MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH UNIVERSITY OF ECONOMICS AND FINANCE

FINAL REPORT
The Course: Management Information Systems

Topic: Building an MIS Solution for Tesla, Inc

Lecturer: MSc Võ Thị Kim Anh

Student’s Group member: 04

Student’s Code Student’s Full name Contribution (%)

205121286 Vũ Thuý Mỹ Uyên 100%
215120955 Phạm Thị Thúy Duyên 100%

Ho Chi Minh City, August 19, 2024

 MINISTRY OF EDUCATION AND TRAINING
HO CHI MINH UNIVERSITY OF ECONOMICS AND FINANCE

FINAL REPORT
The Course: Management Information Systems

Topic: Building an MIS Solution for Tesla, Inc

Lecturer: MSc Võ Thị Kim Anh

Student’s Group member: 04

Student’s Code Student’s Full name Contribution (%)

205121286 Vũ Thuý Mỹ Uyên 100%
215120955 Phạm Thị Thúy Duyên 100%

Ho Chi Minh City, August 19, 2024

 TABLE OF CONTENTS
LIST OF FIGURES AND TABLES ............................................................................ i
LIST OF ABBREVIATION ........................................................................................ ii
ACKNOWLEGDEMENT .......................................................................................... iv
I. INTRODUCTION ..................................................................................................... 1
1.1. Purpose of the report ...................................................................................... 1
1.2. Project scope .................................................................................................... 2
1.3. Research methods ........................................................................................... 2
1.3.1. Data Collection Methods ............................................................................. 2
1.3.2. Data Analysis Methods ................................................................................ 3
II. COMPANY SELECTION ...................................................................................... 4
2.1. Overview of history of formation and development of tesla .......................... 4
2.1.1 Overview of the company ............................................................................. 4
2.1.2. History of Tesla, Inc. ................................................................................... 5
2.2. Strategic Orientation ......................................................................................... 6
2.2.1 Mission and vision of Tesla .......................................................................... 6
2.2.2. Core values ................................................................................................... 6
2.3. SWOT analysis of Tesla ..................................................................................... 6
2.3.1. Strengths ....................................................................................................... 7
2.3.2. Weaknesses ................................................................................................. 10
2.3.3. Opportunities ............................................................................................. 13
2.3.4. Threat .......................................................................................................... 14
2.4. Competitors ...................................................................................................... 16
2.4.1. Ford Motor Company ............................................................................... 16
2.4.2. General Motor ............................................................................................ 17
2.4.3. NIO .............................................................................................................. 18
2.4.4. Volkswagen ................................................................................................. 19
2.5. Tesla’ Business Needs Analysis ....................................................................... 20
2.5.1. Business model ........................................................................................... 20
1.5.2. Business strategy ........................................................................................ 23
2.5.3. Porter’s Five Forces Model of Tesla ........................................................ 24
 2.5.4. Current information systems .................................................................... 25
III. IDENTIFYING TESLA'S MANAGEMENT SYSTEM PROBLEMS ........... 26
3.1. Tesla may be unable to control manufacturing costs (2021-2023).................. 26
3.1.1 What is the problem with Tesla's manufacturing costs? ........................... 26
3.1.2 Why do these factors affect Tesla's manufacturing costs? ......................... 27
3.1.3 How Tesla has mitigated these issues in the present ................................... 37
3.2. Supply Chain Disruptions ................................................................................... 39
3.2.1. What is the problem: ................................................................................. 39
3.2.2. When did that problem occur: ................................................................. 40
3.2.3. Why does that happen: .............................................................................. 40
IV. PROPOSE A SOLUTION PLAN ....................................................................... 41
4.1. Solution for Problem 1 ...................................................................................... 41
4.1.1 Recommended solution .................................................................................. 41
4.1.2 Which strategy will we choose to implement? ............................................. 45
4.2. Solution for Problem 2 ...................................................................................... 52
4.2.1 Expand alternative sources ........................................................................ 52
4.2.2 Invest in recycling technology.................................................................... 59
4.2.3. Evaluate solution and expected outcome ................................................. 60
V. CONCLUSION ...................................................................................................... 62
5.1. Summarizing the Main Contents .................................................................... 62
5.2. Evaluation of the Report and Future Development Directions ................ 63
 LIST OF FIGURES AND TABLES
Figure 1. Tesla company ...............................................................................................4
Figure 2. Swot analysis of Tesla ....................................................................................7
Figure 3. Ford EVs next to a charging station .............................................................16
Figure 4. General Motors company .............................................................................17
Figure 5. ES8 – SUV electric car of China .................................................................18
Figure 6. Volkswagen’s electric car ............................................................................19
Figure 7. Tesla's business model (1)............................................................................21
Figure 8. Tesla's business model (2)............................................................................22
Figure 9. Tesla's operations .........................................................................................27
Figure 10. Raw materials that make up a Tesla car .....................................................28
Figure 11. Opportunities for in-sourcing .....................................................................31
Figure 12. The customer’s feedback comments on teslamotorsclub...........................33
Figure 13. Tesla Inc's Gross Profit Margin .................................................................32
Figure 14. Research and development expense ...........................................................35
Figure 15. GM vs Tesla in R&D spending ..................................................................36
Figure 16. R&D spending to revenue ratio .................................................................36
Figure 17. Shortage of raw materials of Tesla ...........................................................40
Figure 18. Recycling battery .......................................................................................59
Table 1. Comprehensive Plan ......................................................................................46
Table 2. Budget estimate .............................................................................................49
Table 3. Alternative lithium suppliers .........................................................................53
Table 4. Alternative nickel suppliers ...........................................................................55

i
 LIST OF ABBREVIATION

Acronyms Specialized Meaning

words

MIS Management Management information systems (MIS) is a

Information department within an enterprise responsible for
Systems controlling the hardware and software systems that
the organization uses to make business-critical
decisions. In addition to describing a department
within a company, the term "MIS" can also refer to a
type of computer software that is used to store,
organize and analyze information.

SWOT SWOT analysis SWOT Analysis is an acronym for Strengths,

Weaknesses, Opportunities and Threats. This is a
powerful strategic management and planning tool. It
is a superb masterpiece which every organization
needs to get through to greater heights of success.

ERP Enterprise All the core business processes needed to run a

Resource company: finance, HR, manufacturing, supply chain,
Planning services, procurement, and others.

CRM Customer One of the data management methods related to

Relationship customer information: phone numbers, preferences,
Management consumer needs,... Systematic customer information
management The system creates efficiency in
communicating and serving customers better,
keeping customers staying longer with the company.

D2C direct-to- The business model where a company sells its

customer products or services directly to the end consumer,
bypassing intermediaries such as retailers,
wholesalers, or distributors.

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OEMs Original Original Equipment Manufacturer (OEM) refers to a
Equipment company that produces components or products that
Manufacturer are used in another company's end products. OEMs
typically create parts or systems that are integrated
into larger products by other manufacturers, who
then sell the completed products under their own
brand names.

EVs Electric Electric Vehicles, are automobiles that are powered

Vehicles entirely or primarily by electric motors rather than
internal combustion engines.

BEVs Battery Electric Battery Electric Vehicles, are a type of electric

Vehicles vehicle that relies entirely on electricity stored in
onboard batteries for propulsion. They do not have
internal combustion engines or use gasoline or diesel
fuel.

R&D Research and Refers to the systematic process of investigating,

development developing, and creating new knowledge,
technologies, products, or services. It involves a
range of activities aimed at innovation, improving
existing products, or solving specific problems.

ADaaS Autonomous Refers to a model where autonomous driving

Driving as a technology is offered as a service to users or
Service businesses. This model provides access to self-
driving vehicles or autonomous driving systems
without requiring customers to own or manage the
technology themselves

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 ACKNOWLEGDEMENT

I would like to express my sincere gratitude to all those who contributed to the
successful completion of this final report for the Management Information Systems
course, focusing on building an MIS solution for Tesla.

First and foremost, I extend my heartfelt thanks to our course instructor, MSc Vo Thi
Kim Anh, whose insightful guidance and valuable feedback have been instrumental
throughout this project. Your expertise and encouragement have greatly enhanced my
understanding of management information systems and their practical applications.
I am also deeply appreciative of the support provided by my classmates, whose
collaborative efforts and discussions have enriched the research and analysis presented
in this report. Your diverse perspectives and constructive critiques have been vital in
refining the proposed MIS solution.

Special thanks go to the various academic and industry sources that provided critical
information and data for this project. Their research and findings offered a solid
foundation for understanding Tesla’s needs and the potential impact of the proposed
MIS solutions.

This report is the result of collective effort and shared knowledge, and I am grateful to
all who have been a part of this journey.

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I. INTRODUCTION
1.1. Purpose of the report
The primary objective of this report is to conduct a thorough examination of Tesla’s
business operations and the existing information systems in use, identifying the
challenges and limitations faced by the company. Based on this analysis, the report aims
to propose a comprehensive Management Information System (MIS) solution tailored
to adressTesla’s business problems, enhance operational efficiency, and support the
company’s strategic goals. The specific objectives of this report are as follows:

Addressing Business Needs: To identify and analyze the current challenges and
limitations within Tesla's information systems and recommend a targeted MIS solution
that effectively addresses these issues. This involves evaluating the capabilities of
Tesla’s existing system in supporting business operations and decision-making
processes and suggesting improvements that align with Tesla’s dynamic and evolving
needs.
Enhancing Operational Processes: To demonstrate how the proposed MIS solution can
optimize Tesla’s operational processes, leading to improved efficiency, reduced
operational costs, and increased productivity across various departments. The focus will
be on how the new system can better manage Tesla’s extensive data, improve
communication channels, and streamline resource allocation to support the company’s
rapid production and innovation environment.
Aligning with Strategic Goals: To ensure that the proposed MIS solution aligns with
Tesla’s broader strategic objectives, particularly those related to technological
advancement, sustainability, and global expansion. The goal is to design a system that
not only addresses current business needs but also supports Tesla’s long-term growth
and strategic vision.
Improving Communication and Decision-Making: To explore how the new MIS
solution can enhance internal communication and collaboration within Tesla,
facilitating more effective data management and informed decision-making. This
includes providing tools and functionalities that enable real-time data access,

1
comprehensive analytics, and reporting, thereby supporting better strategic planning
and execution.
1.2. Project scope
Analysis of Current Systems: Conduct a detailed assessment of Tesla’s existing
information systems, identifying key challenges, limitations, and areas for
improvement.
Requirement Gathering: Engage with key stakeholders to gather detailed requirements
for the new MIS solution, ensuring that it aligns with Tesla’s business needs and
strategic objectives.
Solution Design: Develop a comprehensive design for the MIS solution, including
system architecture, data management strategies, and integration with existing systems.
Development and Implementation: Build and deploy the MIS solution, incorporating
necessary features and functionalities, and ensuring integration with Tesla’s current
operations.
Testing and Validation: Conduct thorough testing of the new system to ensure it meets
all specified requirements and performs as expected. This includes user acceptance
testing and resolving any issues identified.
1.3. Research methods
1.3.1. Data Collection Methods
To gain a thorough understanding of Tesla's current MIS and identify potential areas
for enhancement, a combination of primary and secondary data collection methods was
used:
a. Primary Data Collection
Tesla’s Internal Documents: A detailed review of Tesla's internal documents was
conducted, including MIS performance reports, annual report 2021-2023, strategic
plans, and IT infrastructure documentation. This provided insights into the performance
of existing systems, historical data, and strategic objectives related to the MIS.
b. Secondary Data Collection
• Industry Analysis Reports: Relevant industry reports were analyzed to
benchmark Tesla’s MIS against industry standards and competitors. These

2
 reports provided information on best practices, emerging trends in MIS, and
technological advancements pertinent to Tesla’s sector.
• Academic and Professional Literature: A review of academic literature and case
studies on MIS implementation in high-tech and automotive sectors was
undertaken. This provided a theoretical framework and identified potential
solutions based on proven models and similar case studies.
• Benchmarking Studies: Performance data and best practices from leading
companies in the automotive and technology sectors were reviewed. This helped
in identifying industry standards and practices that could be applied to Tesla’s
MIS.
• Market Research Reports: Analysis of market research reports provided insights
into technological advancements and consumer expectations, informing the
design of the MIS solution to align with current and future market demands.
1.3.2. Data Analysis Methods
The collected data were analyzed using various methods to derive actionable insights
and guide the development of the MIS solution:
• SWOT Analysis: A SWOT (Strengths, Weaknesses, Opportunities, Threats)
analysis was performed to evaluate Tesla’s current MIS. This method identified
internal strengths and weaknesses of the existing system, as well as external
opportunities and threats in the automotive and technology industries. The
SWOT analysis provided a strategic overview of the system’s effectiveness and
areas needing improvement.
• Benchmarking: The performance of Tesla’s MIS was benchmarked against
industry leaders and competitors. Key metrics such as system uptime, data
accuracy, user satisfaction, and processing speed were compared to evaluate how
Tesla’s system measures up and to identify opportunities for optimization.
By employing these research methods, the study aims to develop a well-informed,
effective MIS solution that addresses Tesla’s current challenges and aligns with its
strategic objectives.

