TESLA MOTORS INC. Competitive Position Analysis & Future

Growth Strategy

CSTR_Group F11 MOONIS AHMED, MANISH AGARWAL, NIKHIL RATANPAL, HARSH SUREKA

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TABLE OF CONTENTS

1 Executive Summary ......................................................................................................................... 2

2 Automotive Industry and Tesla Motors .......................................................................................... 3

2.1 History – The Early Years......................................................................................................... 3

2.2 Tesla Motors ........................................................................................................................... 3

2.3 Current Market Scenario......................................................................................................... 4

3 Industry analysis: Electric cars ........................................................................................................ 5

3.1 Electric Car Industry Structure before Tesla opened up its patents ....................................... 5

3.2 Electric Car Industry Structure after Tesla opened up its patents .......................................... 6

4 Financial Analysis and Investor’s view ............................................................................................ 7

5 Tesla’s Competitive Advantage ....................................................................................................... 8

5.1 Innovative Lithium ion batteries ............................................................................................. 8

5.2 Large Network of Supercharger stations ................................................................................ 9

5.3 Unique direct-to-customer selling model ............................................................................... 9

5.4 Development of Lithium ion cells ‘Gigafactory’ .................................................................... 10

6 Tesla’s strategy to sustain market leadership .............................................................................. 11

6.1 All Our Patent Belong To You – An act of philanthropy or a strategic game changer? ........ 11

6.2 Joint Ventures ....................................................................................................................... 14

6.3 International Expansion ........................................................................................................ 14

7 Conclusion ..................................................................................................................................... 15

8 Bibliography .................................................................................................................................. 17

9 APPENDIX: One Page Project Outline ........................................................................................... 18

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1 EXECUTIVE SUMMARY

The following company report talks about the strategic plays that Tesla Motors has employed

to gain a competitive advantage in the electric vehicle segment of the automobile industry. It

has effectively played a new game strategy creating a niche product and a position for itself in

the market. Tesla has turned its lack of knowledge into an advantage by going for a new electric

drivetrain for its vehicles and a unique direct-to-customer selling model. This has enabled it to

provide an end-user experience unmatched by any existing automobile manufacturer.

Tesla has been successful because of innovation in product and supply chain. Electric hybrid

vehicles were already present in the market when Tesla entered but the innovative Lithium-

ion battery packs developed by Tesla are more efficient compared to the competitors. The

company has also developed a whole ecosystem with huge investments in the setup of

Supercharger stations and with projected further investments and government incentives, the

electric vehicle (EV) market is destined to take off. The setup of a ‘Gigafactory’ for production

of Lithium-ion cells on a large scale, will help Tesla become one of the largest cell manufacturer

in the US and a potential supplier to other EV automobile manufacturers.

The opening up of the patents might be a dangerous move but Tesla could potentially convert

its competitors into collaborators and reduce the EV manufacturing costs. We feel Tesla has

identified that it cannot develop the whole ecosystem of EVs on its own and needs partners.

However, with its first mover advantage in the R&D of EVs and move towards being a battery

producer, it will still be able to secure a key position in the future EV market. This is reflected

in the stock price of the firm which is on a growing path despite low earnings per share.

Investors are confident in the strategies employed by Tesla and believe in it to become a

market leader in future.

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2 AUTOMOTIVE INDUSTRY AND TESLA MOTORS

2.1 HISTORY – THE EARLY YEARS

Rising fuel costs, fear of exhausting fuel supplies and a growing concern for air pollution

resulted in the re-emergence of electric vehicle prototypes in the 1960s and 1970s such as the

Vanguard-Sebring CitiCar and the REVA. Better versions of electric cars arrived over the next

two decades with GM's EV1 making it to production but proving infeasible to mass produce.

2.2 TESLA MOTORS Tesla Motors was set up in the heart of Silicon Valley in Palo Alto, CA in 2003. The firm was

established with the commitment to develop only fully-electric vehicles. Elon Musk, the

billionaire CEO of the Tesla Motors, is one of the primary driving factors behind its success.

Tesla Motors unveiled the ultra-sporty Tesla Roadster at the SF International Auto Show in Nov.

2006. While the model’s design was not unique, Tesla’s electric drivetrain technology was

revolutionary. It was the first vehicle to use lithium ion technology and was the first all-electric

vehicle to travel more than 200 miles on a single charge. Tesla proved that electric engines can

be extremely powerful and can provide acceleration well in excess of their petrol powered

rivals. The base price of the car in USA was around $109,000 targeting the premium segment.

