TESLA CASE STUDY ASSIGNMENT – YASH PAWAR (22203251)

Current situation & existing issues:

Tesla, owned by Elon Musk, as we all know is one of the biggest manufacturer and seller of highly
efficient electric vehicles. Tesla has been successful in increasing its sales and capturing a range of
important regions of the world over the past decade by implementing its unique business model and
strategy. Till now it has managed to have a positive growth on the stock market and generate good
amounts of profit and revenue. But the question now is whether Tesla will be able to sustain its growth
given a number of upcoming issues such as extreme competition from other EV manufacturers, use of
hydrogen as a fuel for automobiles and rising material costs.

Deep-analysis:

Business model

The business model of Tesla is based on direct sales and service. They do not have any franchised
dealerships. They also make heavy investments in establishing an excellent network of charging
stations called Superchargers. Tesla also has extended its vision to develop energy storage systems for
homes and businesses.

Strategy

Tesla started with focussed differentiation strategy to develop luxury cars and now is driving down the
industry with broad differentiator strategy. Tesla aims at becoming the biggest manufacturer of
premium and highly efficient EVs and convince people worldwide to depend on EVs rather than the
gasoline powered vehicles for environmental safety. Tesla’s strategy focusses on using the company’s
battery and drivetrain technology to challenge the global automotive industry.

Tesla issues/challenges

 Competition from other EV manufacturers

In the last 3-4 years, many new automobile manufacturers like Toyota, Volkwagen, Hyundai, TATA,
BMW, Mercedes, Jaguar, KIA, Ford, etc have made tremendous efforts to enter the EV market.
Many of these have been successful in developing good battery technologies that would allow the
customers to travel for 300-500 kms on a full single charge. Though these companies are yet to
establish a network of charging stations, it won’t take them a lot of time keeping in mind the hefty
investments made.

It is worthy to note that many companies are aiming to provide good EV technologies to their
customers at cheap prices. TATA, for example, launched TATA Tigor EV for just 8.5 lac rupees in
India. Even though Tesla services are for the premium sections of the society, this can impact their
revenue share in the global or regional market once other manufacturers aim at providing good
products at affordable prices. Nevertheless, the aim is to manufacture EV for all sections of the
society to lessen the dependency on gasoline powered vehicles.

 Use of hydrogen as alternative fuel

Scientific research has shown hydrogen to be a dependable and efficient fuel for automobiles. Mr
Nitin Gadkari, the Union Minister of Road Transport and Highways of India, recently himself did a
test of a hydrogen fuelled car in India by using it for 3 days for his daily transport as part of a
 project. If hydrogen fuel technology for automobiles turns out to be more efficient and affordable
than the EV technology, there is a high probability of people preferring them and this can be a
threat to the core vision of Tesla.

 Rising material costs

Rising material costs is not an issue only for Tesla but for the entire automotive industry
collectively. What is more difficult for Tesla is that they work only in the EV domain which makes
it more difficult to get materials at cheaper costs. Tesla still faces material and chip shortages due
to the supply chain disruptions during Covid-19 Pandemic.

Tesla had to raise Model 3 and Model Y SUV by $2000 and $5000 respectively. In a tweet, Elon
Musk stated that these rise in process are due to the supply chain pressure worldwide, especially
the raw materials.

PEST ANALYSIS OF FACTORS AFFECTING TESLA

Political Economic Social Technological

Solution and Conclusion

The recent earnings report of Tesla gives an insight of how well it is currently placed financially. Its
market value is rising exponentially and the company is rapidly growing its global coverage with recent
announcements of entry in Asian countries like India. Nevertheless, as mentioned earlier, it still has to
face the upcoming issues of external competition, hydrogen fuel technology and rising material costs.
Following are some solutions and recommendations to the company’s future approach from my point
of view-

 Increase efficiency and reduce costs to sustain the competitive advantage

With all the automobile companies concentrating on increasing the efficiency of EVs, it is highly
important for Tesla to maintain their stand on the most efficient EV manufactured in the coming
times of extreme completion. Also with many other companies focussing on manufacturing cheap
EVs for all sections of the society, Tesla must focus on cost-cutting measures. It is important to
note that cost-cutting can be achieved by companies having cost-advantage.

 Thinking about hybrid version (EV + hydrogen) technology

Currently there are many hybrid models like Petrol/Diesel + CNG. If the hydrogen technology
becomes more efficient and cheaper in the comping future, the best thing for Tesla to do would
be focus on a hybrid technology to attract people. Otherwise, the success of hydrogen fuel
technology will anyways be a major threat to Tesla.
 Improving supply chain efficiency

Sometimes it becomes difficult to cut costs on materials used as it is not in the company’s hands
to control the costs. But what can be controlled is the inventory and materials handling costs. It is
important to partner with the correct suppliers to streamline ordering and purchasing process.
Tesla must try to economize the transport and materials handling. This will allow them to achieve
a sizable cost advantage over less adapt rivals.