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II. COMPANY SELECTION
2.1. Overview of history of formation and development of tesla
2.1.1 Overview of the company
Tesla, Inc. is an American multinational automotive and clean energy company.
Headquartered in Austin, Texas, it designs, manufactures and sells battery electric
vehicles (BEVs), stationary battery energy storage devices from home to grid-scale,
solar panels and solar shingles, and related products and services.

Figure 1. Tesla company (source: internet)

Tesla was incorporated in July 2003 by Martin Eberhard and Marc Tarpenning as Tesla
Motors. Its name is a tribute to inventor and electrical engineer Nikola Tesla. In
February 2004, Elon Musk joined as Tesla's largest shareholder; in 2008, he was named
chief executive officer. In 2008, the company began production of its first car model,
the Roadster sports car, followed by the Model S sedan in 2012, the Model X SUV in
2015, the Model 3 sedan in 2017, the Model Y crossover in 2020, the Tesla Semi truck
in 2022 and the Cybertruck pickup truck in 2023. The Model 3 is the all-time best-
selling plug-in electric car worldwide, and in June 2021 became the first electric car to
sell 1 million units globally. In 2023, the Model Y was the best-selling vehicle, of any
kind, globally.

4
Tesla is one of the world's most valuable companies in terms of market capitalization.
In October 2021, Tesla temporarily became a trillion-dollar company, the seventh U.S.
company to do so. In 2023, the company led the battery electric vehicle market, with
19.9% share. Also in 2023, the company was ranked 69th in the Forbes Global 2000.
As of March 2024, it is the world's most valuable automaker. [1]
2.1.2. History of Tesla, Inc.
● Beginnings (2003–2004)
Tesla Motors, Inc. was founded on July 1, 2003, by Martin Eberhard and Marc
Tarpenning. Elon Musk later invested $6.5 million and became chairman of the board.
J.B. Straubel joined in May 2004. A September 2009 lawsuit settlement allowed
Eberhard, Tarpenning, Wright, Musk, and Straubel to be named co-founders. [1]
● Roadster (2005–2009)
Tesla began production of the Roadster in 2008. Elon Musk was actively involved in
the company, although he did not have day-to-day control. The company received a
$465 million loan from the U.S. Department of Energy in June 2009 to support the
development of the Model S. Tesla repaid the loan in May 2013. [1] [33]
● IPO, Model S, and Model X (2010–2015)
Tesla went public on the NASDAQ on June 29, 2010. The company opened a factory
in Fremont, California, and began production of the Model S in October 2010. The
Model X was introduced in September 2015. The company also announced Tesla
Autopilot in 2014 and entered the energy storage market with the Powerwall and
Powerpack. [1]
● SolarCity and Model 3 (2016–2018)
Tesla acquired SolarCity in November 2016 and renamed it Tesla, Inc. in February
2017. The Model 3, Tesla’s first affordable electric vehicle, was announced in April
2016. The company struggled to produce the Model 3 but overcame the problems, and
the Model 3 became the world’s best-selling electric vehicle from 2018 to 2021. Elon
Musk controversially announced an IPO in August 2018. [1]
● Global expansion and the Model Y (2019–present)
Tesla opened three new Gigafactories: in Shanghai (Model 3 production began in
December 2019), Berlin (Model Y production began in March 2022), and Texas (Model

5
Y production began in April 2022 and Cybertruck production began in November
2023). Tesla moved its legal headquarters to Gigafactory Texas in December 2021. The
company also invested in Bitcoin but later stopped due to environmental concerns. [1]
[33]

● Recent Events
Tesla announced plans for a Gigafactory Mexico in 2025 and began accepting EV
manufacturers to switch to Tesla's North American charging standard. In April 2024,
the company announced a 10% workforce cut. [1]
2.2. Strategic Orientation
2.2.1 Mission and vision of Tesla
Tesla is the leading electric vehicle company that manufactures vehicles that use
electricity and gas for running. The mission of Tesla is to accelerate the advent of
sustainable transportation by establishing a mass market for electric cars. Further, the
vision of Tesla is to be recognized as the most compelling car company of the 21st
century. [33]
2.2.2. Core values
The main focus of Tesla is on delivering high quality services to customers and the core
values of the company include respecting people, always doing the best by applying the
best available technologies, forecasting, respecting the environment and promoting
learning oriented work culture [1]
2.3. SWOT analysis of Tesla
SWOT analysis is a strategic planning technique that helps to evaluate the strengths,
weaknesses, opportunities, and threats. The SWOT analysis of the company is shown
as follows:

6
 Figure 2. Swot analysis of Tesla (source: businessmodelanalyst.com)
2.3.1. Strengths
● Impressive Hiring Strategy
Musk has always been a CEO who prioritizes talent and experience over
academic credentials, and this shows in how Tesla hires its employees. However,
having this vision and being able to employ it as an effective hiring strategy are
two different things.
To achieve this, Tesla’s development of a somewhat unconventional yet
effective two-step hiring process is notable. The first step resembles the
traditional interview process used by most recruiters, but emphasizes experience
in relevant fields over academic credentials. Applicants who pass the first stage
then move on to the second phase of hiring, which involves practical sessions
which test the hands-on abilities of each candidate.
There are several advantages to this strategy. First of all, in highly technical
fields such as engineering, experience is more highly valued than theoretical
knowledge and leads to more productive workers. Also, by hiring staff with
hands-on experience in these areas, the amount of time and money spent on
training them is significantly reduced. This allows Tesla to hire the very best at
the least cost.
● Strong Brand Value and High Market Capitalization
7
 As of when this article was written, Tesla had a total market capitalization of
$547 billion, making it the seventh most valuable company in the world. Though
this is roughly half its peak value of $1.06 trillion in 2021, the company is still a
safe investment, and most investors see strong long-term growth potential. The
Tesla brand is also quite valuable, valued at $76 billion in 2023, nearly twice its
[2]
2022 valuation.
Several key factors are driving both of these figures:
● Tesla’s is considered a good investment for risk-tolerant investors;
● Tesla’s brand represents the future of fully autonomous driving;
● Tesla has always been at the forefront of a wide range of technological
innovations;
● It has a strong competitive advantage and market dominance over even
its closest industry rivals.
● A Phenomenal Organizational Structure
While Elon Musk has been criticized for some of his less-than-conventional
leadership methods, one cannot deny the positive effect he has had on the Tesla
organizational structure. Officially, the company practices a mixture of
functional and divisional organizational structures, though it is also well-known
for its internal flexibility.
Several factors could be said to contribute to the success of Tesla’s unique
hierarchical structure, such as the hands-on approach promoted by Musk, as well
as several unorthodox rules he enforces.
● Unique Brand Positioning and Superb Marketing Strategy
Tesla is not only one of the most valuable brands in the world, but also one of
the most unique. Serious debates still rage on over whether the company is an
auto manufacturer which dabbles in technology or a tech company that makes
electric cars. With the expansion of the company into secondary markets such as
solar energy and electric batteries, it seems to be tending towards the latter.
Regardless of how one views the company, Tesla’s role as a leading innovator
in future technology is clear, impacting markets both in the U.S. and globally.

8
 Tesla’s marketing strategy is a textbook example of brand leverage and market
positioning. Unlike traditional automakers, Tesla spends virtually nothing on
direct advertising; instead, its marketing brilliance shines through strategic social
media use and public appearances by CEO Elon Musk. This approach not only
keeps marketing costs low but also enhances the allure of the Tesla brand.
The company’s focus on high-visibility events and product launches serves as
powerful marketing tools that reinforce its status as an innovation leader. Tesla’s
marketing tactics, coupled with its cutting-edge technology, solidify its
dominance in the electric vehicle market.
● Strong Innovative Capacity
Tesla has also built a reputation for itself as a powerhouse for innovation and an
early adopter of groundbreaking new technology, especially in the areas of green
energy. Some key examples include:
● Their range of mid-to-high-end electric vehicles, which are some of the
best in the industry;
● Supercharging stations that offer rapid charging times and make long-
distance transport with electric vehicles not only feasible but convenient;
● The Tesla Solar Roof, which allows users to reduce their carbon footprint
while also tapping into the limitless abundance of solar energy;
● Almost Near-total Market Dominance
Despite the fact that Tesla has a higher market capitalization than popular
automakers such as General Motors, Toyota, Ford, Volkswagen, and so on, it
does not produce nearly as many vehicles as they do. However, in the area of
electric vehicles, Tesla by far outpaces all its competition, establishing itself
firmly as the top manufacturer of electric cars anywhere in the world. The
company sold over 900,000 electric vehicles in 2021, with the Tesla Model 3
being its most popular product. [3]
● Its Charismatic CEO
Even though Elon Musk has been so much of a polarizing figure in recent years,
it is impossible to deny his revolutionary vision and transformational leadership

9
 style which has helped him build one of the most successful companies in
history, as well as achieve the status of being the world’s richest man.
In the opinion of numerous analysts, Musk is one of the driving forces behind
the popularity of the Tesla brand and the confidence of investors and consumers
alike in what the company represents. Despite the challenges thrown at him (both
business-wise and technologically), he has been able to overcome many of them
through a mixture of visionary leadership, impeccable work ethic, and an almost
manic obsession with achieving his objectives.
● Shift In Consumer Sentiment Towards Greener Technologies
Tesla has been able to capitalize on the general shift in market sentiment toward
developing greener technologies such as electric vehicles, solar roofs, and
electric batteries. This has allowed the company to make this an integral part of
what their brand represents, code for the present and future.
2.3.2. Weaknesses
● Frequent Manufacturing Delays
Despite the large number of highly skilled individuals who work for the
company, as well as their innovative technology and revolutionary
manufacturing process, Tesla is commonly plagued with frequent manufacturing
and distribution delays. This is likely because the company deals with the
production of highly sophisticated technologies which have a diverse supply
chain network and complex logistics.
This issue is commonly seen with their range of electric vehicles, with the
company being mandated at certain times to stop taking orders for new deliveries
due to multiple supply chain delays. The Tesla Solar Roof is also not immune to
this issue, delaying installations for months.
● Setting Overly Optimistic Targets
Even though the Tesla brand is known for regularly producing revolutionary
technologies, they have at times been accused of being overconfident and even
outright deceptive by promising technologies which are not ready or which
simply do not exist. For example, Musk has been caught promising battery
capabilities that were found to be inconsistent with the laws of physics.

