Case 13 Tesla Motors: Disrupting the Auto Industry
Tesla Motors' strategy was no secret: in 2006 the chairman and CEO, Elon Musk, announced:
So, in short, the master plan is:
•
Build a sports car.
•
Use that money to build an affordable car.
•
Use that money to build an even more affordable car.
•
•
While doing above, also provide zero emission electric power generation options.
Don't tell anyone.1
The remarkable thing was that by 2015, Tesla had kept to that strategy and executed it almost
flawlessly. Phase 1 (“Build a sports car”) was realized with the launch of its Roadster in 2007.
Phase 2 (“Use that money to build an affordable car”) began in 2013 with the launch of the
Model S.
The acclaim that greeted both cars had propelled Tesla's reputation and its share price. Since its
initial public offering in June 2010, Tesla's share price had followed an upward trajectory. On
June 12, 2015, Tesla's stock market value was $31.7 billion. By comparison, Fiat Chrysler was
valued at $20.5 billion despite that fact that Fiat Chrysler would sell about 2.5 million cars in
2015 against Tesla's 55,000. The optimism that supported Tesla's valuation reflected the
company's remarkable achievements during its short history and investors' faith in the ability of
Elon Musk to realize his vision “to accelerate the advent of sustainable transport by bringing
compelling mass market electric cars to market as soon as possible.”2
Indeed, Musk's vision for Tesla extended beyond revolutionizing the automobile industry:
Tesla's battery technology would also provide an energy storage system that would change “the
fundamental energy infrastructure of the world.”
A central issue in the debate over the appropriate market valuation of Tesla was whether Tesla
should be valued as an automobile company or as a technology company. In practice, these two
issues could not be separated: Tesla's principal source of revenue would be its cars, but realizing
the expectations of earnings growth that were implicit in Tesla's share price required Tesla to
maintain technological leadership in electric vehicles. Given that Tesla's rivals were some of the
world's largest industrial companies—Toyota, General Motors, Ford, Volkswagen, and Renault–
Nissan, to name a few—this was a daunting prospect.
Electric Cars
The 21st century saw the Second Coming of electric cars. Electric cars and buses were popular
during the 1890s and 1900s, but by the 1920s they had been largely displaced by the internal
combustion engine.
Most of the world's leading automobile companies had been undertaking research into electric
cars since the 1960s, including developing electric “concept cars.” In the early 1990s, several
automakers introduced electric vehicles to California in response to pressure from the California
Air Resources Board. However, the first commercially successful electric cars were hybrid
electric vehicles (HEVs). Sales of HEVs in the US grew from 9,350 in 2000 to 352,862 in 2007.
By far the most successful HEV, both in the US and globally, was the Toyota Prius, which by
early 2010 had sold 1.6 million units worldwide.
Mass production, plug‐in electric vehicles (PEVs) were first launched in 2008. There were two
types of PEV: all‐electric cars—of which the pioneers were the Tesla Roadster (2008), the
Mitsubishi i‐MiEV (2009), the Nissan Leaf (2010), and the BYD e6 (launched in China in
2010)—and plug‐in hybrid electric vehicles (PHEVs) which were fitted with an internal
combustion engine in order to extend their range. General Motors' Chevrolet Volt, introduced in
2009, was a PHEV.
However, there were also a number of other types of battery electric vehicles (BEVs). Some of
these were highway‐capable, low‐speed, all‐electric cars such as the Renault Twizy and the city
cars produced by the Reva Electric Car of Bangalore, India. There were also various types of
neighborhood electric vehicles (NEVs) intended for off‐road use—these included golf carts and
vehicles for university campuses, military bases, industrial plants, and other facilities. Global
Electric Motorcars, a subsidiary of Polaris, was the US market leader in NEVs. Most NEVs used
heavier, but cheaper, lead–acid batteries.
Electric motors had very different properties from internal combustion engines—in particular
they delivered strong torque over a wide range of engine speeds, thereby dispensing with the
need for a gearbox. This range of torque also gave them rapid acceleration. Although electric
motors were much lighter than internal combustion engines, the weight advantages were offset
by the need for heavy batteries—which were also the most expensive part of an electric car,
costing from $10,000 to $25,000.
