James Tillmann

Tesla
Evaluation and Analysis
Background:
Tesla Motors was name after the scientist Nikola Tesla, Tesla Motor (TSLA) was founded
in 2003. Who founded Tesla Motors can be a disputed; the idea was by Martin Eberhard, Marc
Tarpenning, and Ian Wright. These founders could not come up with the capital to get the
company started. Elon Musk was the person who decided to invest in the company. He also
founded the companies Zip2, PayPal, and Space X. The idea of Tesla is to develop a vehicle that
is fully electric, lithium ion powered vehicle that is eco-friendly, with a design that is appealing
and have a better performance over competitor.
Tesla is trying to come out with an everyday electric car that is reasonable price for
everyone. Tesla first car was the Roadster. This allowed the company to create a product that
sold for a high price that allow them to cover their R&D cost and to get there name out there.
The next car the Model S is going to pave the way for an even cheaper that everyone can
afford. Price and specification of the Tesla Roadster in 2008 to 2010 had a base price of
$109,000 and it could last 200 miles per charge. The next car Tesla produce was the Model S 60
the base model for $69,900 and a range of 208 miles. The upgraded model to the Model S 60 is
the Model S 85 cost of $79,900 and a range of 265 miles. The competition that Tesla faces is
Toyota Motor and Honda Motor (HMC) both has updated their plans for fuel-cell powered
vehicles. Also BMW and Nissan just came out with a new all electric vehicles (EV). These
vehicles had a hard time keep up with Tesla long battery life and advance technology.



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Showing the design of the model S is just below. With this it shows how electric cars and
look good.

Teslas Current Position (Illustrated with VRINE framework):
Value
Even though Tesla is only ten years old and there competition is much older and well
established. Tesla saw the vast opportunity that all electric cars have and are the leaders for
this market. The value that Tesla has is a growing market and a great brand image within this
new consumer segment. According to Forbes increased sales of electric vehicles in 2012 by 83
percent
1
this is showing the huge growth within this market and leaves Tesla with room to
grow.
Tesla is doing more than just making desired vehicle to add value to its company. It is
addressing the main problem within electric vehicles and that is the battery. Tesla has done two
main things to face this problem head on. First, they had created supercharger station this

1
'Dying' EV Industry Set for Growth (Forbes)



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allows the consumer to be able to travel farther away from their home. These Supercharger
stations only take about 20 minutes for a full charge and even more impressive is that the
charge is free, forever. Currently there are 86 Supercharger stations in North America, and 14 in
Europe. Also they are looking to open them up in Chain too. By the end of 2015 they want
to have 98% of the US to be covered by Supercharger stations. Second, Tesla has come out with
an idea of a battery swap system. This would take less time than it would to fill up a normal gas
vehicle and would be a way to keep consumers battery up current and from having to pay big
cost of new battery when the battery would need replacing. They would charge a fee for the
swap and they are looking to have one up and running by summer of 2014 in San Francisco.
Rare
Tesla is rare in many different ways. Tesla is in a new growing market but within this
market they are the leaders in it. Tesla are one of the few all electric vehicle but it out performs
in every aspects. Tesla is the fastest and the longest lasting compare to other electric vehicles.
Toyota has the longest range compare to Honda and BMW but it is only half of the tesla
extraordinary 208 mile range. What the Model S can do is impressive but what it can with
stand is even more remarkable. Tesla Models S achieves best safety rating of any car ever
tested
2
A title like that can speak for its self but more detail is always better. In August 2013
the National Highway Traffic Safety Administration (NHTSA) has gave out the award to Tesla
Model S for not just 5 over all but in every subcategory without exception. What Tesla has

2
Press Release (Tesla Model S Achieves Best Safety Rating of Any Car Ever Tested)



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done as never been achieve for this reason the NHTSA gave the Model S a new combined
record of 5.4 stars. With the Model S being a sedan is also exceeded the safety score of all SUVs
and minivans which is even more impressive. With switching from electric from gas it allow the
cars to have more of a crumple zone and should always be safer then gas vehicle.
Inimitable
Tesla company has a challenging business model to recreate. They first came out with a
luxury vehicle with high profit margin to cover some of its research and development cost. Also
with the Roadster it gave Tesla great brand images that show electric vehicle dont have to be
tiny and ugly. Tesla Model S is selling about the same as its competition according to an auto
blog Tesla sold about 22,300 vehicles, putting it just behind the Volt's 23,094 vehicles and the
Leaf's 22,610. Heck, Tesla sold more green cars last year than Honda, which moved about
20,600 battery-electric, hybrid and plug-in vehicles, combined.
3
Even with a higher price point
Tesla is selling about the same as everyone else and soon will be passing them. Tesla Even
though Tesla is selling about the same of everyone else they are growing and need time to get
loyal customer to switch over to them.
Non-substitutable
This is where the price becomes an issue for Tesla. Even though they have the best
product people are forced to buy inferior goods because they cant afford the Model S. What
Tesla is doing to make them non-substitutable is giving their customer a long range and free
charging stations. With all of the research and development Tesla is producing a product that

