CASE ANALYSIS

on TESLA
 INTRODUCTION

 An American automotive company headquartered in California.

 Tesla Inc. was founded in 2003 by Martin Eberhard & Marc

Tarpenning.

 Specializes in electric vehicle manufacturing.

 Have Tesla owned stores across North America, Europe and Asia.

 Ranked as the best electric passenger car producer in 2018.

 CEO: Elon Musk

(Sources: Tesla, Inc., Wikipedia.org)

MISSION

To accelerate the world’s transition to sustainable

sustainable energy.

Vision

To create the most compelling car company of the

of the 21st century by driving the world’s transition to
transition to electric vehicles.

(Sources: Tesla Official website)

Value proposition of Tesla Inc.

Direct sells with no dealer network

Sporty yet practical vehicle

Battery charging

Using of smart phone to interact with electric car

Highly safe to drive

 Tesla Business Model

Introductory stage

 Tesla did not focus on mass production and economies of

scale.

 Main objective was to enter the eco friendly vehicle market

by creating compelling as well as energy efficient cars.

 The first delivery of Tesla was high-performance electric

expensive sports car named as Tesla Roadster.

 No plan for paid advertising.

 Tesla Business Model

Advanced stage

 Next level based on three unique approach of selling, servicing and

vehicle charging.
 Tesla used direct selling concept by establishing international network of
company owned show rooms and vehicle stores.
 Direct selling helped to foster new product development.
 Customers can directly communicate with Tesla employees.
 Service center and charging are combined with the sales centers.
 Tesla rangers or mobile technicians was introduced for in home
servicing.
 Adoption of supercharger stations across locally and internationally
helped to charge the Tesla cars for free up to certain time.

(Sources: Investopedia, 2019)

 SWOT Analysis: Tesla Inc.

Strengths Weaknesses

• Innovation culture. • Highly expensive to produce.

• Employment of talented • Lack of economies of scale.
individuals. • Failure to on time distribution
• First mover advantage. and delivery due to
• Market leader in electric manufacturing complications.
vehicle segment. • Limited super charger stations
• High quality and durability. and supply of batteries.
 SWOT Analysis: Tesla Inc.(continued)
Opportunities Threats

• Expansion of sales in the new • Increasing competition.

market. • Product defects due to highly
• Introduction of less expensive complex manufacturing.
car (Model 3 with less power • Enormous product liability
and fewer features). claims could erode brand
• Planning of in house battery image.
production technology • Sustainable long term public
(currently using Panasonic). confidence regarding eco
friendly vehicle concept.

(Sources: Business strategy hub, Tesla SWOT analysis, 2019)

Generic strategy of Tesla Inc. (Porter’s model)

Tesla adopted broad

differentiation strategy
based on innovation of
products that differentiate
from its competitors and
build competitive advantage
 Strategy analysis using Ansoff Matrix
Market penetration Product development
(Existing market existing product) (Existing market new product)

 Tesla’s primary strategy  Secondary strategy

 Target is to increase US market share in  Development of new features with
electric car segment. advanced technology and minimal
environmental effect.
 Example is offering solar panels.

Market development Diversification

(New market existing product) (New product new market)

 Tesla focuses on intensive growth by  Continuous learning and strive for

entering international market. innovation.
 Tesla owned store and service center in  Innovation of Tesla Autopilot, a self driven
Europe, Asia and Australia. car without any human assistance, a
landmark for new business.

(Sources: Tesla Inc.’s strategies by Christine Rowland, 2018)

 Tesla Inc. competitor analysis

• Tesla is still a pioneer in the electric vehicle industry.

• Traditional car manufactures are thriving towards hybrid gasoline
electric and purely electric vehicles.
• Competitors like BMW, Chrysler, Ford, GM, Honda, Hyundai, Kia,
Mazda and Mitsubishi involve in developing and producing
electric cars.
• Tesla has owned distribution and sales store which gives
competitive advantage over others.
• Tesla needs to increase super charging stations and self produced
battery to remain pioneer in the market.

