power of these suppliers largely depend on the material supplied; Price Waterhouse Cooper, (21) observe that suppliers of chassis and power train have a relatively stronger bargaining power. Manufactures of the high

Tesla Motors Inc. Company Analysis 11 quality materials required for the production of EVs have high bargaining power. However, this power as argued by Little (15) is high switching with cost relative to mass-market competitors because only a few number of suppliers for the materials are available. The fact that there are a wide number of suppliers at the equipment manufacturing level means that the company can threaten to withdraw purchase and therefore reduces the bargaining power of a single supplier. Inputs such as nickel, steel, aluminum, copper, and lithium offer limited differentiation-making suppliers rather homogenous and therefore less powerful. As such, the bargaining power of suppliers is moderate.

Tesla Motors Inc. Company Analysis 12 SITUATIONAL ANALYSIS Tesla SWOT Summary SWOT Analysis STRENGTHS 

Good engineering and technology

 



Doesn’t have much brand recognition

research capability Able to raise large amounts of capital First mover advantage; the first



among the general public A very small company with small sales

company to offer a relatively practical



volume, so no economies of scale Possible supply problems with

fully electric car, customers include

components, especially if demand

high-profile figures like Arnold

increases The Tesla Roadster hasn’t been on the

Schwarzenegger, George Clooney, and 

power electronics, motor and battery packs Vertically integrated value chain allow

for cost and quality control  Proprietary technology  Low marketing expenses  Efficient production  Lower battery costs  Good brand perception OPPORTUNITIES 



market for very long, the longevity of

Jay Leno Designs and builds many of the components in its cars, including the



WEAKNESSES

Moving towards the family sedan



fully electric cars remains to be proven Already high OPEX is expected to



increase Poor return on invested capital and



equity Higher CAPEX requirements over the



next years High long-term liquidity risk

THREATS 

Wright speed X1, a prototype high

market and making a product that is

performance electric car that caters to

meant for more of the automotive

the same market; the only direct

Tesla Motors Inc. Company Analysis 13 

market Price of oil and gasoline skyrocketing, 

making the price premium for an 

competitor to Tesla that offers a similar

electric car less of an issue Expanding into developing lithium-ion batteries and other energy technologies,

the market with full and hybrid electric 

cars, the GM Volt and Toyota Prius The price of oil falling dramatically in



the short run A competitor having a breakthrough in

partnering with a battery company to 

improve battery technology Economic growth in key markets and

 

especially in China Stricter emission policies Currently low interest rates

product Large automobile companies entering

related energy technologies, like hydrogen powered cars, natural gas, or    

ethanol Higher raw material prices EV incentives phase out Lithium supply constraint Lower oil prices short term

Description of SWOT analysis Strengths Tesla has a number of strengths that give it competitive advantage when compared with the other players in the industry. To begin with, the company has a vertically integrated value chain, which allows cost reduction and promotes quality control. Cost is one of the main challenges facing companies operating in the premium segment of automotive industry, with an integrated and watertight value chain, the company is able to control cost and quality of the products at the same time. A perfect example of the company dedication to cost is the Model S design (Tesla Motors 15). The car is designed to be the best in the world offering industryleading technology, in performance, safety, and practicality. Consequently, the company has an established and loyal customer base. The ability of the company to offer high quality products

Tesla Motors Inc. Company Analysis 14 has seen it win the hearts of most of the premium car consumers in the industry. Innovation is also another key strength for the company. Tesla has thrived to be the best innovator in the industry since its inception. The company has continued to update its Model S product and the promise for better innovation in to the to be launched Model X. other facts such as low marketing expenses, efficient production, low battery costs and good brand perception have worked to the advantage of the company. Furthermore, with good brand perception, the company is poised to win more customers. Efficient products lower battery costs, and low marketing expensive all contribute towards improved profitability. Weaknesses The company has a very small sales volume, which means that there are reduced economies of scale. The company small volume of salves means that there is small return on investment. Higher CAPEX requirements are also another weakness for the company. The company also faces the risk of long-term liquidity (Tesla Motors 16). The nature of Tesla investment demands significant amount of investment in the company infrastructure, which runs the risk of liquidity in the future. The company brand is not well known to the public. The company has small brand equity and the company can easily be overshadowed by other large automakers. Opportunities The company is operating in a new market where there are immense opportunities. Model S according to the company is the only true luxurious electric car. Considering that the company market is new and fully unexplored, the company can capitalize on the opportunity that currently exists. There is also projected economic growth in key markets and especially in China, since there is always a positive correlation between automotive demand and economic growth the