10
 Other times the company has had to backtrack from claims such as fully self-
driving cars, their failed attempt at fully automating their production process,
numerous delays with the much-awaited Tesla semi-truck, and of course, the
controversial Tesla bot. These controversies only serve to dent the company’s
reputation and reduce its reliability to investors.
● Unusually High Employee Turnover Rate
Despite the effectiveness of Elon Musk’s leadership strategy and his ability to
spot talents, his tendency to prioritize results and profits over the well-being of
his staff as well as his somewhat abrasive nature, have led to an unnaturally high
employee turnover rate, especially amongst executive staff. Some workers have
even gone so far as to describe Tesla workshops as sweatshops and abusive, with
the average employee spending just 3.7 years with the company.
According to MarketWatch, the executive turnover rate of the company was
estimated to be about 27% in 2019 [4]. While this was found to be higher than
the 15% cohort average, it was not abnormally high when compared to figures
found at several other top tech companies. However, the executive turnover rate
of staff reporting directly to Musk was found to be 44%, much higher than the
industry average of 9%. This shows that Musk has a penchant for letting go of
employees who displease or disappoint him, even to the detriment of the
company.
● A Controversial Chief Executive Officer
Musk is undoubtedly an integral part of the Tesla brand and projects the image
of a visionary CEO dedicated to driving the world toward a better future (literally
and figuratively). However, this does not come with certain drawbacks.
A string of recent controversies has put Elon Musk and, by extension, his
company in the limelight for the wrong reasons. His $44 billion takeover of tech
giant Twitter, recent controversial political views, and several lawsuits from both
investors and consumers are starting to convince a growing number of people
that a prominent CEO may not be the best thing for a public company. Despite
the general slump in the tech industry towards the end of 2022, many

11
 shareholders view the recent controversies and distractions surrounding its CEO
as an important factor behind Tesla’s losses. [2]
● The Cost of Their Products
Tesla has positioned itself as one of the foremost drivers of future technology.
The premium prices of Tesla’s products underscore that the future of technology
comes at a significant cost. Despite the fact that Musk has claimed that the
ultimate aim of the company is to make sustainable technologies such as electric
vehicles affordable to a broader range of buyers, the base models of their cars
are sold for between $43,990 to $129,990, a significant investment for any buyer.
There are several key factors behind the high prices the company charges for its
products. For example, the cost of the electric batteries within the car makes up
more than 50% of its cost. Also, despite being one of the most prolific sellers of
electric vehicles in the world, the company has struggled to keep up with demand
for its products, further exacerbating the problem of high prices.
● Restricted Output Leading to an Inability to Meet Demand
As we mentioned earlier, Tesla has a hard time keeping up with the demand for
its products. This leads to frustratingly long waiting times for buyers, as well as
seemingly artificially inflated prices. While some people consider this to be a
deliberate strategy to create a sense of exclusivity around their products, it may
end up backfiring as other companies ramp up production of electric vehicles
and similar technology, giving consumers a cheaper and more accessible
alternative to Tesla products.
Another similar issue the company has struggled with is the limited line of
products they offer, especially with regard to its electric vehicles, which function
as its flagship technology. The company only offers four basic models of electric
vehicles plus a semi-truck. This is quite unusual within an industry where most
companies pride themselves on being able to provide a vehicle for nearly any
type of buyer.
● Open-Source Patents
In contrast to most tech companies, Tesla has been famous for using open-source
patents on a wide range of its technologies. While there may be several

12
 advantages to the strategy, such as being able to capitalize on any improvements
that third parties make to existing Tesla technology, there are drawbacks as well,
such as Tesla losing exclusive proprietary rights to innovations it invested
heavily in producing.
2.3.3. Opportunities
● Introducing Its Products to New Markets: Although electric vehicle sales
have surged in recent years, they still lag far behind fossil-fuel cars in many parts
of the world. Tesla could expand its customer base by investing heavily in
promoting electric vehicles in the US, Asia and Africa.
● Improving the Affordability of Their Vehicles: Tesla needs to lower its prices
to attract more customers and not just focus on the high-end EV segment. The
company needs to roll out lower-cost EVs quickly to stay competitive, especially
in the face of cheaper options from other brands and EV makers. While Musk
has promised a $25,000 model, that plan has yet to materialize.
● Improving Their Autonomous Driving Technology: Autonomous driving
technology is a core value of Tesla’s strategy. Although the company launched
a fully autonomous driving beta program in 2020, it has been plagued by
controversies related to safety and software issues. Tesla needs to improve this
technology to become the first company to offer fully autonomous vehicles.
● In-house Battery Production: Tesla currently relies on outside suppliers for key
components, including batteries. To reduce supply chain risks and gain greater
control over the manufacturing process, the company should consider making
batteries in-house.
● Maintaining Its Reputation as the Champion of Innovation: Tesla’s
reputation is built on continuous technological innovation. To maintain its
leadership position, the company needs to continue investing in innovation
through strong leadership, solid finances, and a talented workforce.
● Supporting the Shift Towards Renewable Energy: Tesla, a company known
for its support of renewable energy, could do more to lead the green trend by
leveraging its reputation and brand advantage to promote a sustainable future.

13
2.3.4. Threat
● Increasing Competition from Other Top Automakers
Tesla is certainly not the first company to invest in the electric vehicle market.
Still, it is the first to capture the attention of the general public. This unique brand
position, plus the technological advances the company has historically had over
other manufacturers of electric vehicles, has helped Tesla sell its closest
competitors for years.
However, with the entry of other automaker giants such as Ford, Chevrolet,
Hyundai, and Kia, Tesla has started losing some of its market dominance. Tesla’s
sales still outpace those of other electric vehicle manufacturers.. Still, the
question has started creeping in about how long it can maintain this advantage in
the face of rising competition, growing customer dissatisfaction, and cheaper
alternatives to its products.
● The Distraction Posed By Its Very Prominent CEO
Elon Musk is, without a doubt, a crucial part of the Tesla success story, as well
as one of the core pillars of its brand image. However, recent events may suggest
that having such an outspoken CEO with celebrity-like status may be detrimental
to the business in the long run.
An increasingly large number of investors and even customers are suggesting
that Musk step aside. At the same time, the company employs a more traditional
CEO who will work behind the scenes to steer the ship straight. In response to
this, Musk seems to have taken a step back from the limelight, but if history is
to suggest, it is only a matter of time until he finds himself embroiled in another
public controversy.
● The Uncertainty Surrounding Rare Earth Metals
Every industry has to deal with supply cuts and constraints which are unique to
its manufacturing process. In regard to electric vehicles and solar panels, (two of
Tesla’s primary products), rare earth metals like cobalt, nickel, and neodymium
are some of the most vital components of these technologies.
Supply shocks, trade wars, and wild fluctuations in pricing may pose a
significant risk to the ability of tech companies to obtain these materials. Tesla

14
 is not immune to the supply shocks and recent trade wars between the United
States and China (which represents the source of a large percentage of these raw
materials in terms of mining and processing), which constitutes a significant
threat to the continued supply of these raw earth metals.
● The Legal Intricacies of Self-driving Electric Vehicles
While the thought of driverless cars may seem exciting, it is still a novel and
largely untested technology. Like virtually all new forms of technology, it will
need to be thoroughly tested, vetted, regulated, and most importantly, the legal
ramifications must be fully understood. Concerning this last point, there are
specific legal issues concerning the widespread use of electric vehicles. These
include:
● Testing the capabilities of these vehicles in critical situations.
● Setting the standards for driverless car safety.
● Most conventions are not prepared to deal with driverless vehicles.
● Determining civil liability.
● Determining criminal liability.
● The issue of insurance.
● User data protection and privacy.
● Cybersecurity.
● Changing Government Policy and Public Opinion on Green Energy
While the general consensus has long been reached about the need for the world
to shift towards more sustainable forms of energy, such as renewables and the
use of electric vehicles, certain global shocks have caused both governments,
citizens, and even corporations to reconsider the exact manner through which the
schools will be achieved.
Many of the technologies developed and distributed by Tesla are heavily
subsidized and supported by various government programs targeted toward
promoting green technology. Shifts in public sentiments may lead to a significant
drop in funding and support for these projects, ultimately

15
2.4. Competitors
Tesla may be the most recognizable company in the electric vehicle industry, but that
doesn’t mean it’s the only one.
Traditional automakers are increasingly offering hybrids and all-electric vehicles, such
as the Nissan Leaf. Furthermore, in China, where Tesla is a popular brand, it only has a
6.6% share of the electric vehicle market. [5]
Competitors continue to ramp up production and sales efforts, and for good reason.
Fortune Business Insights estimates the global electric vehicle industry will grow 24.3%
annually, from $287.36 billion in 2021 to more than $1.3 trillion in 2028. [6]
Still, Tesla vehicles carry a certain status cachet that incumbent automakers have yet to
match. Here are some of Tesla’s main competitors. [5]
2.4.1. Ford Motor Company
Ford Motor Company (F) is a multinational automaker founded in 1903. It focuses
heavily on electric cars, trucks, and SUVs. Ford’s Mustang Mach-E won Car and
Driver’s inaugural Electric Vehicle of the Year award in 2021. Ford is headquartered in
Dearborn, MI. As of August 2022, it had a market cap of $63.31 billion. [7]
On the other hand, the automaker that famously declared “Quality First” continues to
struggle with issues on that front, especially with new products. In 2022, Ford issued
more recalls in the U.S. than any other automaker: 68 of them, affecting more than 8.7
million vehicles. That’s up from 53 recalls affecting 5.4 million cars the year before,
according to federal data.

16
 Figure 3. Ford EVs next to a charging station

In 2021, Ford spent about $4 billion on warranty costs alone, The Wall Street Journal
reported last year.
According to Ford, it will invest $22 billion through 2025 to pursue vehicle
electrification. The aforementioned Mustang, the F-150 Lightning pickup, and the E-
Transit van are just three electric models in its upcoming lineup. Moreover, Ford is
focused on building electric vehicles that offer the brand's signature features:
performance, capability, and productivity.
One of Ford's target markets is all-electric commercial trucks and pickups. It plans to
bring the benefits of electric vehicles through accessible pricing and lower ownership
costs. The all-electric F-150 Lightning pickup officially debuted in April 2022. Since
then, more than 4,400 have been sold. [7]
2.4.2. General Motor
General Motors ( GM ) is an American automaker founded in 1908. Responding to the
urgent need for climate change, GM is committed to an all-electric future.