3
Tesla Model S sells 6,900 units in Q4 (AutoblogGreen)



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no other car companies are coming close to. Also with every new car they are trying to knock
the price down. Adding more Supercharging stations will make this product less substitutable
because it will force people to only have Tesla vehicle.
Exploitability
Tesla is in a great spot to use all of the factors that make Tesla such a good auto-
company. Yet, Tesla is still a young company it is making very strong moves to compete with
the other larger auto companies that are moving in to the electric vehicle market. If Tesla can
stay around till there next model comes out I can see Tesla being a very dominant force in the
electric vehicle market.
Problems and Opportunities (Illustrated with PESTEL analysis):
To get a better understanding of how Tesla is position in the auto industry, there must be an
analysis of the whole industry, and the outside factors that would influence the industry.
Political Factors
Many of Tesla political factors are nothing but good. In the US and also in other country
like Canada buyer will get a tax credit. In US buyers get a 7,500 dollar federal tax credit also on
a state level for CA, CO, IL, GA, UT, and WV you get a state tax credit.
4
Those credits are
defiantly sweetening the deal for all Tesla drivers. Also for our current president during his
campaign sad he wanted to put one million plug-in cars on the U.S. road by 2015. It doesnt

4
Incentives (Tesla)



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seem like that will happen but it just shows how government will get their fingers into the EV
market and this helps Tesla out.
A negative factory of political factor that could change Tesla is the way that they sell
their cars is being disputed. In the news you can read about the court case that they are going
to face. 48 states prohibit or limit the direct sale of automobiles, thanks to long-established
laws requiring car purchases to go through a licensed third party. This is a major problem for
Tesla, a company which is trying to reinvent not only cars, but also how they are sold. If they
would lose this court case they would have to change their business model. Even though the
case is not over The Federal Trade Commission (FTC) today weighed in through its
"Competition Matters" Consumers can benefit from change,
5
the officials said. Regulators
should differentiate between regulations that truly protect consumers and those that protect
the regulated.
6
the case does seem to be in favor of tesla. This case seems to be only a bump
in the road for Tesla.
Economic Factors
Tesla, like the rest of the electric vehicle industry has seen a massive growth due to the
raise in gas price. The American population is starting to see the gas increase and in the last
five years it has gone from two dollars a gallon to four dollars a gallon. Tie that in with all the

5
Tesla vs. the auto dealers of America (msnbc.com)
6
Tesla Sales Rules Must Favor Consumers, Not Dealers: FTC (forbes.com)



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uncertainty in the places where we get most of our gas from. The population is looking for ways
to not rely so heavily on gas.
Social
Tesla is a name that is known almost by everyone. They have done a great job marketing
them self and getting there name out in the vast sea of cars. Advertising Age just named Tesla
one of American hottest brands.
7
This shows that consumers like what they see in Tesla and
in today world that matter a lot. The views of car owners are starting to look for better miles
per gallon over larger vehicle with more power. Also zero emission makes a big difference to
buyers when five years ago that was not possible for buyers to get zero emission vehicles. More
bad news can have huge impact on Tesla future. On January 14
th
Tesla announced a recall for
about 29,000 wall adapters for its 2013 Model S after the adapter cord or wall outlet caught fire
in a garage in Irvine, California.
8
With uncertainty for electric vehicle already high news like
this does not put any buyers at ease. Also this is not the first time that they had to recall an
item.
Technological
Technological developments are the whole reason why Tesla is even here. As stated
before it is the fastest and longest lasting car in its class. The reason for the advantage is Tesla
has created a superior power train system. They are working with other EV companies to allow

7
Press Release (Advertising Age names Tesla one of "America's hottest brands")
8
Federal Safety Agency Ends Its Investigation of Tesla Fires (The New York Times)