Electric cars were either redesigns of existing gasoline‐powered models (e.g., the Ford Focus
Electric and Volkswagen's e‐Golf) or newly designed electric cars (e.g., the Tesla Roadster and
Nissan's Leaf). Complete redesign had major technical advantages: the battery pack formed part
of the floor of the passenger cabin, which saved on space and improved stability and handling
due to a lower center of gravity.
Predictions that electric cars would rapidly displace conventionally powered cars had proved
false. In 2009, Frost & Sullivan had predicted that the market for electric vehicles (including
hybrid electric vehicles) would grow to 0.6 million units worldwide in 2015—about 14% of new
vehicles sold.3 In 2014, global registrations of electric cars totaled 340,000. Although this was a
70% increase on 2013, it was a tiny fraction of the total automobile market. The US was market
leader in terms of numbers sold, yet electric cars accounted for a mere 0.74% of total car sales.
During 2015, the market for electric cars, especially in the US, was adversely affected by lower
oil prices: total sales for the first five months of 2015 were little changed from the year‐ago
period (Table 1). However, electric car sales in China grew rapidly, overtaking the US as the
largest market for electric cars.
TABLE 1 Sales of leading models of plug‐in electric cars in the US during January to May
(units)
2015 2014
Tesla S (estimated)
9,200 9,000
Nissan Leaf
7,742 8,301
Chevrolet Volt
4,400 5,290
2015 2014
BMWi3
3,900 336
Ford Fusion PHEV
3,563 3,553
Ford C‐max Energi PHEV 2,900 2,415
Toyota Prius PHEV
2,426 5,988
Chevy Spark
1,559 454
Source: evobsession.
While oil prices were an important factor influencing consumer choice between gasoline and
electric cars, government incentives were even more important. Norway had the highest
penetration of electric cars (14% of the market in 2014). This reflected incentives that included
exemption from purchase taxes on cars (including VAT), road tax, and fees in public car parks;
electric cars were also allowed to use bus lanes.
“Range anxiety”—the threat of running out of battery charge and the limited availability of
charging stations were seen as the primary obstacles to the market penetration of all‐electric
PEVs. However, both issues were being resolved. Between 2015 and 2018, the range of EVs was
expected to double—most EVs would then have a range of close to 200 miles (though still far
from the 265‐mile range of the Tesla S (with an 85 kWh battery pack). Charging stations were
widely available in most urban areas, but they were sparse in many rural areas.
While most experts expected the plug‐in electric car to be the primary threat to conventional
cars, it was not the only zero‐emission technology available to automakers. Fuel cells offered an
alternative to plug‐in electrical power. Fuel cells are powered by hydrogen which reacts with
oxygen from the air to create electricity that then drives an electric motor. Fuel cell technology
was developed during the space program and became applied to experimental land vehicles
during the 1960s. Although a number of automakers had developed prototypes of fuel cell cars,
only Toyota, Hyundai, and Honda had marketed cars powered by fuel cells. Since fuel cells
consume hydrogen, a key factor limiting the adoption of fuel cells was the absence of a network
of hydrogen fueling stations.
Tesla Motors: Product Launches
Elon Musk was a South African‐born, serial entrepreneur with interests in e‐commerce,
renewable energy, and space travel. He had co‐founded Zip2, which provided web‐based
software to publishing companies, and then PayPal, which earned him $165 million when it was
acquired by eBay. His next start‐ups were SpaceX, which would develop space launch vehicles,
and SolarCity, which aimed to become “the Walmart of solar panel installations.”
Tesla Motors Inc., founded in 2003, was named after Nikola Tesla, the pioneer of electric motors
and electrical power systems in the late 19th century. In 2004, Musk became lead shareholder
and chairman of Tesla Motors. He took over as CEO in 2008, and two years later Tesla Motors'
shares began trading on the NASDAQ market.
Tesla's first car, the Roadster, launched in 2007, was a sensation. Priced at $109,000, it was a
luxury sports car. Capable of accelerating from 0 to 60 miles per hour in less than four seconds,
it was faster than most Ferraris. Its range of 260 miles on a single charge far exceeded that of the
plug‐in cars being developed by other automakers. The car became a favorite of Hollywood
celebrities and a statement of environmental responsibility by the super‐rich. The car's battery
was built by Tesla from lithium‐ion battery units supplied by Panasonic, its body was built by
Lotus in the UK, and it was delivered direct to the final customer without using dealers. Only
2,500 Roadsters were produced between 2007 and 2012, but it attracted huge publicity and is
credited with changing public perceptions of electric cars.