Tesla Motors Inc. Company Analysis 15 company should anticipate increased demand (Tovey 2). Stricter emission policies are also in favor of the company. This means that consumers will continue to be influenced by government incentives towards turning to EVs as the viable option for sustainable development. The current low interest rates coupled with high availability of credit is good news for the company. Threats The first significant threat to the company is the incumbent automakers. These companies have established themselves in the industry and have very strong brand equity and resources. If these brands were to release EVs that may be different at a technical level with Model S and Model X, the company brand names will weight in significantly in the customer’s decision making process. News that companies such as Renault, Volkswagen, Fiat, Audi, Lexus, Daimler, and BMW some of the most established players in the premium segment of the automobile industry are involved in the production of EVs is a major threat to the existence and profitability to Tesla. Consequently, the company faces a major threat financially. The company has limited resources and very low margin of error. Any mistake can have a significant cost implication on the company finances. High cost for raw materials, EV incentives phase-outs, and lithium supply constraints are some of the threats that face the company. EV incentives are not permanent and will out phased with time, this means that the company will have to bear the full cost of production and innovation. Raw materials for EV production are very expensive. Increased demand for these materials might affect their availability and force the prices to go up. Equally, lithium is the main lifeblood for EVs. This commodity is not abundantly available and therefore the risk of reduced supply will have a negative effect on the company profitability. Finally, low oil process is likely going to affect the consumption of EVs. Most of the companies in the ICE segment of the automotive industry have invested significantly on energy efficient automotives.

Tesla Motors Inc. Company Analysis 16 This means that most of the consumers will prefer highly energy efficient ICEs due to the low costs of maintenance as compared to EVs (Tovey 4). Competition from related energy breakthrough such as natural gas and ethanol. Assessing Competitors Viability Toyota Motor Company Toyota Motor Company SWOT Summary STRENGTHS 

Strong market position and brand

WEAKNESSES 

recognition 

Strong focus on Research and

image 

Development 

Extensive production and distribution

Brand loyalty



Working in Both High end and low ender user segments of the automotive

industry OPPORTUNITIES

Declining sales in key geographic segments



networks 

Product recalls could affect brand

Poor allocation of resources compared to peers



High interest rates and low availability of credit



High oil prices

THREATS



Growing global automotive industry



Intense competition



Growing partnership with BMW



Appreciation of Japanese Yen



Strong outlook in the EV market



Natural disasters could have an impact on the company production structure.

Tesla Motors Inc. Company Analysis 17 Toyota’s Competitiveness in the EV industry Toyota is the oldest company to venture into the hybrid/EV segment. Before the introduction of Toyota Prius the first hybrid model of EV in the U.S in 2000, the car had received wide popularity in Japan by 1997 (Tovey 2). As of September 2010, over half a million Prius version of EV had been sold in the U.S market alone. The car is cheap fetching around $21,000 and has been applied to the Lexus LS600h, which goes for $104,000 (Tovey 3). The LS600h a large luxury care is in the same category as the Tesla Roadster, which is less specious and less luxurious. Tesla should be very concern about Toyota ambitious plan to offer a larger battery pack and a home charging station as options for the Prius. By providing this option, the company will be well poised to launch a full EV product line, which will definitely have significant success in the market. The plan by Toyota to offer larger battery packs and home charging options will be direct competition to Tesla’s plans to offer fully electric sedans at different prince points. Equally, the planned Tesla sedans priced at $50,000 to $70,000 Whitestar and $30,000 Bluestar are very high compared to Toyota, which can offer fully electric sedans for Lexus for under (Tovay 2) which will be direct competition to the company product. Another Fully electric version of the Toyota Camry is already available in the market. The company has also released the Toyota iQ EV in response of Tesla Model S version of the EV generation. GM GM SWOT Summary STRENGTHS

WEAKNESSES



Global presence



High cost structure



New vision and strategy



Brand dilution



Strong brand portfolio



Bureaucratic culture

Tesla Motors Inc. Company Analysis 18 

Strong presence in China



Knowledge of home market

 4 well performing brands OPPORTUNITIES 



Car recalls

THREATS

Positive attitude towards “green”



