Competitive Analysis of Tesla Motors

Outline Outline Introduction Case for the Electric Car Internal Rivalry Barriers to entry Substitutes and complements Supplier Power Buyer Power Strategy Outline

Tesla Motors Tesla Motors California based start-up company Developed a high performance electric sports car Initial funding ($60m) provided by PayPal, eBay and Google Founders Car does 0-60 mph in about 4 seconds Car can travel 250 miles between charges First 100 vehicles have been sold at the asking price of $100k

Industry Facts Industry Facts Transportation accounts for 63% of Oil Demand

Industry Facts Industry Facts

Industry Facts Industry Facts Daily use of Petroleum worldwide. At present, consumers used 80 million barrels a day (MBD) of petroleum (each barrel contains 42 US gallons). Two thirds goes to transportation 53 MBD for transportation overall 29 MBD for transport for people 19 MBD for transport for freight 5 MBD for air transportation for people and freight. Change title: Industry Facts

Industry Facts Industry Facts US Automobile Industry represents 5% of Private sector GDP 76% of the market is made up of Ford, GM and Chrysler 18% of sales are from Japanese car makers 6.6m Americans are directly or indirectly employed in the automotive industry. Hybrid sales represented 1.2% of the market in 2005, 1.6% in 2006 (est). Forecasts estimate 5% of car sales will be hybrids by 2013

Market Definition Case for the Electric Car Environmental friendliness and low emissions High performance Improved battery technologies and driving range Electric cars are more energy efficient than gasoline cars.

Efficiency vs. Performance Tesla Motors

Internal Rivalry Internal Rivalry A green vehicle: Reduces consumption of petroleum Uses renewable energy sources Has Low emissions Is Fuel efficient Within the “green vehicle” market there are four types: Electric Vehicles Flexible-Fuel Vehicles Hydrogen Vehicles Hybrid Vehicles

Internal Rivalry GM EV1 – Early Electric

Internal Rivalry Honda Insight – Early Hybrid

Internal Rivalry Toyota Prius - Hybrid

Internal Rivalry Tesla Roadster - Electric

Internal Rivalry Venturi Fetish - Electric

Entry Barriers to Entry Economies of Scale Regulation Issues Technological Innovations Brand Loyalty Infrastructure Entry Tesla has an advanteage because it doesn’t have to have volume

Substitutes Substitutes Hybrids Flex Fuel Hydrogen Diesel Compressed Natural Gas Mass Transportation

Energy Efficiency Energy Efficiency

Energy Efficiency Energy Efficiency

Complements Complements Government tax breaks Utility incentive programs Free Parking at Airports Single Occupancy use of carpool lanes No parking meter fees 50% discount by California utilities for changing electric cars

Supplier Power Supplier Power Lotus main outsourcing partner Lotus is providing chassis, body and building Tesla Roadster at Lotus factory in England AC Propulsion drive train Lithium Ion battery Flexibility to adopt new technologies

Buyer Power Buyer Power Ability of buyer to extract profits from seller Green market is emerging Buyer power is limited due to lack of competition

Buyer Power Buyer Power Implementation Phase Vehicle Technology Market Competitive vehicle Penetration across new vehicle production Major Penetration Total Time for impact Turbocharged Gasoline Engines 5 years 10 years 20 years Low Emission Diesel 15 years 10-15 years 30 years Gasoline Hybrid 35 years Hydrogen Cell Hybrid 25 years 55 years

Conclusion Conclusion Short to medium term strategy Sell 100 Roadsters Create recognizable product Self funding of future expansion plans Change opinion of electric vehicles

Conclusion Conclusion Long term strategy Focus on brand recognition Cost optimization Compete in mass market Build infrastructure

Conclusion Martin Eberhard, CEO “There have been tons and tons of companies, for the last 40 years that have tried to make little commuter electric cars. The trouble is that, for the most part, it requires the buyer of such a car to change his or her nature. You’re buying a car that is not as good as an equivalent gas car at all—slower, uglier, with not as much range—and they’re trying to compete essentially on price, where they can’t win. None of those cars were built for people who really like to drive. I get the feeling they’re for people who don’t really think you should be driving, but think if you do have to drive, it should be an electric car. I think if you build a car for people as they are, not requiring them to change their nature, it’s much more likely for you to succeed. And I think our investors agree.”