The Model S was Tesla's first mass production car. A prototype was displayed in March 2009
and the car was launched in 2013. The Tesla S was a four‐door, five‐seater sedan (with an
additional third seat to accommodate two children) that came with different battery options (up
to 85 kilowatt‐hours) and a list price between $52,400 and $72,400. The car had a modular
design developed on a flexible platform that would support multiple variants. Despite its high
price (compared to other mass‐market sedans), Tesla claimed that the Model S's overall user cost
was about $1,800 per year—similar to that of comparable gasoline cars—as a result of Tesla's
higher purchase price being offset by savings on fuel and maintenance.
The car was built at the former NUMMI plant at Fremont, California that Tesla had acquired
from Toyota for $42 million. It was sold directly to consumers without using franchised
dealers—the standard approach to sales and after‐sales services in the auto business. Instead,
Tesla opened its own directly managed showrooms in major cities throughout the world. This
direct sales model conflicted with the laws of several US states, which required retail sales of
automobiles to be undertaken through independent dealers. Tesla was soon involved in a flurry
of legal battles. In New Jersey, New York, Maryland, Ohio, and Pennsylvania, Tesla was
successful in getting state laws changed to allow it to directly sell its cars to the public; in Texas,
it failed.
The Tesla S was greeted by a torrent of rave reviews. Tesla's 2014 Annual Report observed:
Since its launch, Model S has won several awards, including the prestigious Motor Trend Car of
the Year for 2013. Surveys by Consumer Reports gave Model S the highest customer satisfaction
score of any car in the world in 2013 and gave Tesla Service the best overall satisfaction rating in
the entire automotive industry in 2015. Model S also earned the highest safety rating in the
United States by the National Highway Traffic Safety Administration.4
In addition to unsurpassed range and remarkable acceleration, it was praised for its stability and
handling. The car's electronics were considered an advance upon those available from any other
automaker. The driver's console featured a touchscreen that controlled almost all the car's
functions, eliminating the need for most knobs and other controls; the car used a wireless fob
instead of a key; and its software allowed the driver to adjust the car's suspension and steering
behavior.
The Model S was to be followed by the Model X, a crossover between a sedan and an SUV
(sport utility vehicle), built upon the same platform as the Model S, and to be launched in the
third quarter of 2015.
Tesla's Technology
Tesla regarded itself as a technological leader within electric vehicles:
Our battery pack and electric powertrain system has enabled us to deliver market‐leading range
capability on our vehicles at what we believe is a compelling battery cost per kilowatt‐hour. Our
battery packs use commercially available lithium‐ion battery cells and contain two to three times
the energy of any other commercially available electric vehicle battery pack, thereby
significantly increasing the range capabilities of our vehicles. Designing an electric powertrain
and a vehicle to exploit its energy efficiency has required extensive safety testing and innovation
in battery packs, motors, powertrain systems and vehicle engineering.
Our proprietary technology includes cooling systems, safety systems, charge balancing systems,
battery engineering for vibration and environmental durability, customized motor design and the
software and electronics management systems necessary to manage battery and vehicle
performance under demanding real‐life driving conditions.
However, Tesla's Sportster and Model S had, for the most part, combined existing automotive,
electric motor, and battery technologies with little radically new innovation. In terms of electric
motors, the technology was mature and well diffused. Tesla produced its electric motors in‐house
and possessed several patents relating to refinements in their design (e.g., a liquid‐cooled rotor).
However, the critical technical advantages of Tesla's electric motors related to their overall
integration within the electrical powertrain and the software that managed that system.
Batteries
Electrical storage represented the most formidable challenge facing electrical vehicle
manufacturers. The lithium‐ion battery was first introduced by Sony in 1991, and soon became
the dominant type of battery for laptop computers and other rechargeable electronic devices. By
2005, all the automakers developing electric vehicles had adopted lithium‐ion batteries because
of their superior power to weight ratio as compared with alternative battery types. For electric
cars, lithium‐ion cells are first combined into modules then the modules are combined into
battery packs. Battery packs are controlled by software that monitors and manages their
charging, usage, balancing, and temperature. The leading producers of lithium‐ion batteries are
shown in Table 2.
