Competitive Analysis of Tesla Motors

Outline

Outline

1. Introduction

2. Case for the Electric Car

3. Internal Rivalry

4. Barriers to entry

5. Substitutes and complements

6. Supplier Power

7. Buyer Power

8. Strategy

Tesla MotorsTesla Motors

• California based start-up company

• Developed a high performance electric sports car

• Initial funding ($60m) provided by PayPal, eBay and Google Founders

• Car does 0-60 mph in about 4 seconds

• Car can travel 250 miles between charges

• First 100 vehicles have been sold at the asking price of $100k

Industry FactsIndustry Facts • Transportation accounts for 63% of Oil

Demand

Industry FactsIndustry Facts

Industry FactsIndustry Facts

• US Automobile Industry represents 5% of Private sector GDP

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

• 18% of sales are from Japanese car makers

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

• Hybrid sales represented 1.2% of the market in 2005, 1.6% in 2006 (est).

• Forecasts estimate 5% of car sales will be hybrids by 2013

Market DefinitionCase for the Electric Car

• Environmental friendliness and low emissions

• High performance

• Improved battery technologies and driving range

• Electric cars are more energy efficient than gasoline cars.

Tesla MotorsEfficiency vs. Performance

Internal Rivalry

A green vehicle:• Reduces consumption of petroleum• Uses renewable energy sources • Has Low emissions• Is Fuel efficient

Within the “green vehicle” market there are four types: • Electric Vehicles• Flexible-Fuel Vehicles• Hydrogen Vehicles• Hybrid Vehicles

Internal Rivalry

Internal RivalryGM EV1 – Early Electric

Internal RivalryHonda Insight – Early Hybrid

Internal RivalryToyota Prius - Hybrid

Internal RivalryTesla Roadster - Electric

Internal RivalryVenturi Fetish - Electric

Entry

Barriers to Entry

• Economies of Scale

• Regulation Issues

• Technological Innovations

• Brand Loyalty

• Infrastructure

Substitutes

• Hybrids

• Flex Fuel

• Hydrogen

• Diesel

• Compressed Natural Gas

• Mass Transportation

Substitutes

Energy EfficiencyEnergy Efficiency

Energy EfficiencyEnergy Efficiency

ComplementsComplements

• Government tax breaks

• Utility incentive programs

• Free Parking at Airports

• Single Occupancy use of carpool lanes

• No parking meter fees

• 50% discount by California utilities for changing electric cars

Supplier Power

• Lotus main outsourcing partner

• Lotus is providing chassis, body and building Tesla Roadster at Lotus factory in England

• AC Propulsion drive train

• Lithium Ion battery

• Flexibility to adopt new technologies

Supplier Power

Buyer PowerBuyer Power

• Ability of buyer to extract profits from seller

• Green market is emerging

• Buyer power is limited due to lack of competition

Buyer PowerBuyer Power

Implementation Phase

Vehicle

Technology

Market

Competiti

ve vehicle

Penetration

across new

vehicle

production

Major

Penetration

Total Time

for impact

Turbocharged

Gasoline Engines

5 years 10 years 10 years 20 years

Low Emission

Diesel

5 years 15 years 10-15 years 30 years

Gasoline Hybrid 5 years 20 years 10-15 years 35 years

Hydrogen Cell

Hybrid

15 years 25 years 20 years 55 years

ConclusionConclusion

• Short to medium term strategy

• Sell 100 Roadsters

• Create recognizable product

• Self funding of future expansion plans

• Change opinion of electric vehicles

ConclusionConclusion

• Long term strategy

• Focus on brand recognition

• Cost optimization

• Compete in mass market

• Build infrastructure

ConclusionMartin Eberhard, CEO

“There have been tons and tons of companies, for the last 40 years that have tried to make little commuter electric cars. The trouble is that, for the most part, it requires the buyer of such a car to change his or her nature. You’re buying a car that is not as good as an equivalent gas car at all—slower, uglier, with not as much range—and they’re trying to compete essentially on price, where they can’t win. None of those cars were built for people who really like to drive. I get the feeling they’re for people who don’t really think you should be driving, but think if you do have to drive, it should be an electric car. I think if you build a car for people as they are, not requiring them to change their nature, it’s much more likely for you to succeed. And I think our investors agree.”