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MGCR 423 > Tesla > Flashcards

Tesla Flashcards

1
Q

Bargaining power of buyers

A
  • high
  • lots of choice
  • Bargaining power of buyers is high since there are more and more alternative EVs available in the market now, especially at various price points
  • Since Tesla buyers are no longer eligible for the federal tax credit, Tesla loses a bit of appeal to consumers as well
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2
Q

Bargaining power of suppliers

A
  • pretty high
  • COGS is high and threatens profitability
  • a bit lower since Tesla has its own gigafactories, controls some of the production
  • especially threatening due to dependence on global supply chains for raw inputs, batteries, and chips
  • some of this threat can be offset through vertical integration (but that requires a lot of cap-ex investment)
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3
Q

General conclusions about five forces

A
  • varies across locations, but overall everything is high

- can tell its high because Tesla isn’t really profitable

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4
Q

Threat of Rivalry

A
  • high
  • strong competitors across different areas, but especially high in China
  • Rivian and Lucid Motors in the US, Porsche and Audi in Europe, and NIO in China
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5
Q

Threat of substitutes

A
  • high
  • global EV adoption is slow, education and charging infrastructure are lacking, more hybrids are being brought to market and gas prices are low.
  • EV market still small
  • in addition to other kinds of cars, there’s also public transport, bikes, etc. (especially in transition to greener economy)
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6
Q

threat of new entrants

A
  • very high
  • EVs becoming a trend
  • US auto giants like Ford and GM are gearing up to enter the EV market and can leverage their existing customer base and large capital to increase their speed to market through acquisitions and gain substantial market share on Tesla.
  • Barriers to entry are low as the giant car companies have lots of resources to enter the EV space as well
  • Only problem is the charging network, as Tesla’s charging network is only compatible with its own cars so other EVs won’t be able to tap into it
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7
Q

Main opportunities for Tesla

A
  • Chinese market is huge EV vehicle market
  • pick-up truck sector (very profitable)
  • automated fleet of vehicles, like a Tesla owned uber service –> tracks with decreased car ownership
  • growth in demand for electric cars (people want to reduce carbon footprint, potential new gov regulations to support this demand)
  • other energy initiative growth (utilize its technological expertise in batteries, thermal management and power electronics. Ex: innovative Solar Roof, PowerWall)
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8
Q

Trends in the environment

A
  • less privately owned vehicles
  • growing demand for electric cars
  • increasing gov regulations to environmentally friendly development
  • but some tax rebates are decreasing
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9
Q

Threats to Tesla

A
  • legal obstacles in some US states since Tesla doesn’t use car dealers
  • Chinese population do not have a garage where they can charge their cars at night. More populated, apartment, no parking. Need for dense public charging stations.
  • Electric vehicle sales growth in China in percentage change from previous year seems to be decreasing
  • Competitors:
  • > GM: largest legacy carmakers (in terms of number of cars sold) in the US.
  • > Ford: second largest incumbent carmaker in the US.
  • > Both investing the self driving car technology and autonomous driving. (and electrification)
  • also existing competition and likely many people entering the market in China and elsewhere (Chinese market also has many cheap alternatives)
  • Price of gas in the US remains low (hovering around 2.50$ a gallon)
  • Questions whether the demand for Tesla 3 will remain strong now that Tesla no longer qualifies for any federal credits. (decreasing federal credits)
  • Any disruption in production of lithium-ion batteries, since lithium-ion batteries are the most critical and most expensive component for EVs and they are required in every EV, Powerwall and PowerPack
  • also multi-point competition:
  • ->GM & Ford is also investing in self driving car technology
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10
Q

Tesla’s strengths

A
  • Elon Musk (powerful, charismatic, lots of reach)
  • strong word of mouth marketing –> low marketing expenses
  • strong company culture and brand loyalty
  • proprietary design and innovation
  • synergies among other ventures (Tesla Energy, Tesla Insurance, Tesla AI–> also supports the innovation)
  • access to financial capital
  • reduced manufacturing complexity a bit by reducing customization options
  • Only car manufacturer that provides over-the-air (OTA) software updates for its owners, and thereby incrementally upgrading the vehicles through continued new software releases.
  • strong market share in the US
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11
Q

weaknesses

A
  • problem scaling up production profitably, while also launching several new models
  • ->also had many issues with production which caused delays and led to unhappy customers
  • on an annual basis, company is yet to make profits
  • customer service is inferior, not to the level of a luxury car brand
  • ->while they generally have good brand image, this could hurt them in the long run
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12
Q

Tesla’s core competencies

A
  • design
  • combination of software and hardware
  • technological innovation (both in cars and other energy areas)
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13
Q

Tesla’s competitive advantages

A
  • Tesla has a unique and strong brand image synonymous to sustainability, innovation, and design.
  • Elon Musk, can be viewed as a cult icon and is a very powerful public figure.
  • Tesla has the ability to leverage data to pioneer autopilot, self-driving cars and automation.
  • It has network effects
  • value-added diversification into other areas (Energy, Insurance, AI)
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14
Q

Key industry success factors

A
  • Establish charging network
  • Vary product offerings and price ranges
  • Have long battery life and range
  • Have speedy delivery and local service
  • Focus on safety and performance
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15
Q

business-level strategy

A

differentiation

  • proprietary design
  • marketing based a lot on Elon Musk/ word-of-mouth
  • -> Elon Musk has cult following
  • unique technology within the cars (OTA updates, social network)
  • also unique distribution (online and showrooms only) and no price discounts ever

more details

  • ex. the Tesla Roadster, which had faster acceleration than a Porsche or Ferrari and cost $115,000, so definitely not affordable
  • develops premium lines on top of its base models (ex. premium version of the Model X, which is more expensive and offers more features than the base model)
  • Tesla offers OTA updates and a clean-slate design.
  • ->only car manufacturer that has over-the-air (OTA) software updates that upgrade Tesla vehicles with new software releases, so every Tesla car is fully up-to-date with new innovations.
  • The clean-slate approach means that Elon Musk does no market research when designing cars, which makes them look different from the other cars offered on the market,
  • -> ex. CyberTruck, .
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16
Q

gen notes about Tesla satisfying customer needs and unique from comp offerings

A

-Tesla is unique from competitors’ offerings due to its distinct vision, supercharging station network spanning the US, DTC sales model, social media connections that are built with customers, use of data, and micro-targeted insurance pricing.

