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Tesla Motors Paper

Broken up into 4 parts

1. Brief history and background (1-2 pages)

2. Identify the problems that the company is facing currently

3. Give recommendations that address problems and provide actionable steps to accomplish these recommendations.

4. Give updates on company that illustrate what would happen to the company if they followed the recommendations.

Refer to the outline and provide details. Use professional sources and if possible the company's quarterly reports and shareholder letters.

Use MLA formatting and in text citations.

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Tesla Case Outline I.History and Background • July, 2003- Tesla Motors was founded by Martin Eberhard and Marc Tarpenning • 2004 - Elon Musk invests in Tesla Motors and becomes the Chairman of the Board • July, 2006 - Tesla Roadster is released • 2007 - Tough times for Tesla as the company was losing money. (Elaborate on this) In response Ze’ev Drori was made CEO • 2008 - Elon Musk takes over as CEO • June, 2008 - Model S is revealed by the company (Implication of this?) (How was this different from the roadster?) • June, 2009 - Tesla Motors received a $465 million loan from the Department of Energy. The loan was paid off nine years early • June, 2010 - Tesla goes public and is the first American car company to do so since Ford went public • February, 2012 - Tesla releases its first SUV, the Model X • 2012 - Tesla began building charging stations for their vehicles • 2015 - Tesla wins lawsuit in New Jersey and is able to sell their cars directly to customers (Edit: this reflects a broader trend in their distribution network. Please discuss, making sure to include the challenges they faced using the traditional channels. • March, 2016 - Tesla reveals their most affordable car yet, the Model 3 (Be more specific) II. Problems • Profitability. Why haven’t they broken even yet? • Tesla faces conflicts with car dealerships. Why? And is not able to sell their vehicles in many states including Texas and Alabama • Too reliant on ITCs and incentives. How so? • Not enough affordable options for the average consumer • Manufacturing is not meeting demand, causing back orders and long waits for the consumer to receive their vehicle III. Recommendations • How can they turn a profit? • Increase marketing and support legislation in those states where the company still cannot sell vehicles directly to the consumers • Create new more affordable and practical models. How? Ones that can be manufactured quickly to increase sales and prepare for the possibility of the loss of ITC on electric vehicles • Develop and produce more vehicles in the same price range or below that of the Model 3. How? • Ramp up production, especially of the Model 3 and find ways to capture economies of scale. How? IV. Update • Tesla will eventually be able to sell their electric vehicles all across the United States • By allowing the company to function without investment tax credits, they will be protected from any possible political changes to the ITC policy for electrical vehicles • This will enable Tesla Motors to secure a large part of the current market and change the way that people travel • More drivers will come to Tesla instead of its competitors or non electric vehicles if they can receive the car in a reasonable time frame for a low price • Tesla acquires SolarCity (Need a lot of details) • Semi-truck and Roadster reveal. Implications? Work Cited Van Den Steen, E. (2015, December 17). Tesla Motors[Scholarly project]. Retrieved November 15, 2017, from https://services.hbsp.harvard.edu/services/proxy/content/61922340/61922346/b3aa52e92be8d dac3cf04efb6e59fff6 Baer, D. (2014, November 11). The Making Of Tesla: Invention, Betrayal, And The Birth Of The Roadster. Retrieved November 15, 2017, from http://www.businessinsider.com/tesla-theorigin-story-2014-10 Is Tesla Equipped To Change The World? – Infographic. (n.d.). Retrieved November 15, 2017, from https://insideevs.com/tesla-revolution-tesla-equipped-change-world/ Kumparak, G., Burns, M., & Escher, A. (2015, July 28). A brief history of Tesla. Retrieved November 15, 2017, from https://techcrunch.com/gallery/a-brief-history-of-tesla/ Lambert, F., & Fred Lambert @FredericLambert Fred is the Editor in Chief and Main Writer at Electrek.You can send tips on Twitter (DMs open) or via email: fred@9to5mac.com. (2017, May 30). Tesla is leading a new charge to allow direct sales in Texas with a pure free market approach. Retrieved November 15, 2017, from https://electrek.co/2017/03/12/tesla-directsales-texas/ Model 3. (n.d.). Retrieved November 15, 2017, from https://www.tesla.com/model3 Stewart, J. (2017, July 31). When You'll Get Your Tesla Model 3-And How to Get It Faster. Retrieved November 15, 2017, from https://www.wired.com/story/tesla-model-3-deliverytimeline/
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Tesla Motors Business Analysis
History and Background
Tesla Motors was founded in July 2003 by Martin Eberhard and Marc Tarpenning
(Baer, 1). The two founders managed the auto company until in 2004, Elon Musk invested in
Tesla Motors by financing its $7.5 million Series A and became the Chairman of the Board.
Elon Musk again in 2005 led the financing to raise the company $13million so as to finance
the development of Tesla Roadster which was released in July, 2006. Musk and Technology
Partners helped the company to raise $40million Series C in 2007. Tesla faced some tough
times in 2007 as the company was losing money and was in need of new leadership and
therefore in response, Ze'evDrori was made CEO due to his experience as a high-tech
entrepreneur and chief executive. The reason why Tesla was losing a lot of money and found
itself in financially tough times in 2007 could be attributed to the fact that Tesla had failed to
attract the additional $100m investment that would have helped in financing its operations (Van
den Steen, 4). Another reason it was losing money could be because it was stretching itself thin
by attempting to introduce several cars into a market that is hard to create a presence when it
was not yet an established company.
In 2008, Elon Musk took over as CEO and in the same year in June, Model S was
revealed by the company. Model S was the car that Tesla came to be known for. Model S was
manufactured to be a more affordable luxury sedan that would produce zero emissions despite
having every single amenity that a luxurious vehicle would have. Model S was, therefore,

