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Situation Analysis

Tesla Motors, Inc.

Brennan Price

Table of Contents

Executive Summary
3
Brand/Product Analysis
3
Market Analysis

Competitor Analysis
6
Consumer Analysis
10
Tesla Motors Inc. SWOT
11

Challenge/Positioning Statement
12
Key Insight

12

References

14

Appendices

15

Executive Summary
Tesla Motors has rocked the automotive industry by introducing
the first all electric technologically advanced, luxury vehicles. The
startup company has brought down the novelty of EV while opening a
potential number of new markets for consumers and investors. Pushing
the envelope further, Tesla continues to be a front-runner in the latest
driving technology.
First, my analysis will go over the Tesla Motors brand in-depth.
Next, I will dive into the markets the EV company competes in and
three main competitors. Then, from data gathered, a description of the
typical Tesla customer will form. Finally, I will share some key insight
into the analyzed company.

Brand/Product Analysis
In July 2003 two silicone valley engineers, Martin Eberhard and
Marc Tarpenning, founded Tesla Motors to prove electric cars are a
better choice than gasoline-powered ones. To compete in the
automotive market, their electric car design had to include a large mile
range and offer customers no compromises in switching to electric
vehicles. PayPal inventor and sustainable energy philanthropist Elon
Musk joined Tesla in February 2004, becoming the controlling investor
and overseeing limited engineering operations. From the beginning
Musks idea was to commercialize the electric vehicle and bring
efficient cars powered by sustainable energy into households across
the world.
The first vehicle Tesla produced, the Roadster, was released in
2008. Achieving a range of 245 miles per charge and accelerating from
0 to 60 mph in 3.7 seconds, the Roadster brought a new meaning to
electric vehicle. Although limited production brought the Roadster
number to around 2500, every US model sold out within months of the
release. Tesla (Roadster) is the first maker to crack the EV legitimacy
barrier in a century. (Motor Trend) In 2012 Tesla launched the worlds
first all electric luxury sedan, better known as the Model S. With three
battery-pack choices and the option of dual motors, which enables allwheel drive capabilities, the Model S is now bringing in 270 miles per
charge. The P90D Model S with Ludacris Mode creates 762 horsepower

and accelerates 0 to 60 in 2.6 seconds, making it one of five street


legal cars in the world to break 1.0g of force during initial acceleration.
Although there are few competitors in theluxury EV market, Tesla
competes with high-end brands, hybrid and gas alike. BMW and
Mercedes Benz answered back by offering compact luxury electric
models. Companies such as Porsche and Aston Martin are soon to
follow suit.
Today Tesla has just begun to roll out its Model X, the worlds first
all electric SUV. Similar to the Model S in chassis and battery options,
the X offers more seating and extended space. With the future in mind,
Tesla plans on releasing the Model 3, around 2017. This third vehicle in
the companys line-up will be smaller; more compact and feature a
price tag for the average income. Once again, the new battery
powered car will include a range of around 250 miles per charge
(Tesla). With persistence in replacing fossil fuel with electricity, Tesla
continues to press forward with battery research and vehicles to
outperform the gas dominated car industry. In preparation for
increased sales, the EV guru Musk, has started construction of a GigaFactory. The plant will support the high rate of battery production
anticipated for the companys future car.
Tesla is a publicly traded company with 10,161 current
employees. The EV revolution leader generated 6,500 U.S. jobs in
corporate facility projects, the most of any company. (Galegroup)

Expanding at a rate of 73.4% in the year 2015, Tesla shows little signs
of slowing down its growth. In 2013, Tesla sales totaled just over two
billion dollars. (Hoovers) The all-electric vehicle company caters to
affluent customers with a green and tech-savvy mindset. Throughout
the world Tesla is known as the first company to single handedly
disrupt the car market with an electric vehicle. Offering more that just
a green car, Tesla strives to reinvent the meaning of eco-friendly
vehicles.