Fluctuating fuel prices

vehicles



New emission standards



Increasing fuel prices



Rising raw material prices



Changing customer needs



Intense competition



Growth through acquisitions

 Exchange rates GM’s Competitiveness in the EV industry

General Motors is a significantly formidable force in the industry that poses a major challenge to Tesla. The company has invested a large amount of its capital in the development of alternative vehicles for EVs. The current development of Volt, which is not true EV, indicates that GM is highly interested in hybrid care market and will continue to pursue the goal to achieve EV capabilities in the future. A preorder of 20,000 Volt as the care got into product indicates that the market for Volt is formidable (IEDC 6). The car is designed approximately forty miles on battery power and then the care engages 1.0L turbocharged gas engine automatically to recharge the battery solves that main challenges facing EV vehicles. Furthermore, the main challenge facing purely EVs is battery recharge. Consequently, the option provided by GM can run on both biodiesel and gasoline. The company E-Flex system adopted in the production of Volt represents a significant force in standardizing EV components making it an added advantage for the company. The company’s alternative model for Model S is relatively cheap. It will definitely

Tesla Motors Inc. Company Analysis 19 attract more client base compare to the current Tesla Product. If the company were to choose the lower end market, it would face significant competition from GM. BMW BMW SWOT analysis STRENGTHS

WEAKNESSES



Brand reputation



High cost structure



Environment friendly vehicles



Weak brand portfolio



Quality products



Perception of high prices



Highly skilled workforce



Too few acquisitions and strategic



Corporate Social Responsibility (CSR)

 Strong brand presence in China OPPORTUNITIES

partnerships

THREATS



Increasing fuel prices



Intense competition



Positive attitude towards “green”



Rising raw material prices

vehicles



Decreasing fuel prices



Expand brand portfolio



Growing euro exchange rate



Changing customer needs BMW’s Competitiveness in the EV industry BMW has been an established player in the luxury market. The company has continued to

innovate and produce low consumption automobiles, high performance luxury products. BMW has major advantages due to its ability to its ability to manufacture efficient Dynamics, such as Mild hybrid technologies. The company has sole patents in start-stop systems which shuts engine off when not needed, regenerative breaking system, and small 4-cylinder gas and diesel engine.

Tesla Motors Inc. Company Analysis 20 The company has established hybrid technology model options particularly the BMW X5 model. Coupled with its BMW vision efficient dynamics, the company has prototypes for solar powered hybrid technologies and BMW hydrogen 7-powered version of the Luxury 7 series. The company is the world fist hydrogen-drive luxury. The i series model of BMW EV has performed exemplary well with the latest model i8 selling around 10,000 units immediately after its production. Considering its technological capabilities, the company is a significant competitor to Tesla (Brenan, n.p). Intensity of Existing Competition Competition in the automobile industry is intense. Material costs are always high, price wars and strict regulations by the government reduce profitability. While the automotive industry is at a mature stage in the developed nations, the only way for manufacturers to capture new markets is through innovation. At the world stage, 35 automobile products companies exist in the market, 22 of these companies are based on Asia (IEDC 4). However, only the ICE segment of the automobile industry has reached a maturity stage. The EV segment has high potential and most of the automakers are increasingly investing a significant amount of their resources on production of EVs. Companies are increasingly being forced to innovate and any company that seeks to remain competitive in the automobile industry must be innovative. As such, the intensity of rivalry in existing automakers is very high. Furthermore, automakers are being forced to go with contemporary changes in environmental sensitivity, which demand for fewer ICEs and more of EVs. Customers and Competitors Tesla is a niche car manufacturer. It is the only all-electric, commercial luxury sports vehicle, which makes Tesla’s customers and competitors very unique. While exploring Tesla’s