17
 Figure 4. General Motors company
GM plans to design, engineer, and produce electric vehicles in every style and price
range, including the Chevrolet Silverado EV with a 400-mile range. It is also building
competitive advantages in batteries, software, vehicle integration, and manufacturing.
It will invest $35 billion globally in electric and autonomous vehicles (AVs) by 2025.
It expects to sell one million EVs annually, in North America and China. GM has sold
more than 100,000 Bolt EVs since its launch in 2017. The Bolt has received some of
the best satisfaction and loyalty ratings in the industry. Three-quarters of Bolt EV
buyers in the US are new to GM. [8]
Batteries are a key part of GM’s EV strategy. Its Ultium battery packs cost nearly 40%
less than the batteries in Chevy’s Bolt EV. What’s more, the company has estimated
that its second-generation Ultium packs will cost about 60% less than the batteries used
in its current cars. Its manufacturing platform will handle batteries for all of its electric
vehicles, based on a single common cell and interchangeable propulsion components.
General Motors is headquartered in Detroit, MI. EV batteries will be manufactured in
Lordstown, OH. As of August 2022, it had a market cap of $58.39 billion. [9]
2.4.3. NIO
NIO Inc. (NIO) is a Chinese holding company that designs, manufactures, and sells
premium smart electric vehicles for international markets. These include the EP9, which
it claims is one of the fastest electric vehicles in the world, and its flagship SUV, the
ES8. Nio also provides customers with energy solutions that include access to public
charging, access to mobile charging vans, and battery swapping.
According to NIO, it is distinguished by “continuous technological breakthroughs and
innovations, such as industry-leading battery swapping technologies, Battery as a
Service, or BaaS, as well as proprietary autonomous driving technologies and
Autonomous Driving as a Service, or ADaaS.”

18
 Figure 5. ES8 – SUV electric car of China
In July 2022, NIO delivered 10,052 vehicles. That’s a 26.7% increase year-over-year.
The company delivered 60,879 electric vehicles through July, up 22% year-over-year.
The company was founded by Li Bin and Qin Li Hong in November 2014 and is
headquartered in Jiading, China. Its autonomous vehicle research and development
center is located in San Jose, CA.19 As of August 2022, NIO had a market capitalization
of $32.85 billion. [10]
2.4.4. Volkswagen
Volkswagen is one of the world's largest automakers. Its highly recognizable products
and brands include Volkswagen, Audi, Bentley, Lamborghini, Porsche, and Skoda cars.
A decade after Tesla entered the electric vehicle market, Volkswagen has quietly
entered the market. It is estimated that 50% of its US sales will be electric by 2030. It
is spending tens of billions to achieve this goal. It also plans to produce 1.5 million
electric vehicles by 2025 to help buyers meet the EU's expected emissions targets.
In 2019, Volkswagen announced that it would launch nearly 70 new electric models
over the next 10 years. On that basis, it expects to build 22 million vehicles on electric
platforms. [11]

19
Volkswagen is developing a comprehensive decarbonization program, pledging to
achieve a CO2-neutral balance across all areas from fleet to production to management
by 2050.

Figure 6. Volkswagen’s electric car

Founded in 1937, Volkswagen has survived world wars, countless boom and bust
cycles, and the infamous 2015 emissions scandal, in which it admitted that many VW
diesel cars sold in the US had built-in software that could detect when they were being
tested for emissions and could alter performance to get better results.
Volkswagen is headquartered in Wolfsburg, Lower Saxony, Germany. As of August
2022, Volkswagen had a market capitalization of $85.66 billion. [11]
2.5. Tesla’ Business Needs Analysis
2.5.1. Business model
Tesla has adopted a direct-to-customer (D2C) business model where the company sells
its products directly to the customers by eliminating all the middlemen such as dealers

20
from its supply chain network. Also, the supply chain practices of Tesla are vertically
integrated as the company runs and operates its plants where the electric vehicles are
manufactured. The Tesla manufacturing plants and Gigafactory also supply the products
to the company through the direct distribution channels which include the company
physical and the online store which then sells the products and services to the customers.
Tesla also has created its supercharger stations where Tesla cars can be charged in only
30 minutes free of cost. The main purpose behind the supercharger stations is to speed
up the growth of electric cars.
Tesla has achieved a strong market position through broad differentiation and effective
marketing strategies. Tesla's business model is shown as follows:

Figure 7. Tesla's business model (1)

21
Figure 8. Tesla's business model (2)

22
1.5.2. Business strategy

At the time of Tesla's founding in 2003, electric vehicles were very expensive. In 2006,
Elon Musk stated that Tesla's strategy was to first produce high-price, low-volume
vehicles, such as sports cars, for which customers are less sensitive to price. This would
allow them to progressively bring down the cost of batteries, which in turn would allow
them to offer cheaper and higher volume cars. Tesla's first vehicle, the Roadster, was
low-volume (fewer than 2,500 were produced) and priced at over $100,000. The next
models, the Model S and Model X, are more affordable but still luxury vehicles. The
most recent models, the Model 3 and the Model Y, are priced still lower, and aimed at
a higher volume market, selling over 100,000 vehicles each quarter. Tesla continuously
updates the hardware of its cars rather than waiting for a new model year, as opposed
to nearly every other car manufacturer. [1]

Unlike other automakers, Tesla does not rely on franchised dealerships to sell vehicles.
Instead, the company directly sells vehicles through its website and a network of
company-owned stores. The company is the first automaker in the United States to sell
cars directly to consumers. Some jurisdictions, particularly in the United States, prohibit
auto manufacturers from directly selling vehicles to consumers. In these areas, Tesla
has locations that it calls galleries that the company says "educate and inform customers
about our products, but such locations do not actually transact in the sale of vehicles."
In total, Tesla operates nearly 400 stores and galleries in more than 35 countries. These
locations are typically located in retail shopping districts, inside shopping malls, or
other high-traffic areas, instead of near other auto dealerships.

Analysts describe Tesla as vertically integrated given how it develops many

components in-house, such as batteries, motors, and software. The practice of vertical
integration is rare in the automotive industry, where companies typically outsource 80%
of components to suppliers and focus on engine manufacturing and final assembly.

Tesla generally allows its competitors to license its technology, stating that it wants to
help its competitors accelerate the world's use of sustainable energy. Licensing
agreements include provisions whereby the recipient agrees not to file patent suits

23
against Tesla, or to copy its designs directly. Tesla retains control of its other intellectual
property, such as trademarks and trade secrets to prevent direct copying of its
technology.

On April 15, 2024, Tesla secured a deal with Tata Electronics to supply semiconductor
chips, marking a significant step in Tesla's expansion into India's automotive market.[13]

On May 2, 2024, Tesla announced that it has abandoned its plan for next-generation
gigacasting, a cutting-edge manufacturing technique. Initially aiming to revolutionize
production and reduce costs, Tesla has now opted for its more proven method of casting
vehicle underbodies in three pieces. This strategic shift reflects the company's focus on
self-driving vehicles and adjusting to market challenges.

2.5.3. Porter’s Five Forces Model of Tesla

Industry Rivalry. The U.S. automobile industry is a mature multi-billion-dollar
oligopoly. General Motors, the highest selling car manufacturer in 2016, realized $166.4
billion in revenue (General Motors, 2017). The large competitors and brands control
market share and the industry is highly competitive. In a fight for flat market share,
competitors design new car models and redesign existing car models, and offer
attractive incentives to influence potential customers.

Bargaining Power of Suppliers. The bargaining power of Tesla’s suppliers is

moderate because Tesla’s production is currently limited compared to other competitors
in the industry and Tesla is dependent upon its suppliers. Tesla is particularly dependent
on its battery supplier, Panasonic, with whom Tesla has a supply agreement through the
end of 2017 (Thompson, 2015). There are other potential suppliers in the industry and
Tesla is expecting to significantly increase production which would increase Tesla’s
bargaining power, however, Tesla is leveraging their agreement with Panasonic to
create a Gigafactory that will “produce more lithium ion batteries annually than were
produced worldwide in 2013” (Tesla Gigafactory, 2017).

Bargaining Power of Buyers. The power of buyers in the automotive industry is high
because there are many different manufacturers, makes, and models to choose from,

24
and many dealers will negotiate sale prices. However, the bargaining power of Tesla
customers is moderate because there are all electric and hybrid alternatives offered by
other competitors, however, the company does not negotiate sale prices.

Threat of New Entrants. The threat of new entrants into the market are low because
of the high barriers to entry and the large size of competitors in the industry. High
barriers to entry include the high cost of research and development to design a car, the
high cost of production (materials, labor), high economies of scale, and the high cost of
brand development and marketing. New entrants would require significant upfront
financing in order to produce a vehicle and compete in the industry. New entrants would
be competing against established name brands that benefit from economies of scale and
offer differentiated product lines.

Threat of Substitutes. The threat of substitutes to Tesla in the automotive industry are
moderate because of alternatives offered by competitors, as well as public
transportation. The cost to switch from one vehicle manufacturer to another, or to
choose public transportation as an alternative is low. Also, competitors offer other
electric/hybrid models with varying price ranges that also perform well.

2.5.4. Current information systems

Tesla employs a variety of advanced information systems to support its operations and
drive innovation. Here are some key components:
Big Data Analytics: Tesla uses a proprietary platform called Teslalytics to collect,
analyze, and interpret vast amounts of data from its global fleet of vehicles. This data
includes vehicle performance metrics, driver behavior, and environmental conditions,
which help Tesla improve vehicle efficiency, develop advanced safety features, and
optimize the charging infrastructure. [14]
Enterprise Resource Planning (ERP): Tesla’s ERP system, developed in-house,
supports various business functions such as manufacturing, supply chain management,
and financials. This system was crucial in enabling Tesla to sell directly to consumers
online, bypassing traditional car dealerships. [15]

25
Operating Systems: Tesla vehicles run on a customized version of Linux, which
provides the necessary security, capability, and performance. This system is tailored to
handle the specific demands of Tesla’s vehicles and sophisticated onboard computer
systems. E-commerce Platform: Tesla has developed its own e-commerce platform to
sell its products and services directly to consumers. This platform supports online sales
and enhances the customer experience by integrating with other IT systems. [16]
These systems collectively enable Tesla to maintain its competitive edge in the
automotive industry and continue its mission of accelerating the world’s transition to
sustainable energy.
III. IDENTIFYING TESLA'S MANAGEMENT SYSTEM PROBLEMS
3.1. Tesla may be unable to control manufacturing costs (2021-2023)
3.1.1 What is the problem with Tesla's manufacturing costs?
Controlling manufacturing costs is critical to the future success of the company. This
requires implementing and maintaining cost-effective manufacturing processes while
achieving planned high levels of output and quality. Tesla states in its 2023 balance
sheet that “ Cost reduction remains a key enabler of our mission.” However, Tesla warns
in its 2023 annual report of challenges such as production bottlenecks and the need to
address them in a timely manner while continuing to improve processes and reduce
costs that “we may be unable to control our manufacturing costs”. Failure to achieve
these goals could result in delays in establishing and/or sustaining production ramps, as
well as inability to meet associated cost and profit targets. [17]

26
 Figure 9. Tesla's operations (source:Tesla)

The chart shows Tesla's operations divided into four main categories: Supply Chain,
Manufacturing, Products, and Services. Under Manufacturing, this section highlights
"Factory Software," "Warehouse & Inventory," and "Logistics & Transportation." We
found that the costs associated with the elements that Tesla develops are scattered across
these subsystems, which leads to the uncontrolled increase in manufacturing costs in
the 2023 financial report.

3.1.2 Why do these factors affect Tesla's manufacturing costs?

a. Material Costs:

The cost of raw materials, such as lithium, nickel, steel, and aluminum, has a significant
impact on the total cost of production. Pricing for these materials is governed by market
conditions and may fluctuate due to various factors outside of our control, such as
supply and demand and market speculation

The prices of raw materials are variable and not fixed, and Tesla emphasizes that
production prices will not be known in the long term, as stated in the "Material Cash
Requirements" section of its 2023 annual report. Contracts will be flexible in the short

27
term with different suppliers, which is uncertain about raw material prices, although
Tesla's goal is to reduce the average price of a car.