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more luxurious than the Roadster. The Model S was bigger than the roaster as it was built with
5 adult seats and 2 children seats and therefore a total of 7 passengers. In June 2009, Tesla
Motors received a $465 million loan from the Department of Energy. The loan was paid off in
May 2013, nine years early. In June 2010, Tesla goes public and is the first American car
company to do so since Ford went public (Kumparak, Greg, et al. 1). Tesla unveiled its first
SUV and AWD vehicle known as the Model X on February 9, 2012. In 2012, Tesla quietly
started developing a small number of electric car charging stations in California for charging
its vehicles. By the time of their announcement, 6 stations of the superchargers were
operational. In 2013, Tesla was experiencing a wave of success having launched its first massproduced car that is the Model S (Stewart 2).
In 2015 Tesla won a lawsuit in New Jersey that allowed it to sell their cars directly to
customers. Car manufacturers face a huge challenge in their distribution network in the United
States as they are not allowed by the US to sell their car directly to customers but rather through
third-party dealerships. One of the challenges of using these traditional distributional channels
such as dealer networks is that the high customer acquisition costs inspire dealers to turn the
store traffic into sales with the use of aggressive tactics that create differential margin according
to the willingness of the customer to pay. The process of buying vehicles from dealers was
frustrating and made many customers unhappy which pushed some to look for second-hand
cars. In March, 2016 Tesla revealed their most affordable car yet, the Model 3 (“Model 3” 1).
The base model was to start from $35,000 and it is this affordability that made Tesla triple its
2015 sales with the Model 3 (Van den Steen, 4).
Problems
Despite the fact that Tesla has a considerably good number of customers and sales, the
company is yet to break even when it comes to profits. The profits of $22million that Tesla

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made in 2016 marked its first profits after 14 quarters of losses and negative cash flows. This
is due to the fact that the company is still facing a challenge when it comes to increasing its
manufacturing so as to meet the needs of its customers. This is affecting its ability to build and
maintain a successful mass market for its vehicles. The costs that go into manufacturing its
luxurious cars could also be another reason why the company is failing to make profits.
Currently, critics are skeptical whether Tesla will make a profit in 2017 like it did in 2017 due
to the possibility of its costs ballooning due to the various commitments it has. These
commitments include an expansion of its production facilities so as to be able to manufacture
the Model 3 mass-market electric car. Another commitment is funded to finance its $2.8billion
acquisition of Solar City corp and the cost of increasing its deliveries to 500,000 by 2018. All
these production and operations costs eat into the revenue of the company and result in either
very little profit or losses (Stewart 1).
Another reason Tesla could be having trouble making a profit is the fact that it is going
against a basic business principle which is identifying demand and then capitalizing on it at a
profit. Tesla despite having a huge demand for its cars is not exploiting this market advantage
but instead attempting to create and dominate a new market. The Model S and Model X
vehicles give Tesla domination over a small market for luxury electric cars, but instead of
focusing on this market and building its advantage, Tesla want...


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