TABLE 2 The world's top‐ten producers of lithium‐ion batteries (in megawatt‐hours)
1st Quarter 2015 2014
Panasonic
888
2,726
AESC
361
1,620
BYD
196
461
Mitsubishi/GS Yuasa 135
451
LG Chem
114
886
Samsung
105
314
Wanxiang
62
0
Beijing Pride Power 47
121
Tianneng
38
77
SB LiMotive
37
0
Total
1,983
6,656
Source: http://cleantechnica.com/2015/05/06/10‐biggest‐electric‐car‐battery‐manufacturers‐are/,
accessed July 20, 2015.
The leading automakers had each partnered with a battery producer to develop and supply
batteries for their electric cars. Renault–Nissan, under the leadership of Carlos Ghosn, was the
most enthusiastic pioneer of electric vehicles, investing over $5.6 billion in its electrical vehicle
program (which included the Nissan Leaf). This investment included a battery plant in Tennessee
developed in collaboration with NEC. General Motors had partnered with LG for its supply of
lithium‐ion batteries.
Investments in battery plants were motivated by two factors, first, projection of a shortage of
capacity for lithium‐ion batteries for electric vehicles and, second, by the presence of a steep
learning curve in battery production. This meant that there were substantial savings in unit costs
for those producers able to expand their battery production the fastest.
Unlike Nissan, which had collaborated with NEC to develop a lithium‐ion battery for its cars
from scratch, Tesla used off‐the‐shelf lithium‐ion cells bought from Panasonic. The cells were
considerably smaller than those used by Nissan, hence requiring a much larger number (7,000)
for the Roadster as compared with 192 for the Nissan Leaf, but avoiding some of the problem of
overheating associated with lithium‐ion cells.5
In July 2014, Tesla announced an agreement with Panasonic to build the world's biggest
manufacturing plant for lithium‐ion batteries. By 2020, the plant would have the capacity to
manufacture 35 gigawatt‐hours of battery cells and 50 gigawatt‐hours of battery packs. The
facility, the “Gigaplant,” would cost about $5 billion—of which Tesla would invest $2 billion,
Panasonic between $1.5 billion and $2 billion, and the state of Nevada would provide $1.25
billion in grants and tax breaks. The plant was located near Reno, Nevada and would begin
production during 2017. The plant's annual output would exceed the entire global output of
lithium ion batteries in 2013. Tesla's goal in building the plant was, first, to ensure sufficient
supply of battery packs for its cars and, second, to bring down the cost of lithium‐ion batteries
from a cost of about $260 per kilowatt‐hour in early 2015 to about $120 by 2020.
The Gigaplant would also allow Tesla to expand its sales of storage batteries for homes and
businesses. At a product launch event on April 30th, 2015, Elon Musk announced its
Powerwall—a battery pack for home use. Tesla offered two types of Powerwall: one to provide
storage for solar‐generated power (the 7 kWh model costing $2000) the other as emergency
backup (the 10 kWh model costing $3500). With solar panels from SolarCity, Musk could now
offer a total home generation system. In addition, Tesla would launch its Powerpack—a large
capacity power storage unit for business and utilities at a cost of $250 per kilowatt‐hour. Only a
week after their launch, Bloomberg estimated that Tesla had taken $179 million in orders for
Powerwalls and $635 million for Powerpacks. As a result, all Tesla's 2016 scheduled production
of these two products had been pre‐sold.6
Of Tesla's patents and patent applications up to the end of 2012, one‐third related to batteries and
another 28% to battery charging.7 Its battery patents related mainly to the configuration of
batteries, their cooling and temperature management, and systems for their monitoring and
management. Tesla undertook limited research into battery chemistry, but monitored closely
developments elsewhere (see Exhibit 1). Musk was skeptical of claims of major breakthroughs in
battery technology, noting that most battery inventors were “long on promises and short on
delivery.” However, in May 2015, Tesla hired Jeff Dahn of Dalhousie University, one of the
inventors of the nickel‐manganese‐cobalt battery.8
EXHIBIT 1
The Quest for a Better Battery
The quest for a cheaper way of storing electricity was viewed as one of the greatest challenges in
industrial R & D, most efforts focused upon improving lithium‐ion batteries. Technical
developments included:
•
developing electrodes that combined lithium with other elements (Electromechanical
Technologies Group at Berkley Livermore National Laboratories);
•
providing thin‐film coatings for the positive electrode (Stanford University);
Using solid or gel‐like electrolytes (Oak Ridge National Laboratory).