Sales volumes of electric and hybrid cars in the USA was significantly hit by the economic

downturn of 2008. However sales picked up in 2012, when the country’s economy stabilized,

governmental regulations shifted in favour of high efficiency vehicles and gasoline prices rose.

The Model S sedan, launched in June 2012, is the current flagship vehicle for Tesla. It comes

with options of a 60 or 85 kW battery pack, allowing a mileage of 208 to 265 miles. It is priced

between $70,000 and $100,000 in the USA, again targeting the premium segment.

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2.3 CURRENT MARKET SCENARIO

The mile per gallon (MPG) standards for passenger cars under CAFE (Corporate Average Fuel

Economy) in the US remained static between 1990 and 2010. However, CAFE passenger car

MPG standards rose sharply in 2011 and 2012. This prompted manufacturers to begin offering

a wider array of alternative fuel and hybrid vehicles in the US in order to comply with the rising

standards. Under new agreements finalized by the Obama administration in August 2012, MPG

standards are set to rise steadily between now and 2025. Consequently, it is essential for

manufacturers to look to hybrid and electric vehicles in an attempt to increase the average fuel

efficiency of their vehicles, releasing more of these vehicle types in the US market.

The return to relatively high gasoline prices in the US in 2011 had a positive effect on the hybrid

market: the market returned to rapid expansion in 2012. Higher gasoline prices drove price-

conscious motorists towards purchasing hybrid and electric cars, as potential running cost

savings increased, justifying the typical premium paid by consumers at the purchase of hybrid

and electric cars.

Toyota is the clear leader in the Hybrid and Electric car segment in the US, with a 2013 market

share of 58.2% in terms of volume. It offers both plug-in mid-range sedans as well as premium

EVs under the Lexus brand. Ford has been in the ascendancy in recent years: its share of the

US hybrid segment has increased significantly, and it has also seen similar success in the plug-

in segment. However in 2013, Toyota’s market share was almost 9% lower than for the whole

of 2012. Consequently, strong sales of Ford, Nissan and Tesla plug-in vehicles have eroded

Toyota’s overall market share. It will be interesting to see how the industry will shape up in the

coming years with new and small players like Tesla trying to leapfrog the incumbents in Toyota

and Ford.

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3 INDUSTRY ANALYSIS: ELECTRIC CARS

Founder – Elon Musk’s vision for Tesla is to become an independent car maker and offer

electric cars at affordable prices to the consumer but there were significant roadblocks to

achieving this dream. An industry analysis using Porter’s 5 forces of the Electric car Industry

before and after Tesla move to open up its patents shows the ingenuity of the strategy of Tesla

to change the entire game that they were playing and turn competitors into collaborators and

their major weaknesses into their major strengths. The strategy is very similar to what Android

has done to Apple.

3.1 ELECTRIC CAR INDUSTRY STRUCTURE BEFORE TESLA OPENED UP ITS PATENTS

Rivalry (Very Low)

* Existing car manufacturers tried to come with electric cars but got limited success

* Currently no major players in the electric car industry

* Most of the cars manufactured are gasoline based.

Potential entrants (Low)

Buyer power (Moderate)

Substitutes

(Very High)

Supplier power (Very High)

Battery suppliers (Differentiated and few

players)

Super charging network (Very few players)

Component suppliers (Very few)

Electric vehicle Power train (viable

technology for cars developed and known

only to Tesla)

Highly Segmented

Differentiated product

Quality (Mileage, battery cycle, comfort,

style) are of high importance

Low switching cost

High cost and the safety risks associated with

batteries and high amount of time required

to recharge the battery make electric cars

unattractive compared to its rival gasoline

cars. Efficient technology not available

Heave infrastructure required to develop

charging stations (like gasoline stations)

Only 1% of the total cars manufactured are

Electric cars even though electric cars have been

known for more than a decade the industry could

not take off because of the high risk of substitutes

from the gasoline cars.

Gasoline car manufacturers have the advantage

of efficiency of scale because of mass

manufacturing and low cost of supporting

infrastructure like gas stations and give tough

competition to manufacturers of electric cars

which is in the nascent stage

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Though the competition was low and Tesla was the leader in Electric car industry, the huge

supplier power of electric car component suppliers (a lot of them single suppliers for auto-

components for Tesla), limited super charging stations and battery manufacturers and the high

risk of substitutes from gasoline cars made the industry unattractive for Tesla even with a huge

competitive advantage because of its innovative technology.

