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Tesla Motors Competitive Analysis

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Derek Standlee

on 5 June 2015

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Transcript of Tesla Motors Competitive Analysis

An Introduction to Tesla
Five Forces: Industry Rivalry

American-based manufacturer of premium electric cars and electric powertrains
Tesla's Goals
Environmental Responsibility
Recent Developments
Some say
might be
driven down
by Tesla's "open source" operation, increasing industry rivalry:

Number of competitors
likely to be
easier entry to the market

Exit barriers
are high:
Can’t use the capital invested for something else
Competitors are here to stay

Risks of
price competition:
Less product differentiation
High fixed costs

Five Forces: Industry Rivalry
highway capable
plug-in cars
in US market -

Chevrolet > Nissan > Prius > Tesla

small industry
0.71% of new car sales in 2014
>125,000 vehicles sold

current internal structure
Five Forces: Threat of Substitutes
Five Forces: Industry Rivalry

But, we argue
might actually
thanks to Tesla's decision:

until 2022:
18.6% annual growth rate
2.4% market share of new vehicle sales in US.

Higher growth rate
--> bigger pie -->
bigger share

Rivalry can
increase average profitability
of an industry if each competitor serves
different customer segments
Tesla = premium

CEO influence
--> forward-looking
Consumer's initial choice: gasoline or electric
High perceived switching costs
Just 36% of consumers understand enough

Effects of open-sourcing: increasing industry profitability
Easier consumer education
Economies of scale for battery production
competitor and trust networks
Five Forces: Threat of New Entrants
Open-sourcing will decrease barriers to entry for battery production

Could introduce significant competitors

Mitigating factors:
"Gigafactory" competitive advantages
Potential for even greater profit
buyer power by standardizing vehicle specifications
Pay attention
to opportunities for borrowing
6k+ employees
37 Countries
125 stores and service locations
Revenue per unit of 2017-model car over time
Became an open-source company by making their patents freely available
All citations:
Malcolm, Wade, Caroline Narich, and Mark Schutz. “Plug-in Electric Vehicles: Changing Perceptions, Hedging Bets.” Accenture. January 1, 2011. Accessed November 5, 2014.
“Gigafactory Will Cost Tesla $5 Billion But Offers Significant Cost Reductions.” Forbes. March 11, 2014. Accessed November 6, 2014.
https://www.youtube .com/watch?v=FZ6lZJWL_Xk
https://www.youtube .com/watch?v=mURbzh9t0_0&feature=youtu.be&t=15m1s
While conventional wisdom suggests that refusing to enforce patents would be disastrous, allowing free entry to the market, driving down prices, and eliminating the potential profit associated with innovation, Tesla does not seem to subscribe to this initial assumption. In fact, their reasoning directly aligns with a Porter's Five Forces analysis.
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