Innovatory battery technologies were also being developed by start‐up companies:
•
•
The British appliance maker Dyson, together with General Motors, had invested in
Sakti3, which was developing solid‐state batteries that had a potential cost‐to‐power ratio
of $100 per kilowatt.
•
EOS Energy Solutions was producing huge ‐zinc‐based batteries whose cost of $160 per
kilowatt‐hour made it viable for utilities to store electricity.
Sources: “Charge of the Lithium Brigade,” The Economist Technology Quarterly (May 30, 2015);
“Battery Revolution: A Clean Leap Forward,” Wall Street Journal (March 16, 2015).
Despite widespread excitement that Tesla's revenues from batteries could outstrip those from
cars, Scientific American noted that, first, Tesla did not possess any breakthrough technology in
batteries and, second, while Tesla had some cost advantages over other suppliers of battery
packs, it was not clear that this cost advantage was sustainable.9
Battery Charging
If the range of its cars was one clear advantage that Tesla had over its competitors, the other was
in battery charging. Tesla's Superchargers offered the world's fastest recharging of electric
vehicle batteries. A Supercharger delivered up to 120 kWh of direct current directly to the
battery. As a result, a 30‐minute charge from a Supercharger offered 170 miles' driving,
compared to just 10 miles with a 30‐minute charge from a public charging station. The speed of
the Supercharger is a result of the technology embodied in the Supercharger, the architecture of
Tesla's car battery packs, the high voltage cables that feed the battery, and the computer system
that managed the charging process. At the end of 2014, Tesla had 380 Supercharger stations in
North America, Europe, and Asia which provided free charging to Tesla owners. In addition,
there were 1000 locations in hotels and other locations in North America and Asia with Tesla
wall connectors for free charging of Tesla cars.
In June 2015, Tesla had about 64 patents relating to its charging system. These related to the
design of connectors and cables, systems for voltage and optimal charge rates, management
systems for charging stations that charged multiple vehicles, and several other aspects of the
charging process.
However, despite the superiority of Tesla's proprietary changing system, this did little to assist
the general inadequacies of the electric vehicle charging infrastructure. The critical problem was
not a shortage of charging stations but multiple systems. There were two problems:
1. There were two competing technical standards for fast charging: the CHAdeMO standard
supported by Nissan, Mitsubishi, and Toyota and the SAE J1772 standard supported by
GM, Ford, Volkswagen, and BMW. Tesla's proprietary charging system was not
compatible with either, hence to use the large number of CHAdeMO and SAE J1772
charging stations, Tesla owners needed to buy special adapters.
2. Multiple networks of charging stations with different systems of payment. In the US the
biggest network of fast‐charging stations was owned by ChargePoint, which required
users to purchase an annual subscription. In China, the leading provider of charging
stations was the State Grid, a major electricity supplier. However, its charging stations
could not charge Tesla cars. In several European countries, leading automakers (notably
Renault–Nissan and Daimler) had collaborated with national power utilities (e.g., EDF in
France and ENEL in Italy) and national governments to provide national networks of
charging stations in each country. Tesla had built its own network and bundled the cost of
charging into the price of the car.
Tesla Opens Its Patents
From its earliest days, Tesla had taken a rigorous approach to protecting its intellectual property.