Market Analysis
Of the 61,218 electric battery cars sold in 2014 throughout the
U.S., 16,550 were Teslas. This data tells us that Tesla owns roughly
twenty-seven percent of the battery car market. (Hybridcars)
16,550
61,218

= 0.2703

In 2015, Tesla outsold the competition in the large luxury car market.
Of the 99,198 cars purchased, the Model S sold 25,202 leading the SClass the Mercedes last year of 21,934. Of the large luxury car market,
Tesla owns more than 25%. Mercedes however, also has the CLS-Class
bringing in a figure of 6,152 nationwide and totaling sales in the
market to 28,086. (Evobsession)
Tesla Market Share
25,202

= 0.254

Mercedes Market Share


28,086

=0.283

99,198

99,198

Tesla operates by directly selling its products to its customers


online eliminating dealerships, which is different from any other
manufacturer. Whether you build your Model S from home or one many
design studios, your Tesla is made with the options you choose. In turn
this means no middleman, no dealers, no salesman. The price you see
online is the price you will pay for your selected options. Tesla,
therefore, retains one hundred percent of its sales. This method is
illegal in some states, however many have taken the laws under review
and continue in overturning them.
Typically the Tesla uses the pull strategy to entice customer to its
products. Customers want to feel they too play a part in helping save
the planet from global warming. Loading their vehicles with large
screens and autonomous driving, the Model S appeals to the
technology-savvy consumer.

Competitor Analysis
Once again, Tesla is a particularly unusual brand due to its
competition in two completely different markets: luxury cars and
economy cars. For the competitor analysis, I will select two current
competitors: the third top selling battery electric vehicle, the Nissan
Leaf, and the Mercedes-Benz S-Class, which competes with Tesla in the

Large Luxury Car market. Last I would like to analyze a new potential
luxury EV niche competitor Faraday Future.

Nissan
Nissan has been synonymous with affordable vehicles since the
company started Nissan. With a price tag starting just under $30,000,
the Leaf appeals to a larger green-minded consumer number. Few
people can justify spending over $70,000 for a car, much less
$170,000 for a fully equipped Tesla Model S. (Tesla) For younger
generations and lower income households, the Leaf is a much more
affordable choice. On top of price, Nissan has an array of options for
service across the U.S. and world. If you run in to automotive trouble, a
Nissan service center or an automotive technician who is able to make
repairs is relatively close. Being an automotive giant, Nissan has deep
pockets to spend in research and development of lithium-ion batteries
of its EVs range. At 12.9% Nissan hold the majority of the lithium-ion
battery market; Tesla currently owns only 8.4%. (IBISworld) The Leaf
tops out at around 100 miles per charge, which is average for most
batteries in cars today. Unfortunately lack of range places a burden on
the user, who might be switching to an EV from gas powered.
Distances traveled are restricted and this EV becomes an around-town
or commuter car. In 2014, the Nissan Leaf outsold the Tesla Model S,

however, in January 2015, Tesla outsold every EV and again in January


2016
Nissan SWOT
Strengths
Remains one of the top selling EV on the market
Established in the automotive industry
Weaknesses
EV has shorter range
Relies on home charging or secondary charging
locations
Splits focus on gas and electric production
Opportunities
Could be a viable option to other EV
Potential for higher production numbers of vehicles
Threats
Tesla will be offering a lower priced EV to compete
directly with cars like the Leaf.

Mercedes-Benz
Long-time icon of luxury, Mercedes-Benz has been the top choice
vehicle for diplomats and celebrities across the globe. As of recent,
Mercedes has tapped into the same niche as Tesla offering the new BClass, an all-electric compact luxury vehicle. The B-Class is actually
Tesla powered, developed with collaboration from Mercedes. As of
2015, Mercedes plans on challenging Tesla by introducing an all
electric luxury car of their own. Aside from its electric ventures,
Mercedes is in control of the large luxury car market as we can see
from the market summary. Mercedes has yet to offer their fully electric
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luxury car but for many it will be a viable option to a Tesla. Consumers
who have previously purchased luxury cars will be familiar with
Mercedes and its platforms.
Mercedes-Benz SWOT
Strengths
Worldwide established luxury brand
Weaknesses
Relied on Tesla for EV parts, has none of its own
Opportunities
Could offers an alternative to Tesla, both gas and
electric
Threats
Could be left behind in the EV race

Faraday Future
Surrounded in rumors and mystique, Faraday Future casts a
small stone into the EV pond January 2016 at the Consumer Electronics
Show. Suspected of being financially backed by Chinese version of
Netflix and with numerous former Tesla employees, Faraday has only
released a concept for a modern EV sports car. The new company plans
to compete by focusing on a single chassis, which can be configured to
house multiple battery arrays and up to four motors. Much like Teslas
Autopilot, the future car tech company will include autonomous driving
features. Faraday also purposes utilizing a subscription for its products.
Instead of purchasing or leasing a vehicle, customers would pay a
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monthly subscription and be given option for choosing variations of the


