1. Olga Jemeljanova Joona Kanerva Niko Kuki Mikko Nummela
Tesla Motors
Olga Jemeljanova Joona Kanerva Niko Kuki Mikko Nummela
Group 10

2. Question
“Discuss the strategies that Tesla has so far utilized in the electric car manufacturing industry. What has Tesla done differently in comparison to the other players? What has it done in a similar fashion? What should Tesla’s strategies be in the future? Envision how the dominant designs in the field will evolve.”

3. Outline Tesla Motors Tesla’s strategy Tesla’s strategy comparison
Comparison to traditional car manufacturers with electric cars
Comparison to other electric only car manufacturers
Tesla’s future strategy and dominant design
Summary

4. Tesla Motors
American automotive and energy storage company that designs, manufactures, and sells electric cars, electric vehicle powertrain components and battery products
Founded in 2003
Public company listed on NASDAQ
Source: (IR, 2016)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

5. Tesla’s strategy ”So, in short, the master plan is:
1) Build sports car
2) Use that money to build an affordable car
3) 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.”
-CEO Elon Musk, 2006
Tesla’s strategy
Step one was making the Tesla Roadster high price, low volume
The Model S is step two with mid price, mid volume
The third generation will be low price, high volume
(Tesla, 2016a)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

6. Electric vehicle industry
Competing technologies: Gasoline, Hybrid, Ethanol, …
Typical challenges
Limited range of the batteries
Time it takes to charge the battery packs
Need to emplace a sufficient number of battery stations
Requirement for owners to replace the battery pack after several years of use due to wear and tear at high cost
Source: (Halla, 2015)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

7. Tesla’s shaping strategy
Shaping View
Shaping Platform
Participants
Shaping Acts and Assets
To succeed, a shaping strategy needs a critical mass of participants. The "Shaper" can attract them through:
Shaping view: Convincingly articulating the opportunities and benefits of participation
Shaping platform: Defining standards and practices that make participation easy, affordable and valuable
Shaping acts and assets: Demonstrating they have the conviction and resources for the view to succeed
(Hagel et al., 2008)
(Hagel et al., 2008)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

8. Tesla’s shaping strategy
Shaping View
Long-term view
Accelerate the advent of sustainable transport by bringing compelling mass market electric vehicles to market as soon as possible
Promote electric vehicles globally
Promote sustainable energy technologies globally
Source: (Halla, 2015)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

9. Tesla’s shaping strategy
Shaping Platform
Electric vehicle charger network
Rolling out thousands of “Supercharging” stations around the world
Electric powertrain production facility that caters other electric vehicle manufacturers
Providing components/batteries for other electric car manufacturers
Providing battery swap for other electric car manufacturers
Investing in a giant battery plant in Reno, Nevada
Opening its patents to the competition
Source: (Halla, 2015)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

10. Tesla’s shaping strategy
Shaping Acts and Assets
Tesla’s central competitive advantage is the low cost and high performance of Tesla’s battery pack
Tesla has comprehensive and proprietary technology with over 40 patents related to EV vehicles
They have a unique platform for the development of EV vehicles
Tesla is not just an automaker, but also a technology and design company with a focus on energy innovation
Sources: (Tesla, 2016b; Halla, 2015 )
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

11. Tesla Motors’ current situation
Year
Car model
Sold units
2017
Tesla Model 3 -
2015
Tesla Model X
~ 3 000
2012
Tesla Model S ~
2008
Tesla Roadster
~ 2 000
Year
Revenue (k$)
Gross profit (k$)
Operating income (k$)
Net income (k$)
2015
4,046,025
923,503
-716,629
-888,663
2014
3,198,356
881,671
-186,689
-294,040
2013
2,013,496
456,262
-61,283
-74,014
Sources: (Tesla, 2016c; Yahoo Finance, 2016)
Tesla’s gross profit is positive but operating income is negative due to Tesla’s operating expenses, which are categorized as Research Development and Selling General and Administrative (Yahoo Finance, 2016).
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

12. What has Tesla done similarly?
Luxury brand car with high price
Innovative development of electric vehicle
Big data collection
BUT the biggest difference is in
a product innovation strategy (by Cooper & Edgett, 2010)
Defining innovation goals and objectives
Selecting strategic areas
Developing a strategic map
Allocating resources
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