Figure 10. Raw materials make up a Tesla car (source: tesla impact report 2023)

In the normal course of business, Tesla enters into agreements with suppliers to
purchase components and raw materials for use in the production of its products.
However, due to the contract terms, the variability in the exact growth curves of Tesla's
development and production processes, Tesla said that "we generally do not have
binding and enforceable purchase orders under such contracts beyond the short-term,
and the timing and magnitude of purchase orders beyond such period is difficult to
accurately project." [18]

b. Labor Costs:

28
Tesla has bottlenecked and damaged its production capabilities and quality by keeping
every aspect of manufacturing in-house—rather than partnering with third parties to
help craft and manufacture components. Musk believes this strategy will eventually
give the company a manufacturing cost advantage.

Industry Standard: Most automakers rely heavily on a network of third-party suppliers.

This allows them to focus on core competencies such as design and final assembly while
benefiting from the expertise and efficiencies of their suppliers. Partnering with third
parties spreads risk. If one supplier faces issues, the automaker can often switch to
another. Tesla's approach places all the risk within its own operations.

This includes everything from battery production to software development, which can
lead to inefficiencies and production bottlenecks. To support our points regarding
Tesla's in-house manufacturing complexity and its comparison to other EV (Electric
vehicle) manufacturers that use third-party suppliers, let's look at some detailed data
and analyses from recent studies and reports: quality control data, cost analysis,
financial performance, and case studies/industry comparisons.

- Tesla's In-House Manufacturing Complexity

Tesla's strategy to keep manufacturing in-house includes everything from battery

production to software development. This approach has several benefits, including
greater control over the production process and quality. However, it also introduces
significant complexity and potential inefficiencies.

Cost and Production Bottlenecks:

○ Production Costs: Tesla's cost per vehicle in 2021 was approximately

$39,000. Tesla's innovative manufacturing techniques, such as the use of
single-body castings and their "unboxed" process, aim to reduce these
costs significantly, promising potentially cutting production costs by up
to 50% [19]
○ Bottlenecks: Despite these innovations, the complexity of managing
everything in-house can lead to production bottlenecks. Tesla has faced

29
 delays and challenges in scaling production quickly to meet demand, as
seen with the initial production issues of the Model 3 [20].

Specialization vs. Generalization:

○ Third-Party Suppliers: Other EV manufacturers often use third-party

suppliers for specific components, which allows them to benefit from
specialized expertise and optimized production processes. For example,
many OEMs (Original Equipment Manufacturer) use shared or modified
platforms to boost production volume, allowing them to reduce R&D
costs and increase efficiency [21]
○ Efficiency Gains: Manufacturers like Volkswagen and BMW, which rely
more on specialized suppliers, have streamlined their supply chains to
enhance efficiency and maintain high quality. This approach can reduce
the complexity and overhead that Tesla faces with its in-house model.

Comparative Analysis with Other EV Manufacturers: To provide a clearer comparison,

let's look at some key metrics and strategies from other leading EV manufacturers:

Recent reports from McKinsey and other industry sources provide specific data on
production costs:

● Cost Comparisons: Tesla's production cost per vehicle is around $39,000, while
traditional OEMs using a mix of in-house and outsourced production have
managed to keep costs lower. For instance, by converting ICE plants to BEV
lines, traditional manufacturers can save up to 10% in capital expenditures
compared to starting new BEV lines from scratch [21].

30
 Figure 11. Opportunities for in-sourcing

The chart highlights the best opportunities for in-sourcing (shown in gray),
which are typically battery-pack and battery-module assembly, and e-motor and
inverter assembly. These areas show incremental cost savings, indicating that
vertically integrating these components can provide OEMs with a financial
advantage.

● Efficiency Gains: Outsourcing specific components and focusing on flexible

manufacturing lines can defer up to 25% of required capital expenditures until
production volumes ramp up, providing a cost advantage over Tesla's more
capital-intensive in-house approach [21].

In short, while Tesla’s in-house manufacturing approach offers control and potential
long-term benefits, it also brings significant complexity and cost to scale and
manufacture in-house. By comparison, other EV makers leverage third-party suppliers
and flexible manufacturing to reduce costs and improve efficiency in their own research
and operations of massive component manufacturing.

- Quality Control Data

31
Defect Rates: Tesla has faced various quality control issues over recent years. For
example, the Model Y has experienced problems with body hardware, tailgate, door
alignment, and paint defects. Similarly, the Model X and Model S have encountered
issues with body hardware, climate systems, and in-car electronics [22] [23].

Figure 12. The website “teslamotorsclub.com” displays customer feedback comments

Customer Satisfaction and Reliability Ratings: According to Consumer Reports,

Tesla ranked near the bottom in reliability among 24 brands, scoring 40 out of 100 in
reliability. Electric vehicles overall also scored poorly, but Tesla's position improved
slightly from previous years [22] [23].

- Cost Analysis

Manufacturing Costs: Tesla’s vertical integration strategy, where they produce many
components in-house, contrasts with other automakers that rely on specialized third-
party suppliers. While vertical integration can potentially reduce costs in the long term,
it also introduces complexity and requires significant upfront capital investment. This
can be seen in the incremental cost savings analysis for in-sourcing critical BEV
components, where certain components like battery-pack assembly and module
assembly show slight cost savings, but battery-cell production could lead to a 23% cost
increase if not managed efficiently [23].
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Capital Expenditures: Tesla's substantial investment in Gigafactories and other
production facilities highlights the high capital expenditure required for their in-house
manufacturing approach. This is contrasted with automakers like General Motors and
Ford, which have diversified their production through partnerships with third-party
suppliers, reducing their immediate capital outlays.

- Financial Performance

Tesla’s gross profit margins have fluctuated significantly, often impacted by their heavy
capital investments in manufacturing infrastructure. Periods of high capital expenditure,
such as during the ramp-up of new Gigafactories, have often led to tighter profit
margins.

Figure 13. Tesla Inc's Gross Profit Margin (source: findbox)

To substantiate the claims about Tesla’s financial performance and profit margins,
several key data points can be highlighted:

Profit Margins: Tesla's gross profit margins have experienced notable fluctuations,
primarily influenced by their significant capital investments in manufacturing
infrastructure. For instance, Tesla's gross profit margin for fiscal years ending 2019 to
2023 averaged 21.3%, with a peak of 25.6% in December 2022. However, these

33
margins saw a decline, with Tesla reporting a 17.7% gross profit margin for the most
recent twelve months [24].

Capital Expenditures and Financial Strain: The high capital expenditure, particularly
during the ramp-up of new Gigafactories, often leads to tighter profit margins. For
example, during periods of significant investment in Gigafactories, Tesla's operating
margins have been impacted, reflecting the financial strain associated with maintaining
and expanding in-house production capabilities [25].

Revenue and Market Share: Despite these challenges, Tesla’s strategy has enabled
rapid scaling of production and an increase in market share. Their revenue growth has
been substantial, with a significant increase in annual gross profit from $13.6 billion in
2021 to $20.9 billion in 2022, although there was a 15.31% decline in 2023 to $17.66
billion [24],[25].

Industry Comparison: Comparing Tesla’s strategy with competitors, companies like

Ford and GM, who leverage more traditional supply chain models with third-party
suppliers, tend to have different financial dynamics. For instance, while Tesla invests
heavily in vertical integration, which can lead to higher upfront costs and fluctuating
profit margins, traditional automakers benefit from lower immediate capital
expenditures but may miss out on long-term cost savings and innovation control
[24],[25].

These points collectively illustrate the financial complexities and outcomes of Tesla's
in-house manufacturing strategy, highlighting both the challenges and advantages it
brings compared to traditional outsourcing models in the automotive industry.

c. R&D Expenses:

Significant investments in research and development for new product designs and
manufacturing processes also impact costs. Tesla's R&D expenses include costs for
engineering, manufacturing testing, prototyping, and amortized equipment expenses.
“Research and development (“R&D”) expenses consist primarily of personnel costs for
our teams in engineering and research, manufacturing engineering and manufacturing

34
test organizations, prototyping expense, contract and professional services and
amortized equipment expense.”

Figure 14. Research and development expense

R&D expenses increased $894 million, or 29%, in the year ended December 31, 2023
as compared to the year ended December 31, 2022. The overall increase was primarily
driven by additional costs in the current year related to the pre-production phase for
Cybertruck, AI and other programs. R&D expenses as a percentage of revenue stayed
consistent at 4% in the year ended December 31, 2023 as compared to the year ended
December 31, 2022. Our R&D expenses have increased proportionately with total
revenues as we continue to expand our product roadmap and technologies

Tesla's significant investments in research and development (R&D) encompass various

areas such as new product designs and manufacturing processes. Their R&D expenses
include costs for engineering, manufacturing testing, prototyping, and amortized
equipment expenses. In 2021, Tesla's R&D spending rose by 74% to $1.1 billion. This
increase was primarily due to a $506 million rise in employee-related expenses, $263
million in R&D materials, $211 million in facilities, outside services, and depreciation
expenses, and $103 million in stock-based compensation [26].

To demonstrate the out-of-control R&D spending of Tesla. We compared Tesla and

General Motors (GM), two major companies in the automotive industry, both of which
invest heavily in research and development (R&D) to innovate and lead in emerging
markets, especially in electric vehicles (EVs) and autonomous driving technology.
However, their approach and scale of R&D investment can differ significantly,
reflecting their corporate strategies and market positions.

35
 Figure 15. GM vs Tesla in R&D spending

Between 2021 and 2023, Tesla’s average annual R&D spending was $3.1 billion, with
a notable increase to $4 billion in 2023, up nearly 30% from 2022 and almost double
the amount in 2021 [27]. This significant expenditure underscores Tesla's commitment
to developing and manufacturing its own battery cells, software, and hardware for its
vehicles, necessitating continuous investment in R&D [27].

Figure 16. R&D spending to revenue ratio

36
To recap, GM has a much bigger R&D budget than Tesla, roughly 2X larger than Tesla
in fiscal year 2023. From the revenue and costs and expenses perspective, GM has
allocated a much higher R&D budget than Tesla. However, when we look at the growth
rates, Tesla’s R&D growth rates did much better than that of General Motors. Tesla’s
R&D growth rate has averaged 40% since 2021, while GM’s figure averages only
17.5%.

These investments are vital for Tesla's mission to advance sustainable energy and
improve manufacturing processes, ultimately aiming to reduce production costs and
make electric vehicles affordable for the mass market [27].

3.1.3 How Tesla has mitigated these issues in the present

Tesla has implemented various innovative manufacturing techniques aimed at

drastically reducing production costs. One of the most notable strategies includes the
use of single-body castings, which replace hundreds of individual parts with just three
large pieces. This method not only reduces the complexity of the assembly process but
also saves 35% of factory space compared to traditional methods [26].