Tesla Motors Inc. Company Analysis 21 customers and competitors, we can simultaneously look at its 4 M’s of advertising. This consists of to whom Tesla markets and who the market consists of, what motivates customers to buy, what message Tesla is relaying to consumers, and how Tesla communicates to its consumers through media. Tesla’s market consists of early adopters, consumers that are seen as affluent, educated, and motivated by social prestige. Consumers are also viewed as highly technologically literate. Model S owners typically have an income of over $100,000, and they consist of mostly men (Tesla Motors 13). Tesla is a status symbol and customers see owning one as part of defining their personal brand. The social prestige of owning a sleek, sophisticated, luxurious vehicle that is also environmentally friendly is the main, but not the only motivator. The vehicles safety also influences buyers. In fact, Tesla’s model S received the highest safety ratings out of any car ever manufactured. Tesla sells so well because the message it relays is the the driving force for customers, but it’s not all about the look. Musk says, “It is more than just a company, it is more than just a product. There is a cause there that really matters”, and this is something that all consumers know. The Model S is often compared to the Chevy Volt and Nissan LEAF because they are the top three selling all-electric or extended-range electric cars (IEDC 3). However, it attracts a completely different type of buyer. On average, Tesla owner are younger and wealthier than owners of the Volt or LEAF. Customers are not particularly price-sensitive and seem to typically place a premium on service and design, making Tesla’s main competition luxury vehicles rather than electric.

Tesla Motors Inc. Company Analysis 22 Tesla Market Analysis Market Segmentation The company has adopted a geographical segmentation approach. The company has three geographic markets, North America, Europe, and Asia. North America has remained the largest segment of the company sales accounting to 77% of the total revenues generated by the company (IEDC 4). Europe is the second leading in terms of sales generated by the company. The company has focused on countries such as Switzerland, Denmark, and other Scandinavian countries. In Asia, the company has started rolling out some of its products in Japan and China. The diagram below captures Tesla Market Segmentation.

Tesla Product Targeting and Positioning The company targets high-end users in the luxury segment of the automotive industry. By differentiating itself from the existing brands, the company has proved that electric vehicles are possible by offering models of electric vehicles that are fun to ride and comfortable to the user. To control the market, the company has segmented its target market into four sections: the BlueStar, the WhiteStar, the Roadster, and Future models (IEDC 2). The segment values are represented as follows:

Tesla Motors Inc. Company Analysis 23

Adopted from, PriceWaterhouseCooper, 21. The company has positioned itself in the market through the zero emission and environmental friendly tag. By embarking on environmental awareness, the company products use 100% renewable energy, and are better for the world economy. Some of the benefits associated with company products include, zero gas price, tax incentives in selected states, single-occupancy access to car pool lanes, discounted electrical rates, free parking at LAX and other airports, no parking meter fees, and the reduction of oil dependency in the world. New Markets China offers one of the most reliable markets for the company. Contemporary statistics indicate that china is the largest automotive consumer in the world. Equally, it is the largest world green house gases emitter. Consequently, statistics show that it is the largest growing luxury vehicle market across the globe (IEDC 4). China therefore offers a great opportunity for Tesla. Recognizing this opportunity, the company has already began establishing its presence in China. However, the company faces major challenges in the Chinese market because of import duties imposed on foreign vehicles. For example, the current model S is priced at $120,000 approximately 50% more than the prices in the U.S (Price Waterhouse Cooper 12). These prices position Tesla at the middle in the luxury brands in China.

Tesla Motors Inc. Company Analysis 24 New Products To capture the low-end consumer market, the company has announced that it will be releasing a third generation model of EV by 2017. The car is estimated to cost an estimated $35,000. The new model comes as a response to the current gap on the low-end market. The company has also announced that it would be releasing its Model X cross over by 17 but commercial production will commence on 2018 after the estimated launch and full operation of Gig factory. Consequently, the company has announced release of new domestic power batteries costing $3,500 and $2,000. The entry into the new domestic market as explained by the CEO is in tandem with the company goals of transitioning the world into green energy (Tovay 3). However, to have an advantage in the market, with other companies that have stronger brands and are good at utilizing the current technology to produce cheap yet competitive products as well, Tesla would have opted for a model that costs even lesser than the proposed new car of $35,000 (Tesla Motors 14). The low-end consumer market does not prefer extravagant and leisurely components of a car, and the company can reduce the leisurely components of the new product, which will subsequently reduce the costs of production, and allow the company to introduce in the market, a product much cheaper than the $35,000 car announced. Tesla’s Marketing Strategy and Current Customers by Segments Tesla Motors Company is often attracting much fanfare among the customers and the investors as well. It has long-term fundamentals hence EVs are here to stay and the company holds an enviable position in this market. It has never disappointed investors and has been outperforming the legacy carmakers’ stock by a huge margin. However, the prices for EVs have continued to be prohibitive in spite of the increased technological innovations as well as the