body and configured chassis. One day a subscriber could have a SUV
or truck and the next he or she could request a sports car. Although
this may sound enticing, Faraday has yet to release any hard plans and
remains mostly behind closed doors. The latest rumor is that AstonMartin has partnered with Faraday to create an electric version of the
four-door sedan, the Rapid. Tesla has showed the world a start-up
company from silicone valley can compete amongst the largest auto
manufactures. This may create new companies who pose a threat to
Tesla in the long run.
Faraday Futures SWOT
Strengths
Comprised of a large number of Tesla employees
staff members
Utilizes one chassis with different configurations:
ease of production
Weaknesses
So far has produced only a computer generated
concept car unrelated to their plan
Funding is still considered speculative
Opportunities
Possible collaboration with other companies such as
Aston Martin to increase production
Offers a new type of consumer transportation with
subscription
Threats
Commercialization of new consumer vehicles is
relatively hard for start up companies
Teslas battery plant is already in construction

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Consumer Analysis
Tesla's customer demographics tend to be highly educated,
high-income earners. Buyers of the Motors Model S also tend to be a
little younger than typical luxury car buyers, according to polling from
Edmunds.com. 83.9% of Tesla owners are male leaving little female
ownership. 77.3% have an income of $100,000 and over. 33.2% are
ages 18 to 44 years old, while the majority, 50.6%, are 45 to 65 years
old. (Techcrunch)
In several states, the share of used Model S sedans actually
surpasses sales of new ones. The market share of used Model S
vehicles in Washington is 8.9%, nearly double its share of new Teslas.
Florida, Washington, Texas, New Jersey, Arizona, and Nevada all sell
more used Model Ss than new ones. In the used market, California still
has the largest share of new and used Model S sales. But here, demand
for new Model S vehicles outpace demand for used ones. Californias
share of used Model S sales is only 30.5%, compared to its 42.5%
share of all new sales, according to Edmunds, which examined
registration data of all 1,600 Tesla Model S vehicles have ever been
sold in the pre-owned market in the U.S. The Tesla brand has migrated
into different age and earning demographics. Some 36% of all used
Model S buyers earn less than $100,000 a year. Only 25% of new
Model S buyers have salaries under $100,000. (Fortune)

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Tesla Motors SWOT Analysis


Strengths
The only company building charging stations to support its
vehicle
Eliminates dealerships and third parties with online only
sales
Weaknesses
Delayed productions; over promise, under delivers
Fairly new to the automotive industry
Opportunities
Has head start in the EV market
Potential to cover lower income consumers with third
model
Threats

Competition from auto manufacturers which are


established
Competing in two different markets

Challenge/Positioning Statement
The main challenge Tesla faces today is opening up its market to
lower income customers. With Model X and Model S having high price
tags, it is difficult to get the product into the hands of the average
income person. In fulfilling customer satisfaction, Tesla will need to
increase chargers and service centers.

Positioning Statement

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We want car consumers to choose a Tesla for their next automotive


purchase and embrace a seamless transition to renewable energy as
fuel for powering their next vehicle.

Key Insight
Consumers understand by now; gasoline byproducts are harming
the environment by polluting the atmosphere. However, most are
hesitant to purchase all electric vehicles because of the drastic
compromises. Words that come to mind when observing the eco
friendly car market of the past are sluggish, unattractive and small.
Tesla saw this as a problem and gave the customer a remedy: sleek,
fast, long range and loaded with technology. The Model S is every thing
the Leaf doesnt offer and more, which comes at a steeper price tag.
Although there has been a spike in pre-owned sales of the Model S, this
is not financially achievable for all customers. Average household
income will tend to choose a less expensive option. Currently Tesla
holds control over a niche; no other brand makes a large electric luxury
car. This leads consumers left with only Tesla as a choice for that
specific market. I suspect this will change within the next five to ten
years, when other companies will start to roll out their electric lines to
compete.
Today it is clear the EV market will be expanding, however it is
uncertain when consumers will fully adapt to the future of the

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automotive industry and loose preconceived notions of compromise. To


continue competition in the EV market, Tesla must introduce a solid
Model 3, with a reasonable entry-level price tag therefore opening
doors to a larger customer base. In turn Teslas third model will have to
pass the scrutiny of many more consumers. Following the higher
numbers of Tesla owners, service centers will need to be added to
locations near the customer. Numbers of charging stations will also
have to be increased to alleviate a new generation of driver from
range anxiety. Special to the brand, Tesla absolutely must keep in
mind two types of customers it has created, which I have come to find
particularly interesting. First and foremost are the Signature line of the
Model X (first 500), the Model S (first 2500), and the entirety of the
Roadster customers. Requiring a one hundred percent down payment
on a vehicle, these first generation consumer purchases were made
blind without having seen or driven the car in person. Another mention
is the customer who would not normally spend their finances on a
luxury car, but instead purchase a Tesla because of the higher range
and limited compromise transition to an EV. Tesla tapped into a niche
and has created a cult-like customer who believes in eco-green
philanthropy to the point some would consider irrational. Very few
companies are able persuade a customer to make a down payment,
much less a payment often far north of $100,000, for a product they
have only seen drawings of: Tesla has, over 3,000 times.