Additionally, Tesla has introduced a new manufacturing process called the "unboxed
process." Instead of the traditional method of assembling a car from a full body-in-
white, Tesla builds major sub-assemblies (front, rear, floor, and side panels) separately
and then integrates them. This approach, along with the use of their 4680 structural
battery packs, significantly streamlines production and reduces costs [26]

● Innovative Manufacturing Techniques: Tesla plans to use new manufacturing

processes and smaller factories to cut production costs by half. This includes
building vehicles in smaller modular units and assembling them together, which
reduces the required factory space and overall costs [27],[28].
● Next-Generation Vehicle Platform: Tesla is developing a new vehicle platform
that will be produced at their upcoming Gigafactory in Mexico. This next-gen
platform aims to make vehicles more affordable, with anticipated costs between
$25,000 and $30,000. The increased production scale is expected to lower

37
 manufacturing costs and make electric vehicles more accessible to a broader
market [26]
● Cost Reduction in Existing Models: Tesla has already achieved significant cost
reductions in its current models. For instance, the company managed to halve the
costs between the first-generation (Models S and X) and the second-generation
(Models 3 and Y) vehicles. The same approach is being applied to the next
generation of vehicles [27]
● Energy and Charging Innovations: To further reduce costs for customers, Tesla
has opened its supercharger stations to owners of other electric vehicles and
plans to offer unlimited home charging for $30 per month in Texas using wind
energy [27].

These efforts collectively aim to reduce Tesla's manufacturing costs by 50%, paving the
way for more affordable electric vehicles while maintaining high production quality and
efficiency.

Tesla has done these things to improve this situation.

Tesla has undertaken several measures to control and reduce manufacturing costs,
addressing the challenges that have affected its financial performance.

Automation and Production Optimization

One of Tesla's key strategies is to enhance automation and optimize production

processes. Tesla's Vice President of Vehicle Engineering, Lars Moravy, mentioned that
the company is restructuring its production process to achieve long-term production
goals. This includes deploying a new EV platform and focusing on high-volume
production to lower unit costs [29].

Battery Technology and Cost Reduction

Investing in advanced battery technology is another critical measure. Tesla has focused
on reducing battery costs, one of the most expensive components of electric vehicles.

38
This includes innovations in battery design and production processes to lower the
overall cost per kilowatt-hour [26]

Expansion of Gigafactories

Tesla has built several Gigafactories worldwide, including in Shanghai, Berlin, and
Texas. These facilities are designed to optimize production efficiency and reduce
transportation costs by being closer to key markets. Gigafactories also allow Tesla to
streamline its supply chain and improve economies of scale, which helps in reducing
manufacturing costs [30].

Cost Management Strategies

Tesla has also focused on general cost management strategies, including reducing fixed
costs, improving labor productivity, and enhancing the efficiency of its operations.
These measures are aimed at maintaining profitability even as the company scales up
production [29].

By integrating these strategies, Tesla aims to control manufacturing costs effectively,

ensuring sustainable growth and maintaining its competitive edge in the electric vehicle
market.

3.2. Supply Chain Disruptions

Tesla is facing significant disruptions in its supply chain, particularly related to:
3.2.1. What is the problem:
The problem is a severe shortage of raw materials crucial for battery production, such
as lithium, nickel, and other metals used in electric vehicle (EV) batteries [31]. This
shortage is leading to a significant increase in the cost of these raw materials, which in
turn is driving up the prices of electric vehicles. The higher costs are reducing the
affordability of electric cars for consumers and impacting the financial performance of
automakers, particularly Tesla. “When prices go up, the number of people who can
afford to buy a [Model] S or X doesn’t go down a little bit, it goes down a lot,” Musk
said. That’s why the company has raised the price of its electric cars twice as an

39
incentive. adjusted to the challenges of rising raw material prices and supply chain
disruptions. Its cheapest car now costs more than $45,000 compared to about $38,000.
Tesla’s long-term goal is to create a $25,000 electric car will be more difficult.

Figure 17. Shortage of raw materials of Tesla

3.2.2. When did that problem occur:
The problem began to intensify around 2020 and 2021, with the situation becoming
more acute in recent years. Specific events contributing to the current crisis include the
economic sanctions on Russia affecting nickel supply, increased demand for EVs
outpacing raw material supply, and disruptions in mining and supply chains exacerbated
by labor shortages and inflation. The shortage and resulting price increases have become
particularly noticeable in the past two to three years. [32]
3.2.3. Why does that happen:
Several factors contribute to the raw material shortage and price increases:
● Increased Demand: The rising popularity of electric vehicles has led to a surge
in demand for essential battery materials like lithium, cobalt, and nickel.
Automakers, including Tesla, Stellantis, and Ford, are expanding their EV
production, straining the supply of these raw materials.
● Geopolitical conflicts: Geopolitical events, such as the conflict between Russia
and Ukraine, have disrupted the supply of nickel, a key component of batteries.

40
 Sanctions against Russia, which controls a significant portion of the global
supply of nickel, have led to price volatility and supply shortages.
● Mining Challenges: There are delays and difficulties in obtaining mining
permits, labor shortages, and environmental regulations that restrict mining
activities. For example, the US government shut down a mine in Minnesota to
protect the environment, which affects the supply of nickel and copper.
● Inflation and Costs: Inflation and rising costs in the mining and processing
sectors further exacerbate the issue, driving up the prices of raw materials. This
results in higher production costs for electric vehicles, which are then passed on
to consumers.
These combined factors create a complex scenario where the cost and availability of
raw materials are significantly impacting the electric vehicle industry.
IV. PROPOSE A SOLUTION PLAN
4.1. Solution for Problem 1
4.1.1 Recommended solution

Knowing that these costs are for long-term investment, Tesla has also tried to address
this issue and is seeing significant results. To shift the focus from cost control to
improving brand awareness and attracting investors, Tesla could implement a number
of strategic measures. These efforts would highlight the company’s long-term
investment in technology and innovation, positioning the company as a forward-
thinking leader in the electric vehicle industry.

By focusing on these areas, Tesla can effectively shift the narrative from cost challenges
to long-term strategic investments, enhancing brand recognition and attracting new
investors. This approach will underline Tesla’s vision of leading the future of
sustainable transportation, thus appealing to a broader audience and securing the
necessary capital for continued growth and innovation.

a. Enhance Brand Awareness and Customer Engagement

Specific Objective: Increase global brand awareness and customer engagement by 20%
within the next year through targeted marketing campaigns and community initiatives.

41
 ● Measurable: Track metrics such as social media engagement, website traffic,
brand recognition surveys, and event attendance.
● Achievable: Leverage Tesla's existing brand strength and innovative products.
● Relevant: Strengthening the brand will attract new customers and investors.
● Time-bound: Achieve this within 12 months.

Application:

● Launch Global Marketing Campaigns: Create compelling narratives around

Tesla's vision, innovation, and sustainability. Use digital media, television, and
print ads.
● Community Engagement Programs: Invest in community projects related to
renewable energy and EV education. Host events, workshops, and webinars.
● Celebrity and Influencer Partnerships: Collaborate with influencers and
celebrities who align with Tesla's brand values to reach broader audiences.

b. Showcase Long-Term Investments in Technology and Innovation

Specific Objective: Highlight Tesla’s long-term R&D investments and technological

advancements in quarterly investor reports and public communications.

● Measurable: Number of mentions in media, investor interest, and engagement

metrics during earnings calls and reports.
● Achievable: Utilize existing R&D initiatives and achievements.
● Relevant: Emphasizes Tesla’s commitment to innovation, attracting investors
interested in future growth.
● Time-bound: Incorporate these highlights in the next four quarterly reports.

Application:

● Regular Technology Updates: Publish detailed reports on advancements in

battery technology, autonomous driving, and new product developments.
● Innovation Summits: Host annual or bi-annual summits showcasing the latest
innovations and future plans, inviting media, investors, and industry experts.

42
 ● Collaborations and Partnerships: Announce partnerships with leading tech
companies and research institutions to reinforce Tesla’s position as a technology
leader.

c. Expand Product Line and Market Reach

Specific Objective: Introduce two new affordable EV models and enter three new
international markets within the next 18 months.

● Measurable: Sales figures, market share, and customer feedback in new regions.
● Achievable: Leverage existing manufacturing capabilities and market demand.
● Relevant: Expanding the product line and market reach increases revenue and
investor confidence.
● Time-bound: Achieve this within 18 months.

Application:

● Develop Affordable Models: Design and launch EVs that cater to middle-
income consumers, making electric cars accessible to a broader market.
● Market Entry Strategy: Conduct market research to identify and enter high-
potential international markets such as India, Southeast Asia, and Africa.
● Local Manufacturing Units: Establish local manufacturing units to reduce
costs and comply with regional regulations, improving market penetration.

d. Improve Financial Transparency and Investor Relations

Specific Objective: Increase transparency and communication with investors by

holding quarterly town halls and providing detailed financial forecasts.

● Measurable: Investor satisfaction surveys, participation rates in town halls, and

stock performance.
● Achievable: Utilize existing investor relations infrastructure.
● Relevant: Enhances investor trust and confidence in Tesla’s long-term strategy.
● Time-bound: Implement within the next quarter and maintain ongoing.

43
Application:

● Quarterly Town Halls: Host virtual and in-person town halls where investors
can ask questions and get detailed insights into financial performance and
strategic goals.
● Detailed Financial Reports: Provide comprehensive reports with clear
explanations of financial performance, R&D investments, and future projections.
● Regular Updates: Keep investors informed about key milestones and
achievements through newsletters and press releases.

e. Strengthen Sustainability Initiatives

Specific Objective: Achieve a 30% increase in the use of renewable energy in

manufacturing processes within the next two years.

● Measurable: Energy usage metrics, carbon footprint data, and sustainability

audits.
● Achievable: Leverage existing initiatives and expand renewable energy
projects.
● Relevant: Aligns with Tesla’s mission and attracts environmentally conscious
investors.
● Time-bound: Achieve this within 24 months.

Application:

● Renewable Energy Projects: Invest in solar and wind energy projects for
Gigafactories and other manufacturing units.
● Sustainability Reporting: Publish annual sustainability reports detailing
progress, challenges, and future goals.
● Partnerships with Green Energy Firms: Collaborate with renewable energy
providers to secure sustainable energy sources for all facilities.

By implementing these strategies within the SMART framework, Tesla can effectively
shift the narrative from cost challenges to strategic long-term investments, enhancing

44
brand recognition, and attracting new investors. This approach will underline Tesla’s
vision of leading the future of sustainable transportation, appealing to a wider audience
and securing the necessary capital for continued growth and innovation.

4.1.2 Which strategy will we choose to implement?

In the context of Tesla's objectives, the most feasible recommendation with the least
capital investment and minimal preparation time would be: Enhance Brand Awareness
and Customer Engagement
Reasons for Selection:
● Low Capital Investment: Marketing campaigns, community engagement
programs, and influencer partnerships can be tailored to fit budget constraints
and can often leverage existing relationships and resources.
● Immediate Implementation: These initiatives can be started quickly, using
existing marketing and PR teams, and can be scaled up over time as needed.
● Enhances Brand and Investor Appeal: By increasing brand awareness and
engagement, Tesla can attract new customers and investors, highlighting the
company's innovation and sustainability goals.
● By focusing on enhancing brand awareness and customer engagement, Tesla can
quickly and effectively shift the narrative towards its strengths, using a relatively
low-cost and high-impact approach.
Specific Objective: Strengthening the brand will attract new customers and investors.
Time-bound: Achieve this within 6 months.

Target Audience Impact: The target audience for new investors and potential
shareholders of Tesla is diverse, ranging from individual retail investors to institutional
investors, younger generations, high net-worth individuals, and socially responsible
investors which can inform targeted marketing and communication strategies to attract
and engage them effectively. Understanding these profiles helps in crafting tailored
messages and campaigns to meet their specific needs and interests, ultimately driving
investment in Tesla.