In its 2012 Annual Report it stated:
Our success depends, at least in part, on our ability to protect our core technology and
intellectual property. To accomplish this we rely on a combination of patents, patent
applications, trade secret, including know‐how employee and third party non‐disclosure
agreements, copyright laws, trademarks, intellectual property licenses and other contractual
rights to establish and protect our proprietary rights in our technology.10
Hence the amazement when, on June 12, 2014, Elon announced:
Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to
the creation of compelling electric vehicles, but then lay intellectual property landmines behind
us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent
lawsuits against anyone who, in good faith, wants to use our technology.11
The announcement was followed by a flurry of speculation as to the reasons why Tesla would
want to relinquish its most important source of competitive advantage in the intensifying battle
for leadership in electric vehicles. In the ensuing debate, four possible rationales emerged:
•
Elon Musk's personal commitment to the displacement of petroleum fueled automobiles
by electric vehicles;
•
a calculated judgment that Tesla's interest would be better served by speeding the
development of an electric vehicle infrastructure and a bigger, more efficient set of firms
supplying parts and services to Tesla than by holding on to its proprietary technologies;
•
an attempt to influence the emergence of standards in the industry so that Tesla's
approaches to battery design, charging technology, electric powertrains, and control
systems would dominate the electrical vehicle industry;
• the desire to boost Tesla's visibility and reputation within the industry.
Professor Scott Shane of Case Western University expressed surprise over Tesla's decision:
typically the only way that startups can offset the resource advantages that incumbent firms
possess is by building a strong patent portfolio. However, Shane went on to observe that the
biggest challenge facing Tesla was not competition but the slow adoption of electric cars, hence,
“the benefits of spurring customer adoption of electric cars outweigh the costs of strengthening
competitors.”12
Writing in the Harvard Business Review, Paul Nunes and Joshua Bellin probed the strategic
considerations motivating Tesla's opening‐up of its intellectual property. They pointed first to
Tesla's view of its business environment as an interactive ecosystem rather than as a traditional
industry. Tesla's view was more Silicon Valley than Detroit, including its abandoning of
traditional dealer networks in favor of selling direct to consumers and its patterns of
collaborative interactions with the suppliers of electronic hardware and software. Within its
ecosystem, Tesla's primary role was as an innovator of electrical storage and battery solution, by
adopting an open‐source approach to its technology, Tesla could strengthen its centrality within
its ecosystem.13
However, the fact remained that Tesla's technical strengths were not primarily its patent
portfolio—indeed, Tesla's patent portfolio was smaller than those of most major auto companies
(Table 3). Tesla's strengths were much more in the know‐how needed to combine existing
technologies in order to optimize vehicle performance, design, add‐on features, and the overall
user experience.
TABLE 3 Automobile companies' patents relating to electric vehicles, 2012
Company
Number of US patents
General Motors 686
Toyota
663
Honda
662
Ford
446
Nissan
238
Daimler
194
Tesla Motors
172
Hyundai
109
BMW
41
Source: M. Rimmer, “Tesla Motors: Intellectual Property, Open Innovation, and the Carbon Crisis,”
Australian National University College of Law (September 2014); M. Shah, “Auto Industry May
Ignore Tesla's Patents,” Envision IP (June 26, 2014).
Disrupting the Auto Industry
Tesla's willingness to share its patents only added to the uncertainty over the extent to which
Tesla represented a disruptive force within the auto industry.
Tony Seba, a prominent advocate of clean energy, argued that “the electric vehicle will disrupt
the gasoline car industry (and with it the oil industry) swiftly and permanently … Even worse
from the standpoint of gasoline and diesel cars, the EV [electric vehicle] is not just a disruptive
technology; the whole business model that the auto industry has built over the past century will
be obliterated.”14
Others downplayed the whole issue on the basis, first, that Tesla's patents did not represent a
significant barrier to other companies and, second, it probably did not make much sense for
Tesla to devote time and money to litigating infringements of its patents. Professor Karl Ulrich
of Wharton Business School stated: “I don't believe Tesla is giving up much of substance here.
Their patents most likely did not actually protect against others creating similar vehicles.” He
suggested that patents are increasingly less about protecting innovations from imitation as
strategic bargaining chips: “Big technology‐based companies amass patent portfolios as strategic
deterrence against infringement claims by their rivals … Tesla is essentially deciding it doesn't
want to spend money litigating patents, which is a great decision for its shareholders and for
society.”15
In the debate over, whether or not the electric automobile represented a disruptive innovation,
Clay Christensen and his team at Harvard Business School, were emphatic that Tesla's electric
cars were definitely not such a disruptive force. While classic disruptive innovations typically
target overserved customers with lower‐performance products at a lower price (or open up
entirely new market segments), Tesla offered incrementally higher performance at higher prices.
