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The Emergence of Tesla in the Chinese Market

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Katie Beery

on 13 March 2014

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Transcript of The Emergence of Tesla in the Chinese Market

The Emergence of Tesla into the Chinese Market
Katie Beery, LaNita Burton, Luis Ginez, William Snep, and Corey Tan
Cultural Characteristics Analysis


Lengthy Negotiations & Wariness of Foreigners
Ask questions
A lot of information


Uncertainty avoidance
Environmental benefits & Status quo
Slower diffusion rates
Market penetration pricing strategy
Cultural Characteristics Analysis
Organizational Structure:

Strong power distance
Need to maintain distinctive hierarchy
Tesla will maintain a flat-matrix structure

Promotes innovation which increases risk
Separate from U.S.
Analysis of China's Micro Environmental Factors

China's Automotive Industry

- Extremely competitive

Rising Incomes and Growing Middle Class
- Domestic demand
- Larger consumer culture
- Symbol of financial success
- Target market : Middle to upper class

Analysis of China's Micro Environmental Factors

Roles of Chinese Government
- Encouraging growth
- Granting quotas and subsidies for buyers
- Recharging stations and battery swap stations
- Lowered import tariffs
- World’s largest new energy vehicle market by 2020
- Tesla Model S produce zero emission

Positive developments
- China overtook the U.S. as the world’s number one automotive market
- 83 motor vehicle per 1000 people in China
- China surpassed the US and all other countries in vehicle sales
- Domestic demand for passenger vehicles will remain high in years to come
Electric Car Charging Station
China's Global/National Competitive Advantage
China will emerge as the leading industrial country in the near future

Cheaper products for consumers and a rise in citizens disposable income
for more advanced and sophisticated technology products
shorter distance between suppliers which minimizes costs
to foreign investors: Chinese government's reputation of protecting local businesses, currency manipulation and wage suppression
United States
China's Macro Environmental Factor and Industry Analysis
History China's Automobile Manufacturing Industry

: China joins World Trade Organization (WTO)
Early 2000:
Restrictions placed on foreign automakers
: Decline in car production
: China is recognized as the world's largest automobile producer with largest market growth potential
About 100 whole-vehicle manufacturers and 8,000 auto-parts manufacturers in China
10 key players = 90% of market share
China's Macro Environmental Factor and Industry Analysis
Political Environment:
Politically stable
Government encouragement of Chinese automobile companies R&D, innovation capabilities, and protection of Intellectual Property Rights
At a stage of accelerated industrialization urbanization
Major issue = balance between economic growth and environmental protection
Increase in discretionary income, high real growth rates
Labor Force: low of migrant workers and surplus of college graduates
China's Macro Environmental Factor and Industry Analysis
Demographic Factors
2013 Population growth rate = .46%
Urbanization from development and modern industries and communications in China
2011: population rate of increase in urban areas is 2.85%
Major urban cities: Shanghai, Beijing (capital), Chongqing, Shenzhen, and Guangzhou
China's Macro Environmental Factor and Industry Analysis
Analysis of China's Auto-manufacturing industry continued...
Recent spurred demand of auto-components
Similar to U.S. buyers are attracted to the brand, appearance and engine performance features
Brand prestige and small vehicle size features are expected to remain important purchasing decisions
- economic growth has triggered a growth in purchasing power and sophistication levels of Chinese consumers
Competition will increasingly become more fierce
Final Recommendations and Exit Strategy for Tesla
Tesla Motors, Inc. Company
Tesla's Model S Product
American company that designs, manufacturers and sells electric cars and electric vehicle powertrain components
First gained attention producing the Tesla Roadster - first fully electric sports car
Public Company
NASDAQ stock exchange (TSLA)
First American car maker to go public since the Ford Motor Company in 1956
Founded in 2003
by Martin Eberhard and Mark Tarpenning
Headquarters: Palo Alto, California
2008: Opened first retain store in West Los Angeles, California
2010: Opened a powertrain development facility in Palo Alto, California
Other Facilities:
2013: Tesla operates over 50 company-owned showrooms worldwide
United States, Canada, Europe, Asia (Japan), and Australia
Tesla operates as an OEM (Original Equipment Manufacturer)
Daimler and Toyota
Panasonic - Partner in battery research and development
Supplies battery packs for Freightliner Truck's Custom Chassis Electric Van
2013 Financial Statistics:
Revenue: $2.013 billion
Operating Income: $61.3 million
Net Income: $74 million
6,000 as of January 2014
Tesla Motors Inc., Headquarters
Tesla Model S is a full-sized, electric, 5-door liftback passenger vehicle with rear-motor, rear-wheel drive
Code Name
: "White Star"
: Franz von Holzhausen
2009: First shown to public
June 2012: Retail deliveries started in the United States
August 2013: Released in Europe and first deliveries took place in Norway, Switzerland and the Netherlands
Has the greatest range of an electric car available on the market
89 miles/gallon fuel economy
ASAG ranked the Model S as the best environmental performance in the 2014 full-size cars category
Tesla Model S Prototype at 2009 Frankfurt Motor Show
Primary Instrumental Panel - LCD display - Indicates speed, power usage, charge level, estimated rande and active gear
Model S Charge Port - Located behind the left rear taillight
Analysis of China's Micro Environmental Factors

- In order to gain access into China’s automotive market
- Minimum registered capital of RMB500 million (USD 75 million)
- Advantage : Establishment in Beijing

Final Recommendations
1st year independent of China
2nd year joint venture with China
Maintain separate US and China operations
Global strategy is status quo and environmental

Exit Strategy
Sale to existing automaker
Full transcript