Tesla Motors Inc. Company Analysis 25 massive government dole outs. A section of the market has been having reservations on the longterm utility that can be obtained from the EVs. It has been argued that they are not environmentally friendly as the deadly fossil fuels always go into the electric generators used to run the vehicles. Others do question its soaring valuations although Tesla may not be valued with the same metrics used for many automobile companies such as Ford and General Motors. EVs are not a new concept and most companies have it on their portfolio. Nissan’s Leaf was the best selling electric vehicle in 2014, where the automaker managed to sell 60,000 units (Little 14). Tesla is striving to deal with challenges surrounding the EV industry including range anxiety. No one wants to purchase a vehicle that runs out of power or energy faster with no place to recharge the battery. The company has been able to address the issue by providing a driving range of more than 250 miles in excess (Bloomberg News 3). It has been on the verge developing superchargers that will be of help to those driving over long distances. The company has made this possible by choosing strategic places for the charging program. Busy places have been chosen to reach out to several clients and in a way market the new items being introduced by the firm. Tesla has adopted a differentiated strategy in selling its cars whereby the customer books the car online hence does not need to visit a dealer. It also offers its potential customers a drive test, which acts as a contact point with the customer.

Tesla Motors Inc. Company Analysis 26

Adopted from Little (13) Tesla is experiencing competition in the area it has chosen as its major segment. Several models from the traditional automobile manufacturers offer viable alternatives to the current Tesla models in the market. Their competitors are expected to introduce EVs as well as the Plugin hybrids that will compete with Tesla Model 3 in the mid-price segment (Little 14). It should thus take caution while coming up with the new designs that will compete effectively in the market.

Tesla Motors Inc. Company Analysis 27

Adopted from Little (16) Product Mix and Marketing Activities Tesla’s current product mix is comprised of vehicles and accessories. At present, the only car in their lineup is the Model S sedan. The Model X crossover will be released within the next year, and Tesla is currently planning a smaller, less expensive car expected the next few years. The Tesla Roadster, which is no longer produced, is available for purchase in pre-owned form (Little 14). Accessories include vehicle accessories and apparel. Tesla’s largest source of advertising comes from its brick-and-mortar showrooms, not advertising and media campaigns. Tesla strategically places its “dealer” showrooms in large areas of shopping such as malls and high-endretail clusters. It causes a lot more foot traffic simply walking by, and actually going in and checking out the showroom than typical car dealerships. This in itself is a key marketing tool that helps

Tesla Motors Inc. Company Analysis 28 Tesla gain brand awareness. Tesla’s marketing team is currently comprised of only seven people. As of late, Tesla does not have any plans to run any traditional or new media advertising campaigns in the near future. The 4 Ms of Advertising Market: The target market for Tesla is middle aged affluent consumers who tend to balance high end luxury goods with social responsibility, or being green. The demographics of this market segment do not affect how Tesla conducts business as who is driving the car is not so much important as whether or not they can afford to drive the car. Geographically some consumers may not be as interested in Tesla’s products because a lack of charging stations. Yes, you can charge the car at home but some may wish to charge on the go. Motivation: Consumers are interested in buying Tesla’s products because of the brand image and reputation. Tesla is known as a prestigious and luxuries brand that comes with a life style and has a high perceived value from consumers. With that being said, what motivates them is the image they will posses when driving their vehicles. In that consumer’s social group they will be seen as environmentally friendly with very good taste as the cars look very sleek, sophisticated and modern. Lastly, another motivating factor is the safety behind the vehicles. The Tesla Model S has received the highest safety rating of any car ever manufactured in the world! Message: The company’s marketing communications should really follow the way the brand has been positioned. How your message comes across with what you’re saying, how your saying it and where your saying it should all coincide with the portrayed lifestyle that consumers see as engrained in the brand. Media: We believe that Tesla does need to work on its marketing a little bit. It is a very small department and Tesla could use more employees to help out with their marketing