A further feature of disruptive innovation is that incumbents typically have low incentives to
adopt the disruptive innovation—yet all the major auto firms had been working on developing
electric cars for years. If Tesla is not a disruptive force, who is in the automobile market? A more
likely source, according to Professor Christensen's associate Tom Bartman, was the
neighborhood electric vehicle: a cheap, low‐powered, easy‐to‐park vehicle that is well suited to
urban transportation and can readily be upgraded for use on public roads.16
If Tesla Motors was going to meet strong competition from exceptionally well‐resourced
competitors—companies such as GM, Renault–Nissan, Ford, Daimler, VW, and BMW—it
lacked clear technological advantages over these firms, and if it also was likely to meet
competition from the manufacturers of NEVs in mass‐market electric cars, how feasible was
Elon Musk's goal that Tesla would be “a leading global manufacturer and direct seller of electric
vehicles and electric vehicle technologies”?
Appendix
TABLE A1 Tesla Motors Inc. financial data ($million)
2014 2013 2012 2011 2010
Revenues
3,198 2,013 413
204
117
Gross profit
882
456
30
62
31
Research and development 465
232
274
209
93O
perating profit
(187) (61) (394) (251) (147)
Net profit
(294) (74) (396) (254) (154)
Total assets
5,849 2,417 1,114 713
Total long‐term obligations 2,772 1,075 450
298
386
93
2014 2013 2012 2011 2010
Capital investment
970
264
239
198
105
Notes
1 Elon Musk, “The Secret Tesla Motors Master Plan (Just between You and Me),” (August 2,
2006), http://www.teslamotors.com/en_GB/blog/secret‐tesla‐motors‐master‐plan‐just‐
between‐you‐and‐me, accessed July 20, 2015.
2 “The Mission of Tesla,” (November 18,
2013), http://www.teslamotors.com/en_GB/blog/mission‐tesla, accessed July 20, 2015.
3 Quoted in Tesla Motors, Inc. IPO Prospectus(January 29, 2010): 2–3.
4 Tesla Motors, Inc. 10‐K report for 2014:4.
5 See Tesla Motors, HBS Case No. 9‐714‐913 (2014): 7.
6 “Tesla Has Already Received an Estimated $800 Million Worth of Battery Orders,”
www.bgr.com/2015/05/08/tesla‐powerpack‐powerwall‐battery‐sales‐estimate,
accessed July 20, 2015.
7 “How to Build a Tesla, According to Tesla,” Washington Post (June 23,
2014), http://www.washingtonpost.com/blogs/the‐switch/wp/2014/06/23/how‐to‐build‐a‐
tesla‐according‐to‐tesla, accessed July 20, 2015.
8 “Elon Musk wants inventors to stop pitching his battery ideas,”
www.ecomento.com/2015/05/14/elon‐musk‐stop‐pitching‐battery‐ideas, accessed
July 20, 2015.
9 “Will Tesla's Battery for Homes Change the Energy Market?” Scientific American (May 4,
2015).
10 Tesla Motors, Inc. 10‐K report for 2012.
11 “All Our Patent Are Belong To You,” http://www.teslamotors.com/en_GB/blog/all‐our‐
patent‐are‐belong‐you, accessed July 20, 2015.
12 “Tesla's New Patent Strategy Makes Sense,” Entrepreneur (July 8, 2015),
www.entrepreneur.com/article/25408, accessed July 20, 2015.
13 “Elon Musk's Patent Decision Reflects Three Strategic Truths,”
https://hbr.org/2014/07/elon‐musks‐patent‐decision‐reflects‐three‐strategic‐truths,
accessed July 20, 2015.
14 T. Seba, Clean Disruption of Energy and Transportation: How Silicon Valley Will Make Oil,
Nuclear, Natural Gas, Coal, Electric Vehicles and Conventional Cars Obsolete by 2030,
Clean Planet Ventures (2014): 102–3.
15 “What's Driving Tesla's Open Source Gambit?” Knowledge@Wharton (June 25,
2014), http://knowledge.wharton.upenn.edu/article/whats‐driving‐teslas‐open‐source‐
gambit/, accessed July 20, 2015.
16 “Idea Watch: Tesla's Not as Disruptive as You Might Think,” Harvard Business Review (May
2015).
Purchase answer to see full
attachment