13. What has Tesla done differently?
Car by tech company
CEO Elon Musk (founder of PayPal and SpaceX)
First electric car to drive with a realistic range and is a true pleasure to drive
Utilizes gathered data into good use for customers
Autopilot (parking, steering)
Focus on services
Brand narrative (no marketing, sustainable transportation)
No dealerships
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

14. Innovation framework – Tesla Motors
(Teece, 1986)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

15. Future dominant design
“After each technological discontinuity, sales of all versions of the new technology will peak after the emergence of a dominant design, not during the era of ferment.” “A dominant design will not be located on the frontier of technical performance at the time it becomes dominant.” (Andresson and Tushman, 1990)
Electric cars and self-driving cars in era of ferment
Fully electric cars predicted to have only 5% market share in (Goldman Sachs, 2015)
Dominant design yet to emerge
Development will pass the future dominant design before it becomes dominant
Growth of sales in emerging markets
Customer preferences in e.g. China (the largest market) affect what design is adapted
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

16. Future dominant design
The new dominant design will be electric and automatic
May be reached separately
When is the car good enough?
Range vs. charging
Reliability of automation
Early dominant designs
Standards for charging
Standards for battery swap
Further down the line
Self-driving standards
Mobility as a service standards
Electric
Battery technology
Charger networks vs. battery swap network
Automatic
Mobility as a service
Decreased customer purchases
Increased fleet purchases
Connected cars and infrastructure
Increased safety
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

17. Future strategies for Tesla
Extend supercharger network
Shift R&D focus from product to process
Increase lobbying
Dominant design in powertrain
Extend product range to other markets
Sources: (Tesla, 2016c; LeBeau, 2016)
Tesla Motors – Strategy – Strategy Comparison – Dominant Designs & Future Strategy

18. Summary Current strategy driven by technology and design
Well positioned to compete in future self-driving and zero-emission vehicles
Should aim for dominant design in the electric car powertrain

19. References 1/2
Anderson, Philip, and Michael L. Tushman. "Technological discontinuities and dominant designs: A cyclical model of technological change." Administrative science quarterly (1990):
Cooper, R., & Edgett, S. (2010). Developing a product innovation and technology strategy for your business.
Goldman Sachs. (2015). Cars Available from: thinking/technology-driving-innovation/cars-2025/. [Accessed on 20 April 2016].
Hagel, J., Brown, J. & Davison, L. (2008). Shaping Strategy in a World of Constant Disruption. Harvard Business Review, October 2008, pp
Halla, B. (2015). Piecing Together the Tesla Strategy Puzzle. Harvard Business Review. Available from: [Accessed on 18 April 2016].
IR. (2016). Tesla Motors: Investors Overview. Investor Relations. Available from: [Accessed on 18 April 2016].
LeBeau, P. (2016). Will end of tax credit slow Tesla's Model 3?. CNBC. Available from: [Accessed on 20 April 2016].
McKinsey & Company. (2014). A road map to the future for the auto industry. Available from: map-to-the-future-for-the-auto-industry. [Accessed on 20 April 2016].

20. References 2/2
TED Talks. (2013). The mind behind Tesla, SpaceX, SolarCity, … Available from: [Accessed on 16 April 2016].
Teece, D. (1986). Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Elsevier Science Publishers B.V. (North- Holland), June 1986, pp
Tesla. (2016a). The Secret Tesla Motors Master Plan (just between you and me). Tesla Motors. Available from: master-plan-just-between-you-and-me. [Accessed on 18 April 2016].
Tesla. (2016b). Tesla’s mission is to accelerate the world’s transition to sustainable energy. Tesla Motors. Available from: [Accessed on 18 April 2016].
Tesla. (2016c). Supercharger. Tesla Motors. Available from: [Accessed on 20 April 2016].
Yahoo Finance. (2016). Tesla Motors: Income Statement. Yahoo Finance. Available from: [Accessed on 18 April 2016].
Zucchi, K. (2016). What makes Tesla’s business model different?. Investopedia. Available from: makes-teslas-business-model-different.asp. [Accessed on 20 April 2016].