3.2 ELECTRIC CAR INDUSTRY STRUCTURE AFTER TESLA OPENED UP ITS PATENTS

The move significantly lowered the barrier of entry of existing car manufacturers to enter into

the electric car industry and collectively develop the infrastructure to support the electric car

market. This effectively converted their major competitor i.e. the gasoline car makers to join

Rivalry

Moderate/High (Increasing)

* Existing car manufacturers started entering into the electric car market

* Currently there are globally 29 companies making electric cars.

Potential Entrants

(Moderate -Increasing)

Buyer Power

(Moderate)

Substitutes

(Moderate-Decreasing)

Supplier Power

(Moderate-Decreasing)

Battery suppliers (Increasing)

Super charging network

(Increasing)

Component Suppliers

(increasing)

Electric vehicle Power train

(technology known to everyone)

Commodities like steel etc.

(easily available at competitive

prices)

Highly Segmented

Differentiated product

Quality (Mileage, battery cycle,

comfort, style) are of high

importance

Low switching cost

Opening up the patents by Tesla made

the technology available to everyone.

Incumbent gasoline car manufacturers

could use much of their existing

expertise in manufacturing cars

Opening the patents decreased the threat of

substitutes significantly as manufacturers of

gasoline cars themselves started making

electric cars and trying to convert the existing

market.

For the first time, Electric cars recorded higher

sales growth that gasoline cars.

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Tesla in meeting their vision to make economic electric cars available to the consumers. This

also increased the number of suppliers for high efficiency batteries and auto-components.

Though Tesla’s moves came as a surprise, it was well appreciated by most of its investors (~10%

increase in share price after the announcement) and resulted in other top car manufacturing

companies showing interest in making supercharging stations and developing batteries.

“Tesla makes electric cars, and will only succeed if the entire electric-vehicle industry

succeeds.” – Newyorker.com

4 FINANCIAL ANALYSIS AND INVESTOR’S VIEW

In the last 4 years Stocks of Tesla

have grown by more than 1000%.

More interestingly the company

grew by around 350% in the

calendar year 2013 alone and has

already grown by more than 50%

in the current year in spite of

having negative profit figures. This

can be primarily attributed to the huge success of Model S by Tesla whose delivery started in

June 2012 onwards and the perceived future potential of the company. Tesla revenues grew

by more than 400% in the year 2013 (see below table for actual figures). The journey however

has not been smooth sailing for

the company with news of the

car catching fire on a couple of instances.

Key Financial Fig. 2012 ($ million) 2013 ($ million)

Revenue 2013.5 413.2

Operating Margin -61.3 -394.2

Net Margin -74.0 -396.2

% Growth in Tesla (NASDAQ: TSLA) (Finance.google.com)

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5 TESLA’S COMPETITIVE ADVANTAGE

Tesla Motors’ source of competitive advantage comes from its ability to use an existing

technology in a more efficient way. They have differentiated themselves from their

competitors in the automotive industry by revolutionizing the lithium ion batteries to hold

more charge and in effect, provide better mileage compared to conventional hybrid or plug-in

based electric vehicles. The performance figures generated by Tesla’s batteries is unmatched

in the automotive industry. Besides the batteries, Tesla has developed a robust and unique

value chain ecosystem around its cars which provides better value and end-user experience to

customers.

5.1 INNOVATIVE LITHIUM ION BATTERIES

While competitors discussed the long-term viability of the lithium ion battery and debated on

its feasibility, Tesla Motors launched their cars with it and entered a market where there were

few competitors. Hybrid cars were in production before their entry but Tesla was the first to

introduce cars reliant fully on battery power. To gain a lead over competitors, Tesla made

highly efficient battery pack to give cars a better mileage. By compacting thousands of highly

efficient Lithium-ion cells into a liquid-cooled battery pack Tesla created highest energy density

batteries in the industry.

Despite the highly compact

structure and weight (450

kg), the battery pack is tuned to provide reliability, efficiency and safety. As a result, the

performance figures are at par with industry leaders.

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Competitors can imitate this technology but Tesla has a significant first mover advantage. A

new model development for an established automaker can take anywhere from 1 year (e.g.

Toyota) to a decade (Mercedes & BMW) besides having significant fixed costs investment.