Implementation Plan for the 6 Months:

45
Month 1: Planning and Preparation

Define Objectives:

○ Increase public awareness of the environmental benefits and cost savings

of electric vehicles (EVs).
○ Demonstrate Tesla’s commitment to sustainability and innovation to
investors.

Develop a Comprehensive Plan:

Specific Activities Workshops:EV Webinars:Benefits of Community Projects:

technology, cost EVs, Tesla’s renewable energy
savings, environmental innovations, Q&A installations.
impact. sessions with experts.

Frequency: Weekly sessions Bi-weekly sessions Monthly events

Participants 200-300 per session 2,000 engagements per 5,000 engagements per
webinar project

Table 1. Comprehensive Plan

Identify Key Partners and Stakeholders:

● Local Governments: Support for permits, promotions. Participation in projects,

providing venues.
● Environmental Organizations: Co-hosting events, providing
expertise.Promoting events, participating in activities.
● Renewable Energy Firms: SolarCity, NextEra Energy. Providing resources,
expertise, and sponsorships. Hosting workshops and webinars, participating in
community projects.

Organize the Team:

● Project Manager: Oversee entire project, coordinate between teams.

● Event Coordinator: Plan and execute events, manage logistics.
● Community Outreach Manager: Engage with local communities, secure
partnerships.

46
 ● Marketing Lead: Develop and implement marketing strategies, manage
social media.
● Training Coordinator: Train staff, prepare materials for workshops and
webinars.

Select Venues:

Community Centers:

Locations: Downtown Community Center, Greenfield Community Hub.

Reasons: High foot traffic, central locations.

Tesla Showrooms:

● Locations: Tesla Store in Downtown, Tesla Gallery in Midtown.

● Reasons: Brand presence, ready audience interested in EVs.

Month 2: Promotion and Initial Engagement

1. Launch the Initiative:

○ Announce the community engagement programs on Tesla’s website and
social media platforms.
○ Send press releases to local media and relevant industry publications.
2. Promote Upcoming Events:
○ Create engaging promotional content (videos, infographics) to generate
interest.
○ Use social media, email newsletters, and partner platforms to promote the
events.
3. Host Initial Webinars:
○ Conduct the first online webinar on the environmental benefits of EVs
and cost savings.
○ Include Q&A sessions to engage participants and address their concerns.

Month 3: Expand Reach and Engagement

1. Analyze Feedback:
○ Review feedback from initial webinars to identify areas for improvement.

47
 ○ Adjust the content and format of future events based on participant
feedback.
2. Plan Additional Events:
○ Schedule more webinars and workshops in different locations.
○ Introduce new topics based on community interest, such as renewable
energy solutions and Tesla technology.
3. Increase Promotional Efforts:
○ Collaborate with influencers and partners to broaden the reach.
○ Share success stories and highlights from initial events to build
momentum.

Month 4: Mid-Term Review and Optimization

1. Conduct a Mid-Term Review:

○ Assess the progress of the program against the initial objectives.
○ Evaluate the effectiveness of the events and promotional strategies.
2. Optimize Program Elements:
○ Make necessary adjustments to improve engagement and impact.
○ Strengthen partnerships and expand the network of collaborators.
3. Host Key Community Projects:
○ Organize a large community project, such as a renewable energy
installation or a community EV showcase.
○ Invite local media to cover the event and amplify the message.

Month 5: Continuation and Scaling

1. Continue Hosting Events:

○ Maintain a regular schedule of webinars, workshops, and community
projects.
○ Expand to new communities and regions to increase reach.
2. Scale Promotional Activities:
○ Increase social media efforts, including paid promotions to target specific
demographics.

48
 ○ Engage with participants post-events to keep the community active and
involved.
3. Measure and Report Progress:
○ Track metrics such as event attendance, social media engagement, and
website traffic.
○ Share regular updates and success stories with the broader community and
investors.

Month 6: Final Review and Future Planning

1. Conduct a Final Review:

○ Evaluate the overall success of the community engagement programs.
○ Measure the impact on brand awareness and customer engagement.
2. Document Successes and Learnings:
○ Compile a report highlighting key achievements, challenges, and lessons
learned.
○ Share the report with stakeholders and use it to plan future initiatives.
3. Plan for Sustainability:
○ Develop a plan to sustain the community engagement efforts beyond the
initial 6 months.
○ Secure long-term partnerships and allocate resources for ongoing
programs.

Budget

Month Activity Description Cost

($)

1 Planning and Preparation 20,000

Workshops, Webinars, Content Development, Promotion, Venue

Community Projects Rentals, Miscellaneous

Research and material preparation 3,000

Expert speaker fees 7,000

49
 Social media campaigns 2,000

Email marketing tools 1,000

Community centers and schools rentals 2,500

Tesla showrooms rentals 3,000

Print materials 500

Refreshments for participants 1,000

Team Organization and Training Materials, Training Sessions 4,000

Training
Development and printing 1,000

Venue costs 500

Training fees 2,500

Partnerships and Partnership Development 2,000

Stakeholders

2 Promotion and Initial 12,000

Engagement

Promotion and Marketing Social media ads 3,000

Press release distribution 1,000

Videos and infographics 4,000

Initial Webinars Hosting Platform Fees, Speaker Fees

Webinar software 1,000

Expert speakers 3,000

3 Expand Reach and 16,000

Engagement

Additional Events Webinars, Workshops, Promotional Efforts

Content development 2,000

50
 Speaker fees 5,000

Venue rentals 3,000

Influencer partnerships 3,000

Social media ads 2,000

Feedback Analysis and Survey Tools and Analysis

Improvement

4 Mid-Term Review and 18,000

Optimization

Mid-Term Review Evaluation and Reporting, Program

Optimization

Data analysis 2,000

Adjustments and improvements 3,000

Key Community Projects Large-Scale Event, Media Coverage

Renewable energy installation 10,000

Media coverage 3,000

5 Continuation and Scaling 20,000

Ongoing Events and Projects Regular Events, Community Projects,

Promotional Activities

Webinars and workshops 6,000

Community projects 7,000

Social media ads 4,000

Email marketing 1,000

Participant Engagement Post-Event Engagement

Follow-up activities 2,000

6 Final Review and Future 7,000

Planning

51
 Final Review Data analysis and reporting 3,000

Sustainability Plan, Partnership Negotiations 2,000

Future Planning Long-term strategy development

Partnership negotiations 2,000

Total 99,000

Table 2. Budget estimate

4.2. Solution for Problem 2

Proposed Solution to Address Raw Material Shortages for Tesla
Solution: Diversification of Raw Material Sources
To address the current shortage and rising costs of raw materials, Tesla can implement
a multi-faceted short-term strategy involving forming strategic partnerships and
diversifying its supply chain. Here’s a detailed analysis of how this solution can be
applied: Diversifying sources of raw materials helps reduce reliance on any single
supplier or region, mitigating risks associated with geopolitical events or supply chain
disruptions.
● Supplier Evaluation: Tesla can conduct a comprehensive evaluation of
alternative suppliers and establish relationships with those offering raw materials
from politically stable regions.
● Recycling Initiatives: Implement or expand recycling programs to recover and
reuse valuable materials from old batteries, thereby reducing the need for new
raw materials.
Implementation Steps:
4.2.1 Expand alternative sources
Research and develop alternative sources for key raw materials, including potential
suppliers from different geographic regions.
● Lithium: Evaluate suppliers from regions other than Latin America, such as
Infinity Lithium (Spain) or Australian Lithium (Australia).

52
 ● Nickel: Seek new suppliers from other countries such as Eurasian Resources
(Kazakhstan), PT Vale Indonesia (Tbk) to reduce dependence on Russia.
*Implementation Plan for Alternative Sourcing Solutions for Lithium and Nickel
- Objective: Identify and partner with alternative suppliers for lithium and nickel to
mitigate the risk of supply disruptions due to political conflicts in Latin America and
Russia.
- Analysis of Alternative Suppliers
+ Lithium
Current Supplier Alternative Supplier

Supplier
Albemarle
Corporation SQM Infinity Lithium Australian Lithium

Location USA Chile Spain Australia

Range from $14,000 approximately 6,000 range from $12,000 to range from $14,000 to
to $20,000/tonne. - 10,000 USD/tonne $15,000/tonne. [38] $22,000/ tonne. [40]
Supplies lithium [36]
carbonate and lithium
Cost
hydroxide. [34]

Production approximately 5,000 approximately 309,000 tons of lithium Capacity 36,000

Capacity
tonnes of Lithium 70,000 tonnes of hydroxide per year 10 . tons/year [41]
carbonate equivalent Lithium carbonate The company's goal is
(LCE) annually [35] equivalent (LCE) to supply 15% of global
annually [37] lithium demand [39]

- Known for - Competitive prices - Short-Term - Quality and

consistent quality and due to efficient ● Reduced volume: Australia is
advanced technology mining in the salt Geopolitical Risk: one of the world's
in lithium processing. region. Spain’s stable largest lithium
- Capable of - Recognized for political producers, providing
supplying large product quality and environment lowers large volumes and
Benefits volumes and meeting stable supply. the risk of supply consistent quality.
high demand. disruptions

53
 compared to volatile - Good
Latin American infrastructure: Good
regions. transportation and
● Transportation mining infrastructure.
Cost Savings: - Political stability:
Proximity to Stable political and
European markets economic
cuts transportation environment.
costs and delivery - Short term: Prices
times for lithium. may be similar or
● Easier Supply higher than current
Chain Integration: suppliers, but
Sufficient lithium transportation costs
volumes from can be reduced with
Infinity Lithium reasonable
facilitate seamless adjustments.
integration into - Long term: Secure a
Tesla’s supply sustainable supply
chain, reducing raw with the potential for
material shortages. future expansion.
● Reduced Demand
Pressure: Early
partnerships help
Tesla manage rising
lithium demand
without relying
solely on existing
suppliers.
- Long-Term
● Strategic
Partnership:long-
term relationship
with Infinity
Lithium offers
opportunities for
collaboration in
research,
technology, and
production.

54
 ● Supply Stability:
Infinity Lithium’s
potential for future
production
expansion ensures a
consistent supply as
demand grows.
● Sustainability:
Infinity Lithium’s
focus on sustainable
development aligns
with Tesla’s
commitment to
sustainability,
enhancing Tesla’s
brand value.

Table 3. Alternative lithium suppliers

From the overview of current and alternative raw material (lithium) suppliers, we can
see that alternative suppliers Infinity Lithium and Australian Lithium can better meet
Tesla's needs in solving the problem of raw material shortages when political conflicts
or factors affecting the supply chain occur. Infinity Lithium minimizes geopolitical risks
and offers lower transportation costs to the European market, while Australian Lithium
offers large volumes, stable quality, and a stable political environment. Both have the
potential for long-term cooperation and sustainable development, which is important
for Tesla to maintain a stable supply chain in the future.
+ Nickel

Current Alternative Supplier

Supplier
Supplier

Norilsk Nickel Eurasian Resources PT Vale Indonesia (Tbk)

(Kazchrome and Aksu mines)

Location Russia Kazakhstan Indonesia

55
Production Annual output produces about 140,000 tons of PT Vale Indonesia has the
Capacity about 220,000 nickel per year, accounting for capacity to produce approximately
tons of nickel
about 10% of total global nickel 80,000 - 100,000 tonnes of nickel
[42]
production. [43] metal (Ni) [44] [48]

range from range from $13,200 to $14,400/ Approximately $13,500 - $22,000

$12,000 to tonne. [44] USD/tonne. [45]
Cost
$18,000/tonne.
[42]

- Competitive - Reduced Dependence on - Short-Term

prices due to Russia: Kazakhstan offers an ● Stable Supply: Can supply a
efficient mining alternative that mitigates the risks large volume, enough to meet
in the salt region. of political and economic Tesla's needs, especially when
- Recognized for instability in Russia. stable supply is needed.
product quality - Lower mining costs: ● Product Quality: PT Vale
Benefits and stable supply. Kazakhstan has lower mining Indonesia's nickel is known for
costs, leading to more competitive its high quality, which is
prices. suitable for the requirements of
- Growth potential: Potential for the electric vehicle industry.
large mining projects and future ● Shipping Cost: Although
expansion. Indonesia is geographically
- Short-term: Lower prices reduce distant, establishing a stable
raw material costs immediately. partnership can help Tesla
- Long-term: Create long-term optimize shipping costs
relationships with suppliers with through long-term contracts
growth potential and greater and efficient logistics.
stability. - Long-Term
● Supply Stability: Has the
ability to expand production in
the future, supporting Tesla's
growing demand.
● Strategic Partnerships: Long-
term partnerships can help
Tesla negotiate preferential
prices and adjust contract
terms.

