Tesla Business Model

Introduction:

Tesla Motors was founded in 2003 by a group of engineers in Silicon Valley who wanted to prove that electric cars could be better than gasoline-powered cars.

With instant torque, incredible power, and zero emissions; Tesla’s products would be cars without compromise. Each new generation would be increasingly affordable, helping the company work towards its mission.

Tesla’s mission is:

To accelerate the world’s transition to sustainable transport.

Tesla was nominated as 1st innovative company by Forbes for 2015, exceeding big names such as Unilever and Amazon.

Tesla start was very slow and took them few years to start launching their first products, but this coming from the high technical specifications they are getting out in their products.

They took a unique approach to getting its first vehicle in the market. Instead of trying to build a relatively affordable car that it could mass produce and market, Tesla took the opposite approach, focusing instead of creating a compelling car. In a post on Tesla's website, CEO Elon Musk said this about the company's mission, “If we could have [mass marketed] our first product, we would have, but that was simply impossible to achieve for a startup company that had never built a car and that had one technology iteration and no economies of scale. Our first product was going to be expensive no matter what it looked like, so we decided to build a sports car, as that seemed like it had the best chance of being competitive with its gasoline alternatives.” So Tesla delivered to the market the first high-performance electric luxury sport car, the Tesla Roadster, this was in 2008 “Figurer 1”.

Such business model succeeded with Tesla to secure for them increasing the revenue rapidly and increasing its stock price in the last five years

Figure 3 and figure 4 below is showing the revenues and stock price since 2010

Source: Tesla motors annual report

Stock market price of Tesla Motors, Inc. for 5 years (USD), source: bloomberg.com

Tesla Products and market Scope:

As a new company focusing in electric sport cars Tesla launched its products as following:

- Tesla launched their first car in 2008 Roadster (Figure 1) as electric sport car with high technical specifications making it compete with the gasoline cars available in the market, more than 2,400 Roadsters, now on the road in more than 30 countries

-In 2012, Tesla launched Model S (Figure 5), the world’s first premium electric sedan, Built from the ground up to be 100 percent electric. Fig.5

- Now with more than 50,000 vehicles on the road worldwide, Tesla is preparing to launch Model X, a crossover vehicle that enters volume production in 2015/2016.

In addition to Tesla electrical cars, Tesla started to launch other products and services which supporting their business line and making them close to their customers, such as:

• Super chargers

The World’s Fastest Charging Station, Superchargers are free connectors that charge Model S in minutes instead of hours (Figure 7). Stations are strategically placed to minimize stops during long distance travel and are conveniently located near restaurants, shopping centers, and Wi-Fi hot spots. Each station contains multiple Superchargers to help owners get back on the road quickly.

Tesla Superchargers provide 170 miles of range in as little as 30 minutes, Tesla built till now 557 Supercharger stations with 3,181 Superchargers all over USA, Europe and Asia

• Power wall (Energy storage for sustainable home)

Power wall is a home battery that charges using electricity generated from solar panels (Figure 8,9,10,11), or when utility rates are low, and powers the home in the evening. It also fortifies home against power outages by providing a backup electricity supply. Automated, compact and simple to install, Power wall offers independence from the utility grid and the security of an emergency backup

How Tesla differentiated in the market?

Tesla listed as no #1 innovative company in Forbes for 2015, they are specialized in electrical cars but they used to say about their selves "Tesla is not just an automaker, but also a technology and design company with a focus on energy innovation". This was clear when they decided to penetrate the market with high tech sporty electric car. Tesla motors designing their cars to compete with sporty cars in shape and performance.

Tesla car is a different driving experience. Environmentally responsible.

Tesla is the first fully electric cars.

Below a small comparison shows Tesla different models compared to competitors in the market

Tesla Cars Vs. others electrical cars

Brand/

Manufacture Tesla Tesla Tesla Chevrolet BMW Ford

Model Roadster Model S P85D 70 rear wheel drive Spark EV, Front Wheel Drive I3 Focus EV

1. Range

2. (miles) 245 253 230 82 81, 150 with extended range 76

1. Acceleration

2. (seconds 0-60 mph) 3.9 3.1 5.5 8 7.8

1. Torque

2. (lb-ft) 273 713 325

327 184 181

1. Top Speed (mph) 125 155

140

90 93 84

1. Motor Power (hp) 302 503 hp rear, 259 hp front 382

140 170

143

Tesla Cars Vs. different sporty cars

Brand/

Manufacture Tesla Tesla Porsche Ford Lamborghini

Model Model S P90D 70 rear wheel drive Panamera Turbo S Mustang V6 Sesto Elemento

3. Acceleration

...