5.2 LARGE NETWORK OF SUPERCHARGER STATIONS

Tesla’s electric vehicles require long charging durations for the batteries. A full charge of a Tesla

car from home plug takes around 12 hours but 40 minutes from a Supercharger station. Still it

is comparatively long to conventional fuel based vehicles. So Tesla Motors has offered the

option of switching batteries at the Supercharger station with a fully charged one. Moreover,

for the premium car model owners, this service will be fully free. This significantly reduced the

cost of vehicle ownership and gives them a competitive edge over rival electric, hybrid or

gasoline-based car makers. The only downside is the low number of these stations in the US.

Currently at 37 this doesn’t pose much problem for existing owners but with increasing in EVs

on the road, this might become an issue. Tesla plans to increase the number of its service

stations by 75% and Supercharger stations by 200 globally this year.

However, Tesla does not have to be the only one developing the supercharger stations.

Because of Tesla’s opening up the patents, other automakers will not only develop cars but will

also have to develop the supporting infrastructure. In the long run, this might substantially

decrease Tesla’s investment costs. Given the small size of the EV market, it doesn’t make sense

for a rival competitor to make proprietary charging stations as it could, in effect, kill the market.

5.3 UNIQUE DIRECT-TO-CUSTOMER SELLING MODEL

Tesla has played a differentiation game by focusing on providing a unique consumer

experience by selling directly to the end users without the middle man route of dealership.

Customers get to customize their car before purchasing online. Tesla runs over 50 stores

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worldwide and because of full control over its operations, gets to maintain the same level of

customer service at these locations. Transferring ownership to dealers might put Tesla in a

disadvantage as it might not be able to control the service level. Maintaining a similar level of

customer experience is an intangible benefit which competitors cannot imitate easily.

Moreover, for the competitors, there are significant costs involved moving away from their

current model to imitate Tesla’s.

However Tesla is facing legal troubles in their online selling model from dealer associations in

the states of New Jersey, Texas, Colorado and Arizona with ongoing lawsuits in other states.

The problem is exacerbated for Tesla because these dealers enjoy political clout and could

influence regulations against Tesla (as seen in the state of New Jersey where the National

Automobile Dealers Association played a key role in the ban on Tesla’s direct to customer

approach). But the Federal Trade Commission (FTC) in US supports Tesla’s model and finds it

legal. It will be a challenge for Tesla to see how long they can sustain this online model of selling

to customers given the current challenge from dealers.

5.4 DEVELOPMENT OF LITHIUM ION CELLS ‘GIGAFACTORY’ Tesla is gradually shifting its strategy from being a

niche player to follow a rather blue ocean strategy.

After creating a unique product in Tesla cars, it is

focusing on reducing the costs of manufacturing

thereby reducing the prices of its products and

make the cars more mass market. Another reason

is that to recover its large fixed costs investment in

supercharger stations, it needs to boost sales but sales have not been able to meet the demand

Battery Pack costs forecast. Source: The Economist

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because of slow production of Li-ion cells. To mitigate this risk, Tesla plans to launch a

‘Gigafactory’ by the end of 2017 to minimize the crunch of supply-demand gap of Li-ion cells.

It has already raised 2 bn US$ by issuing a convertible bond for the factory and human resource

requirements and even Panasonic has promised investment in the setup. Tesla aims to reduce

car manufacturing costs by up to 30% with development of more efficient batteries and in large

numbers. Their current battery costs per car stands at $300 per kWh which is already

substantially lower than competitors’. Proprietary designed batteries will help them bring their

cars to the market faster compared to automakers that rely on a third-party battery supplier.

With the opening up of the patents, while competitors will be focused on producing EV models

of their own, Tesla plans to setup up the factory to become a supplier of battery pack to these

automakers when the competitor models finally roll off the line. Moreover, as demand for

more efficient electric vehicles will go up, automakers will look towards going into joint

ventures with battery makers such as Tesla to secure raw material supply. Because of these

measures, Tesla will be in a strong position to be a market leader in Li-ion cells manufacturing

and supply. Reduced costs of manufacturing and reduced prices of cars will increase the

competitive edge of Tesla and make its cars a viable substitute for conventional oil-based cars.

6 TESLA’S STRATEGY TO SUSTAIN MARKET LEADERSHIP

6.1 ALL OUR PATENT BELONG TO YOU – AN ACT OF PHILANTHROPY OR A STRATEGIC GAME

CHANGER?

On June 12, 2014, Elon Musk surprised all by announcing that Tesla will open its patents to all

and will not initiate lawsuits against anybody who is good faith wants to use the technology.

Tesla’s patent policy reversal comes as a surprise, as Tesla has been developing its $5 billion

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battery factory in recent months and many have thought the company would make much of

its money on its battery technology intellectual property.