  • For customer needs, Tesla meets customers’ needs for safe, sustainable transportation at affordable prices.
  • ->For safety, Tesla is working on making autonomous driving 10 times safer than manual driving.
  • ->Tesla has affordable versions of its car models and one of Elon Musk’s main goals is affordability, fitting into Tesla’s vision of the widespread adoption of sustainable energy. This need for affordability is particularly being met by Tesla’s low-priced Model 3 which was very successful

-company’s capabilities involve strong engineering innovation, allowing them to improve their autonomous driving technology, and they can also keep costs low because they have large scale manufacturing which they learned from an alliance with Toyota.

17
Q

Corporate level strategy : general

A

diversifying through energy, AI and Insurance
-these things also contribute to the differentiation strategy that Tesla is pursuing

-also trying to diversify geographically

18
Q

Corporate level strategy: Tesla Energy

A

Gen:
Can offer decentralized energy generation (Solar Roof), energy storage (Powerwall and Powerpack), and energy use
Revenues of Tesla Energy were $1.6 billion in 2018 (up from 181 million in 2016)
 Powerwall is for residential consumers, they can store the solar energy captured from their roods
 Customers can sell back excess energy to utilities (at this this is the hope)
 Powerpack attractive for commercial consumers to avoid power outages

Used acquisition of SolarCity to achieve this

Synergies:
Good for upselling
vertical integration
Can leverage “technological expertise in batteries, thermal management, and power electronics that were originally developed for its EV’s in energy storage”

19
Q

Corporate-level strategy: Tesla Insurance

A

Gen:
 Micro-targeted pricing for car insurance to Tesla owners
• Since has data that can see safe drivers
• Lower insurance premiums correlate with more use of the autonomous-driving mode

Synergies:
Good for upselling
Tesla has deep sets of data that is useful for this
•Logs drivers’ trips, how many miles, when, and where
•If driver obeys rules of the road
•Have complete transparency on how car is being used
Also good to lock-in consumers
•Won’t want to give up cheaper insurance

20
Q

corporate-level strategy: Tesla AI

A

Gen:
Self-driving cars, acquisition of DeepScale
Has expertise because of significant data and the above acquisition
Has developed own AI-chip that affords full self-driving (FSD) capabilities

Synergies:
Also sort of backwards integration
•Not relying on another company to provide software
Tesla’s existing customer data makes them better at this (have huge wealth of data)
•18 billion miles of real-world driving
Autonomy is one of two tech discontinuities that Musk credits Tesla’s ability to enter industry and scale to
•(the other being electrification)
Tesla already applies machine learning algorithms to the interconnected network of Tesla’s to continuously improve and upgrade the autopilot
Partial multipoint competition against Ford and GM who are looking to pursue autonomous vehicles
•Ford had acquired majority stake in Argo AI

21
Q

Tesla acquistions

A

-DeepScale
o“machine learning startup with a focus on computer vision”
o2019

-SolarCity
oAcquired for $2.6 billion in 2016
oSolar energy comoany
oAcquisition made Tesla Inc. world’s first fully integrated clean-tech energy company
Combines solar power, power storage, and transportation
oAlso pushed Tesla to change mission to “accelerate the advent of sustainable energy”
As opposed to sustainable transportation

-Acquisition strategy supports the corporate level strategy
oUse acquisitions to diversify
SolarCity acquisition in 2016 kickstarted Tesla Energy
DeepScale acquisition in 2019

22
Q

Value Chain analysis primary

A 
Supply Chain
• Strategic alliances
• Lean Manufacturing
• Early challenges
• Affected by Covid-19
• Upstream research and development
Operations
• Gigafactories
• Create their own hardware
chips and software,
batteries and chargers
• Limited customizations
• Collect data from drivers

Distribution
• DTC and doesn’t use traditional dealerships • Showrooms
• Distribution problem in early days
• Beat expectations in 2019

Marketing and Sales
• At first lost $50,000 on each car sold
• Sales and services all done in house
• Controls customer experience
• Low marketing expenses
• word of mouth and media coverage
• No discount on vehicles
• Still not profitable
ollow-up Services
• Customer service not up to par
• Dense network of supercharging
stations
• Over-the-air (OTA) software
updates
• Social network for Tesla owners to connect
23
Q

value chain analysis supporting factors

A

Financial
• Company has yet to make a profit
• cap-ex intensive investments in gigafactories
• high COGS → need to achieve economies of scale to become profitable
• but had strong IPO, so has some access to capital

Information Systems
• Network of interconnected autonomous vehicle
• machine learning and AI
• collect data on drivers to make autopilot better
• overall strong tech capabilities

Human Resources
• Open-source mindset
• attract best engineering talent globally
• Elon Musk as a cult icon so attracts people to come work for him

MGCR 423 (20 decks)

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