(Sources: Investopedia, 2019)

 Tesla Inc. cultural traits

• Innovation and problem solving mindset

• Moving fast
• To do the impossible
• Continuous learning
• Think like owners
• Team effort
• To learn from mistakes
• Openness and clear vision
• Customer centric goal
• Flat organizational hierarchy
 Tesla Inc. Financials
Ratio 2018 2017 Remarks
Current ratio 0.8313 0.8561 Liquidity almost remains
same.
Gross margin 18.834 18.9007 Gross profit rose. Higher
the GP, better for
company

Net profit margin -4.5482 -16.6803 Negative profit or loss

continues for years
which should be a major
concern. Though Tesla
gradually overcoming .
Return on asset -3.573 -7.8191 Income generated from
assets therefore is
negative though
improved in 2018.
Asset turnover 0.7216 0.4104 Higher turnover due to
higher sales in 2018.

Debt/Equity 2.0792 1.9705 Higher result means

higher debt issue in
2018.

(https://www.macrotrends.net/stocks/charts/TSLA/tesla/financial-ratios)
 Tesla Inc. Financials(continued)

• Tesla annual revenue for 2018 was $21.461B, a 82.51% increase from 2017.

• Annual gross profit for 2018 was $4.042B, a 81.87% increase from 2017.

• Net loss for 2018 was $-0.976B, a 50.23% decline from 2017 (-1.961B).

• Tesla 2018 annual EPS was $-5.72, a 51.65% increase from 2017(-$11.83).

• Cash on hand for 2018 was $3.878B, a 10.07% increase from 2017(3.523B).

• Tesla total assets for 2018 were $29.74B, a 3.78% increase from 2017.

(https://www.macrotrends.net/stocks/charts/TSLA/tesla/financial-ratios)
Tesla Inc. financials summary (continued)
• Though Tesla Inc. has positive gross profit and gross margin
ratio, its net profit and the profit related ratios are negative.
• Negative profit figure is due to high operating expenses
compare to revenue.(more than 70% increase from 2016 to
2017)
• R&D expenses also increased more than 60% from 2016 to
2017.
• However, cash on hand is increased in 2018 which is a good
sign.
• Company’s Debt to equity increased in 2018 which means high
dependence on debt in 2018.
• As a result of negative profit, Tesla’s stock price was fluctuated
a lot. The last 52 week low price was 176.99 and highest was
377.87 with an average of 269.99.

(https://www.macrotrends.net/stocks/charts/TSLA/tesla/financial-ratios)
 Reason for negative profit

High operating
Heavy investment
expenses and R&D
in infrastructure
cost compared to
for the new Giga
revenue. Fail to
factories as part of
deliver on time
production facility
causes operating
expansion
expenses to go up

Though Tesla Inc.

managed to
improve very
slowly, negative
profit might
continue as long as
facility expansion
occur
 Recommendation
Cost-leadership strategy for more generic models with less power and features to achieve economic of
scale and reduce operating costs.

Several years negative profit mainly due to high capital expenditure as part of future planning. The
message should be given to shareholders to boost up public confidence so that share price should not
drop or fluctuate.

Introduction of the concept of Kaizen costing and Target costing like Toyota to reduce operational costs,
increase quality, continuous improvement and to ensure on time delivery by minimizing product defect.

Entering the emerging international markets like China and India more aggressively and transfer some
production facility there to overcome their current high fixed costs of doing business.

Installation of more super charger stations locally and globally among the high customer based market
and ensure optimal supply of batteries to avoid shortage during emergency.
THANK YOU
Bibliography

 https://en.wikipedia.org/wiki/Tesla,_Inc.

 https://www.tesla.com/about

 https://www.investopedia.com/articles/active-
trading/072115/what-makes-teslas-business-model-
different.asp

 https://bstrategyhub.com/tesla-swot-analysis/

 http://panmore.com/tesla-motors-inc-generic-strategy-
intensive-growth-strategies-analysis

 https://www.macrotrends.net/stocks/charts/TSLA/tesla/fin
ancial-ratios