Musk says that the new policy’s goal is to provide impetus to the advent of sustainable

transport and stem climate change. Tesla’s competitors can now freely take advantage of

its batteries, chargers, or sunroofs. These market disrupting innovations have lowered the cost

and increased the safety of battery packs. Its cars recharge much faster than others on the

market, thanks to connector, software, and power-management advances. Now Tesla intends

to offer these innovations to the entire industry asking for nothing but goodwill in return.

However, is this altruistic action of the Tesla CEO a genuine act of philanthropy or a strategic

game changer for Tesla? We analyze that ramifications of this move on both the EV (Electric

Vehicle) industry as a whole and on Tesla Motors.

Transforming competitor into collaborator: Tesla has realized that its biggest competitors

aren’t EV innovations from other car manufactures. Instead, it’s from the enormous flood

of gasoline cars. Tesla makes electric cars, and will only succeed if the entire electric-vehicle

industry succeeds. It needs an ecosystem comprising other enterprises to help build

charging stations, to improve batteries, and to change the widespread perception that only

the rich and famous can drive these vehicles. Tesla wins if for e.g. its patents help General

Motors improve its batteries, which then leads GM to make more electric vehicles, which

then leads someone else to start a chain of charging stations.

Promoting standardization: If open patents promote standardization, this would imply that

Tesla would be setting the de facto industry standard that other EV manufacturers would

adopt. It would likely mean faster innovation for all as well as cementing Tesla’s position as

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the market leader (as it still holds legal rights to the patents and could use these at a later

stage to gain back the advantage).

Increasing Tesla’s rate

of adoption: It only

delivers a small

fraction of the world’s

automobiles today.

While its cars have so

far been heralded as ground breaking winning several prestigious Car of the Year awards,

its proportion of the world’s automobile sales has been dismal in its seven years of

existence. Opening its patents may encourage other companies to start building charging

stations and other products that would support Tesla’s growth. As Musk puts it, “electric

car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major

manufacturers are small to non-existent, constituting an average of far less than 1% of their

total vehicle sales.”. Tesla is trying to change that.

Achieving greater economies of scale: An electric car is made up of thousands of parts; if

more companies begin using the same ones, the process of putting cars together and

setting up the ecosystem to sustain them becomes simpler and more profitable. For

example, Tesla's patents for its vehicle Supercharging (allowing Tesla drivers to charge half

the car's battery life in about 20 minutes) stations could be shared with other auto makers,

which could help Tesla spread costs and more quickly open more stations.

Attracting human capital: Tesla needs to retain the brightest talent in its attempt to stay

ahead of the innovation curve. If the EV standard is adopted by all and sundry, this will help

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Tesla attract and motivate the world's best technical talent by giving them an opportunity

to work at the mecca of EV technology.

Prima facie, it appears to be a good move by Tesla. However, there are several unanswered

questions. For instance, if Ford or GM were to use the patents to create their own Tesla

knockoffs, would Tesla let that revenue go. What if it’s a rival start-up instead?

6.2 JOINT VENTURES

In addition to raising capital from investors, Tesla has, over the years, entered into several

strategic partnerships with suppliers. We’ve summarized the important ones below:

• Panasonic: In 2010, Tesla entered into an agreement with Panasonic to accelerate its

development of next generation EV cells and also further its battery pack performance. Under

the terms, Tesla uses Panasonic’s battery cells for its newest battery packs because of their

high capacity, light weight, durability and long life. Tesla is also working on completing its

Gigafactory by 2017 and Panasonic has signed a letter of intent to join the project.

• Toyota: In July 2010, Tesla partnered with Toyota Motor Corp. for the development of the

electric version of the RAV4. This deal was aimed at increasing Tesla’s engineering,

manufacturing, and production expertise. However, recent reports suggest that Toyota plans

to terminate the deal ahead of schedule due to lackluster sales. This is good for Tesla as it frees

up more lithium battery packs, translating into deliveries of Model S.

6.3 INTERNATIONAL EXPANSION

Tesla has recently been targeting international markets outside its strongholds in North

America. In 2014, at a minimum, Tesla is expected to focus on a continued push in Europe, and

other emerging markets like Japan, Hong Kong, and Australia. Tesla is looking to install 30 more

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service and sales locations in Europe. It intends to construct a plant in Europe once its electric

cars achieve the sales target of 160,000 units annually in the region. The auto maker also

intends to launch a R&D center in the UK within the next two years and expand its final

assembly factory in Netherlands. In the Asian market too, Tesla intends to raise sales of its

Model S by more than 56% in 2014 by expanding sales to the Chinese markets. Tesla is poised

to invest hundreds of millions of dollars in China helped by various government incentives.