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References
Buhr, Sarah. "How Elon Musk Plans To Sell Half A Million Teslas By The
End Of Next Year." TechCrunch. TechCrunch, 10 Oct. 2014.
Web. 23 Feb. 2016. <http://techcrunch.com/2014/10/10/elonsmusks-plan-to-sell-half-a-million-teslas-by-the-end-of-nextyear/>.
Caldwell, Jessica. "Who Is the Used Tesla Model S Buyer? |
Edmunds.com." Edmunds. Edmunds, 28 July 2015. Web. 23
Feb. 2016. <http://www.edmunds.com/industrycenter/analysis/who-is-the-used-tesla-model-s-buyer.html>.
Gorzelany, Jim. "Electric-Car Buyers Younger And Richer Than Hybrid
Owners." Forbes. Forbes Magazine, 22 Apr. 2014. Web. 23 Feb.
2016.
<http://www.forbes.com/sites/jimgorzelany/2014/04/22/electric
-car-buyers-younger-and-richer-than-hybridowners/#236fab5cad32>.
Kim, Susanna. "Tesla Fans Rally." ABC News. ABC News Network, 21
Nov. 2013. Web. 23 Feb. 2016.
<http://abcnews.go.com/Business/tesla-customers-reachultimate-cult-level-status/story?id=20967050>.
Korosec, Kirsten. "Tesla Has a New Kind of Buyer." Tesla Has a New
Kind of Buyer Comments. Fortune, 29 July 2015. Web. 23 Feb.
2016. <http://fortune.com/2015/07/29/tesla-millennials/>.
Schultz, Clark. "Profile of a Tesla Model S Owner Emerges." Seeking
Alpha. Seeking Alpha, 19 Aug. 2013. Web. 23 Feb. 2016.
<http://seekingalpha.com/news/1230122-profile-of-a-teslamodel-s-owner-emerges>.
Shahan, Zach. "US Electric Car Sales Up 15% In January, Tesla = 38%
of Market." EV Obsession. EV Obsession, 05 Feb. 2016. Web. 23
Feb. 2016. <http://evobsession.com/electric-car-sales-up-15-injanuary-tesla-38-of-market/>.
Valdes-Dapena, Peter. "Mercedes Unveils Tesla-powered Electric Car."
CNNMoney. Cable News Network, 27 Mar. 2013. Web. 23 Feb.
2016. <http://money.cnn.com/2013/03/27/autos/mercedestesla-b-class-electric/index.html?hpt=hp_t2>.
"Best-Selling Battery Electric Cars, 2014." Market Share

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Reporter. Ed. Robert S. Lazich and Virgil L. Burton,


III. 26th ed. Farmington Hills, Mich.: Gale
Group, 2016. 844 pp. 2 vols. Gale Directory Library. Gale.
California State Univ Fullerton. 23 Feb.
2016 <http://find.galegroup.com.libproxy.fullerton.edu/gdl/start.do?prodId=GDL>.
"Companies Generating the Most Jobs in Corporate Facility Projects in
the U.S., 2014." Business Rankings Annual. Ed. Deborah J.
Draper. 2016 ed. Farmington . Gale Directory Library. Gale. California
State Univ Fullerton. 23 Feb.
2016 <http://find.galegroup.com.libproxy.fullerton.edu/gdl/start.do?prodId=GDL>.

Appendices
Terms
EV- electric vehicle

IMC Tactics
Tesla Motors Club
One of the tactics mentioned is the Tesla Motors Club form.
This has been a critical source of information regarding
customer satisfaction while giving Tesla owners a true sense of
exclusive membership. Many times the form is reviewed to see
the latest talk of customer cars. (teslamotorsclub.com)
Online Vehicle Purchasing
Every Tesla, aside from pre-owned, is ordered from the Tesla
website. When making a purchase, the customer has the
power to order the options exactly to his or her desire. Paint,
wheels, sunroof, battery pack up grades, and of course
Ludacris mode can all be selected. Compared to todays car
shopping methods, Tesla gives the customer exactly what they
want. This also cuts out the middleman and eliminates the
haggling of car buying.
(teslamotors.com)

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