Tesla Motors Inc. Company Analysis 29 and rely less on customer advocacy (Bloomberg News 2). To do this we would suggest they start doing more commercial advertisements on channels their target market is most likely to be watching, like major news stations. Also we believe it would be a good idea for Tesla to do more with print and digital marketing. They should be placing ads in for example, Forbes magazine, Wall Street Journal, and maybe even National Geographic. With their digital ads we believe they would have success not only on these companies websites mentioned above, but also maybe advertise on major search engines like Google. Conclusion Tesla is arguably the leading green energy automotive manufacturer in the world. The company has previously focused on the high-end segment of the automotive industry. However, the company has diversified to domestic and low-end segment of the market. A few weeks ago, the company launched the first lithium battery options for domestic customers. Additionally, the company has planned to release the first low end EV by 2017, which will compete with other green vehicles in the low-end segment of the automotive industry. One of the main success factors in the market is its vertically integrated value chain. This allows cost reduction and promotes quality control. Cost is one of the main challenges facing companies operating in the premium segment of automotive industry; with an integrated and water tight value chain, the company is able to control cost and quality of the products at the same time. However, the company faces major strategic challenges. Key among them is the ability to guarantee sufficient battery supply as customer demand balloons. The huge shortage of lithium-ion cells is a major challenge to the company production. While the company has the merits of strategic partnership, the sustainability of lithium-ion batteries remains a major challenge to the company.

Tesla Motors Inc. Company Analysis 30 Works Cited Bloomberg News, Goldman Sees Tesla Consuming Up to 17% of Lithium Output.” Web. Accessed from, http://www.bloomberg.com/news/2014-02-28/goldman-sees-teslaconsuming-up-to-17-of-lithium-output.html Brenan, Morgan. Tesla and Elon Musk's 'major new product line'—is it a battery? CNBC News, 2015. Accessed from, http://www.cnbc.com/2015/03/31/tesla-and-elon-musks-majornew-product-line-is-it-a-battery.html International Economic Development Council. Creating the Clean Energy Economy: Analysis of the Electric Vehicle Industry. International Economic Development Council 2013. Print. 2-36 Little, Dan. Battle for Sales in the Premium Segment: Six Key Levers Impacting Current Automotive Sales Models”. Automotive Viewpoint, 2015. Print. 2-15 Price Waterhouse Cooper. State of the Plug-in Electric Vehicle Market. EV Market Outlook. Pw| C, 2014. Print. 1-40 Tesla Motors – Annual Report 2009, 2010, 2011, 2012, 2013, 2014. Tesla Motors, 2014. Print. Tovey, Alan. Tesla's economy Model 3 electric car to hit the road in 2017. The Telegraph, 2015. Accessed from, http://www.telegraph.co.uk/finance/newsbysector/industry/engineering/11841624/Teslaseconomy-Model-3-electric-car-to-hit-the-road-in-2017.html Yahoo Finance. TSLA. Accessed from, http://finance.yahoo.com/q?s=TSLA APPENDIX I

Period Ending

Tesla Motors Inc. Company Analysis 31 Mar 31,

Dec 31,

Sep 30,

2015

2014

2014

Jun 30, 2015 Total Revenue

954,976

939,880

956,661

851,804

Cost of Revenue

741,606

679,807

694,964

599,953

Gross Profit

213,370

260,073

261,697

251,851

181,712

167,154

139,565

135,873

201,846

195,365

196,970

155,107

Non Recurring

-

-

-

-

Others

-

-

-

-

Total Operating Expenses

-

-

-

-

Operating Expenses Research Development Selling General and Administrative

Operating Income or Loss

(170,188) (102,446)

(74,838)

(39,129)

(22,121)

(369)

(2,792)

(156,708) (124,567)

(75,207)

(41,921)

28,703

29,061

(103,910)

(70,982)

Income from Continuing Operations Total Other Income/Expenses 13,480 Net Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Minority Interest

24,352

26,574

(181,060) (151,141) 3,167

3,040

3,719

3,727

-

-

-

-

Tesla Motors Inc. Company Analysis 32

Net Income From Continuing (184,227) (154,181)

(107,629)

(74,709)

Ops Non-recurring Events Discontinued Operations

-

-

-

-

Extraordinary Items

-

-

-

-

Effect Of Accounting Changes

-

-

-

-

Other Items

-

-

-

-

Net Income Preferred Stock And Other

(184,227) (154,181) -

-

(107,629) -

(74,709) -

Adjustments Net Income Applicable To (184,227) (154,181) Common Shares

(107,629)

(74,709)