Table 4. Alternative nickel suppliers

56
Based on our analysis of current and alternative suppliers, we conclude that selecting
Eurasian Resources and PT Vale Indonesia (Tbk) as alternative suppliers to Norilsk
Nickel is a sound strategic decision to mitigate the risk of supply disruptions in the event
of political conflict.
Eurasian Resources offers short-term benefits with competitive pricing and reduced
dependence on Russia, while its scalability and low mining costs help keep raw material
costs at reasonable levels.
PT Vale Indonesia (Tbk), despite its higher prices, offers superior product stability and
quality, with the ability to expand production in the future and build long-term
partnerships.
Integrating both suppliers will not only ensure stable supply and reduce dependence on
a particular geographic area, but also optimize costs and increase flexibility in the
supply chain. This creates a solid foundation to effectively respond to any future
disruptions.
- Steps to Negotiate
1. Determine Needs and Requirements
- Needs: Determine the specific volume of lithium and nickel required for
production, including the type of feedstock (lithium carbonate, lithium
hydroxide, nickel sulfate, nickel metal).
- Requirements: Establish requirements for quality, delivery time, payment
terms, and contract terms (including price adjustment clauses).
2. Research and Select Suppliers
- Research:
● Information gathering: Gather information about new suppliers, including their
supply capabilities, product quality, and reliability.
● Compare: Compare prices, delivery terms, and additional benefits of each
supplier.
- Selection:
● Selection of suppliers: Select suppliers that are capable of meeting needs and
have the potential for long-term cooperation.

57
 ● Risk assessment: Evaluate risk factors related to geopolitics, mining
environment, and stable supply.
3. Conduct Negotiations
- Approach:
● Contact: Contact potential suppliers to discuss Tesla's needs and requirements.
● Define conditions: Discuss specific conditions such as price, delivery time, and
payment terms.
- Negotiate prices:
● Negotiate prices: Negotiate to achieve more competitive prices, request price
adjustments based on market fluctuations.
● Long-term price commitments: Negotiate terms to commit to stable prices or
adjust prices to minimize fluctuations.
- Delivery terms:
● Negotiate delivery times: Ensure delivery times are consistent with Tesla's
production needs.
● Payment terms: Negotiate flexible and reasonable payment terms.
- Long-term commitments:
● Long-term agreements: Negotiate long-term agreements to ensure continuous
and stable supply.
● Ensure relationships: Build strong relationships with suppliers to support long-
term growth.
4. Contract Signing
- Contract Signing:
● Contract Terms: Sign a contract with clear terms on responsibilities, quality, and
price.
● Performance Commitment: Ensure that contract terms are fully and accurately
implemented.
- Monitoring:
● Performance Monitoring: Monitor contract performance, ensuring quality and
delivery times are met.
● Problem Solving: Resolve issues promptly and effectively.

58
 5. Evaluation and Adjustment
- Performance Evaluation:
● Evaluate results: Evaluate the performance of new suppliers based on quality
● Adjustment: Adjust supply strategy as necessary to ensure long-term goals are
met and supply chain stability is maintained.
4.2.2 Invest in recycling technology
In addition to expanding supply sources, the solution to diversify supply sources for the
Tesla supply chain also includes investing in old battery recycling technology. 92% of
the materials in batteries can be recycled, so implementing a solution to invest in battery
recycling technology to reduce dependence on new raw materials will help reduce costs
and protect the environment [47]. The goal of the plan is to use recycling technology to
recover precious metals such as lithium, cobalt, and nickel from used batteries. Potential
partners such as Li-Cycle, Redwood Materials, and Northvolt provide advanced
recycling technology, helping to recover efficiently and ensure environmental
standards. [46]

Figure 18. Recycling battery (source: internet)

The plan includes building recycling facilities, equipping modern technology, and
cooperating with investors to share costs. The process of collecting old batteries and
recycling will include steps such as collecting batteries, transporting them to recycling
facilities, separating, and refining precious metals. Tesla will also integrate recycled

59
materials into its manufacturing processes, optimize costs, and assess the impact on its
products and supply chain. This solution will not only reduce raw material costs and
dependence on new sources of supply, but also contribute to the company's
sustainability goals thanks to advanced technology and stable raw material supply.
4.2.3. Evaluate solution and expected outcome
a. The Raw Material Diversification Solution
- Performance:
● Reducing Political and Economic Risk: By expanding relationships with raw
material suppliers from politically stable regions such as Spain, Australia,
Kazakhstan, and Indonesia, Tesla can reduce risks associated with political
conflicts and economic instability in existing regions. This helps ensure the
stability of the supply chain.
● Optimizing Transportation and Supply Costs: With diversification in supply,
Tesla can choose suppliers that are closer to its factories or have more efficient
transportation infrastructure. For example, choosing Infinity Lithium in Spain
can reduce shipping costs to European markets.
● Improving Sustainability and Partnerships: New partners can provide materials
with sustainable standards, which not only helps Tesla maintain its
environmental commitment but also improves the company's image in the eyes
of investors and customers.
● Ensuring Stable Supply and Long-Term Costs: Long-term partnerships with
suppliers such as Infinity Lithium and PT Vale Indonesia can provide more
stable pricing conditions and opportunities for future production expansion.
- Expected Outcomes:
● Improved Supply Chain Stability: Expanding relationships with a variety of
suppliers will reduce dependence on existing sources of supply, minimizing the
impact of market fluctuations and political crises.
● Cost Optimization: Although raw material prices from some new suppliers may
be higher in the short term, competition and long-term contracts can help reduce
long-term costs.
b. The Investment in Battery Recycling Technology

60
- Performance:
● Reduced Dependency on New Raw Materials: Investing in battery recycling
technology reduces dependence on new raw materials by utilizing materials from
used batteries, which can help reduce raw material costs.
● Environmental Protection: Recycling batteries reduces waste and pollution, and
supports Tesla's sustainability goals.
● Increased Material Efficiency: Advanced recycling technology can recover up to
92% of valuable materials, reducing the need for new mining and contributing
to the conservation of natural resources.
- Expected Results:
● Reduced Material Costs: Recovering and reusing materials from used batteries
can reduce material costs, helping Tesla reduce product prices.
● Enhanced Brand Image: Environmental protection and sustainability efforts can
improve Tesla's brand image and attract environmentally conscious customers
and investors.
● Facilitate Growth: Integrating recycling technology into the manufacturing
process not only reduces costs, but can also open up opportunities for innovation
and improvement in products and manufacturing processes.
To solve the problem of raw material supply shortages in battery production, Tesla
needs to adopt two important strategic solutions: expanding raw material supply and
investing in battery recycling technology. Expanding supply includes diversifying raw
material suppliers from different regions, such as lithium and nickel, to minimize risks
from geopolitical factors and supply chain disruptions. At the same time, investing in
battery recycling technology helps Tesla reduce its dependence on newly mined raw
materials, reduce costs, and contribute to environmental sustainability. By integrating
these two solutions, Tesla can ensure a stable and sustainable supply of raw materials,
optimize production costs, and improve supply chain efficiency, thereby strengthening
its competitive position and promoting the company's long-term development in the
electric vehicle industry.

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V. CONCLUSION

5.1. Summarizing the Main Contents

This report has provided an in-depth analysis of Tesla Inc., focusing on the company's
strategic orientation, current challenges, and proposed solutions. The primary objective
was to evaluate Tesla’s management system issues, particularly its challenges in
controlling manufacturing costs and managing supply chain disruptions. Key issues
include fluctuating raw material prices, inefficiencies in production processes, and
susceptibility to global supply chain interruptions, all of which contribute to elevated
production expenses and potential delays in fulfilling customer demand.

Our findings suggest that Tesla’s ambitious growth strategy and commitment to
innovation require a more robust approach to cost management and supply chain
stability. The complexity of Tesla’s manufacturing processes, combined with the
volatility of the global supply chain, highlights the need for more effective control
mechanisms and strategic planning. Addressing these challenges is crucial for Tesla to
maintain its competitive advantage and support its strategic goals of market leadership
and technological advancement.

In response to the identified problems, we proposed a series of targeted solutions.

Central to these recommendations is enhancing brand awareness and customer
engagement, which shifts focus from cost challenges to emphasizing Tesla’s strengths
and long-term investments. This strategy leverages marketing, community engagement,
and transparency to attract investors and build brand value. Additionally, diversifying
raw material sources addresses shortages by reducing dependency on single suppliers
and regions. It includes expanding alternative sourcing and recycling initiatives, which
helps manage costs and ensures a stable supply of critical materials.

Both solutions are designed to support Tesla’s growth by improving its market position
and operational resilience. Enhancing brand awareness focuses on investor and
customer engagement, while diversifying raw material sources aims to stabilize supply
chains and manage costs effectively.

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 5.2. Evaluation of the Report and Future Development Directions

The report’s strengths lie in its detailed analysis and actionable solutions. The
recommendations are strategically sound, addressing both brand awareness and supply
chain stability. However, several limitations must be noted. The reliance on current data
and projections may not fully account for future market shifts or unforeseen global
events. The volatility of raw material prices and supply chain disruptions could impact
the effectiveness of the proposed strategies. Furthermore, while the focus on brand
awareness and raw material diversification is crucial, other areas such as production
efficiency and supplier relationships are not covered.

The recommendations may also require significant investment and time for
implementation, potentially causing temporary disruptions. Additionally, the study does
not address regional variations in supply chain dynamics or regulatory challenges,
which could affect the applicability of the solutions in different markets. Future research
should consider these factors to provide a more comprehensive approach to Tesla’s
strategic planning and resilience against emerging challenges.

Moving forward, Tesla should focus on strengthening the implementation of these

solutions by continuously monitoring and adapting marketing campaigns and
community engagement programs, as well as expanding alternative supply sources and
recycling initiatives. Enhancing strategic planning and control through advanced
analytics and forecasting tools will help manage production costs and supply chain risks
more effectively. Investing in technological innovation will drive advancements that
reduce costs and improve product offerings, while fostering stronger industry
relationships will enhance supply chain stability and access to new technologies.

Staying informed about market and regulatory changes is also crucial. Tesla should
adapt its strategies to mitigate risks and seize opportunities as these dynamics evolve.
By focusing on these development directions, Tesla can bolster its market position,
enhance operational resilience, and maintain its leadership in technology and
sustainability, thus achieving its long-term strategic goals.

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