7 CONCLUSION

Tesla’s 'Open source' strategy might turn out to be a masterstroke in the long run. While the

commercial incentive to do is clear: encourage investment and provide fresh impetus in

adoption of electrical vehicles by other manufacturers, the reason for acting now isn’t so.

Possibly, Tesla has realized that it lacks the scale and financial wherewithal to create the

electric car market on its own and is now prepared to loosen its grip on the market.

While Musk’s desire to encourage innovation and the transition to an environmentally friendly

transport system is commendable, we feel, Tesla’s decision is more about securing its position

as a key player, if the not the leader, in the future automobile ecosystem. Much could rest on

Musk’s definition of acting in ‘good faith’. We feel that this is a deft strategy to proclaim that

Tesla’s technology is in fact the de facto standard of EV industry and the very patents that Tesla

claims to offer for free at this point will allow it to play an important role in shaping the industry.

Tesla’s technology adopters will most likely sign license agreements to protect themselves if

Tesla decides to back track. Tesla too may wish to retain some right to enforce their patents in

the future, and to protect future inventions using the patent system.

While this move is a risky one, it certainly does make sense from Tesla’s point of view. The

company’s stock has doubled in the past year, but the industry is struggling. We believe that it

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is Tesla’s strength and innovative business model that will propel it forward, not any reliance

on patent litigation or licensing models. Therefore, opening up its patents in order to evolve

the EV industry, certainly seems to be a stroke of genius for the high flying Elon Musk.

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8 BIBLIOGRAPHY

Why does it cost so much to manufacture cars?

Bloomberg: Tesla’s Direct Sales Push Raises Auto Dealer Hackles - link

Why dealerships should embrace Tesla’s direct sales approach - link

FTC comes out in favor of Tesla. Greencarreports.com - FTC in support of Tesla

Economist: Better Power Packs Will Open Road for Electric Vehicles - Better Power Packs

Hybrid and Electric cars in the US: MarketLine Research

Hoover’s Company Overview – Tesla Motors : Tesla Motors

Tesla: The Californian start-up that made head way on the automotive giants -

http://advantage.marketline.com/Product?pid=ML00013-051

Rise in EV auto financing to spur demand - Rise in EV autofinancing

Gigafactory will provide multiple benefits to Tesla Gigafactory Benefits

Automakers & Lithium producers - Lithium producer partnernship

Electric Cars Timeline – PBS.org – Electric Cars Timeline

Electric cars History - http://avt.inl.gov/pdf/fsev/history.pdf

Passenger Vehicle Industry in US – Q3 2014 - BMI Report

Tesla’s Car Buying Experience : Businesswire - Businesswire Report

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9 APPENDIX: ONE PAGE PROJECT OUTLINE

Company - Tesla Motors Inc.

Research Questions

How has Tesla managed to create a niche product in the automotive world and gained a

competitive position in the industry? How does it plan on sustaining its market position?

Why do we find the issues we have selected to study ‘interesting’ or relevant?

Tesla Motors is an automobile manufacturer involved in producing fully electric vehicles and

powertrains with zero emissions. The core of their product is the batteries that power their

products but the batteries themselves are nothing new which other manufacturers haven’t

been doing. However, Tesla’s batteries significantly outperform those of their competitors in

terms of both mileage and charge capacity. Tesla has used this USP to work towards expanding

the electric vehicle segment of the automotive industry which despite the efforts of existing

giant vehicle manufacturers did not pick up pace until Tesla’s entry. Although Tesla faces a lot

of hurdles from existing competitors and regulations which affects its unique selling approach,

it has managed to grow aggressively and profitably. We would like to evaluate Tesla’s decision

to open up patents to the market and analyse whether Tesla’ strategy is a strategic

masterstroke to sustain its competitive advantage or a blunder.

Research Methodology

Research methodology will focus on what new-game strategy did Tesla Motors effectively use

to gain a competitive advantage and how its competitors have responded to its position. It will

also involve analysis of Tesla’s decision to make their patents publicly available and its effect

on the automotive industry as a whole with respect to Porter’s Five Forces. Data will be

primarily gathered from company financial reports, industry/company overview databases

such as Factiva and DataMonitor, news articles and technology blogs & forums.