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them to use this technology to get more backing the electric car market. The Model S also
competes very well against gas vehicle too. Tesla 8.4% market share in the luxury market pass
Audi A8 and BMW 7 series.
Environmental
Tesla is trying to prove the fact that we dont need gas to get around. Due to the lack of
invitation of most car companies they are producing hybrid vehicles that are half gas and half
electric. They are unable to get the car to a true zero emission. Tesla on the other had is all
electric and puts out no emissions. Some would argue that even though noting is coming out of
the tail pipe there still is a burning of fossil fuel to make electricity. That may be the case now
but in a few more years we will have more alternative energy and that argument will not hold
up any more.
Legal
Federal and state laws give out tax credit, to promote the electric car and alternative
energy. This is allowing they higher cost of these new electric vehicle to be lower for everyone
to buy to help the automotive companies to still make profit. With this profit they can afford to
keep on spending money on R&D to make better electric vehicles. High tax on gas in some state
makes electric vehicles more appealing.
Analysis:
During the time of the going green movement Tesla have made high risks moves that we
have yet to see if they will fully take off. Tesla trying to find footing in the automotive market



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when it released the Roadster in 2008, this was the time of the worst sales for the car industry
in the last 20 years. Tesla has beaten the odds sold 2,500 unit.
It is hard to make this analysis with Tesla financial records. There is almost nothing
good to take out of Tesla past 3 years of the company. If anything in exhibit one someone can
see the rapid growth of sale of Tesla compare to the relative flat of the competition.


Exhibit One:


It may be hard to see because the numbers of the competition is so large but Tesla only making
200 million to 2 billion in just 2 years a great thing. Tesla still has a long way to go but it is still a
young company. Looking at Test lifecycle of a business I would say it is just leaving the startup
$204,242.00 $2,012,496.00
$-
$50,000,000.00
$100,000,000.00
$150,000,000.00
$200,000,000.00
$250,000,000.00
2011 2012 2013
Total Sales
Tesla
Honda
Toyota
BMW
Numbers in 1000


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10


phase and about to go into rapid growth. While Tesla competition is long establish and doing
fine except for Honda. As the price off gas goes up so will the demand for electric vehicles and
Tesla is positioning its self to be the leader of the class.
Even though Tesla has taken a negative net income and everything about the finance
would make someone think it is a failing company. Yet, stock price for Tesla has done nothing
but raise over the past years the stock price is doing great. In exhibit two it will show how Tesla
was doing the worst out of the four to now doing the best. In figure one it shows the past
recorder of Tesla stock price. Tesla will continue to see this growth if they keep on
producing safe, efficient, and reliable cars.
Exhibit Two:



$28.56
$150.43
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
2011 2012 2013
Stock Price
Tesla
Honda
Toyota
BMW


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11


Figure Own:

With growth like this Tesla will not be able to keep it up but I feel like it will grow a lot and

Recommendations:
Tesla has are ready made it past the worst time to sell their vehicles. Now that the
economy is starting back up people are spending money on items like this. I feel like Tesla only
has one big move left that it needs to take. That would be opening up a battery plant to make
their vehicles affordable to the middle class. An article in Forbes talks about the gigafactory for
Tesla. A clip of this article is Teslas aim is to become self-sufficient in battery production,
allowing its sales to significantly grow without the delays that have plagued other companies.
9

This would allow Tesla to make the own battery to keep cost down and then they could take
over more of the market share. This would allow them to build more charging stations and add
value to their company. It will come at a big cost. The gigafactory will cost $5 billion to get up

9
The High Stakes Race By Southwest States For Tesla's $5 Billion Gigafactory (Forbes)


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and running. Not only will that it be a high risk move but if people lose faith in Tesla they may
not recover from such large debt. With that being said I feel like it is the only move that Tesla
can make to get out of becoming a luxury vehicle to an everyday car for millions of people.
I feel like Tesla needs to keep on building up Supercharging stations. This will allow Tesla
drivers more freedom and also the drivers a safety net so they will never by on the road side
with no charge. I feel like they can hold off on the swapping stations because they are more
expensive and it would be better just to have more Supercharging stations across North
America.
Something that Tesla should look into is working with business owners and has charging
stations at work places. This would give them a competitive advantage over other electric
vehicles but also a huge convince factor to any owners of Tesla that could have it charged at
work.
Ultimately if Tesla wants to get out of the luxury vehicle market into the electric vehicle
market the price of the newer vehicles will have to be around $40,000. With today auto market
demand, safety rating can be a big factor for this reason Tesla should promote the fact that the
Model S is the safety vehicle. Beside the fact Tesla finance look terrible I feel it will grow and
become a strong company with all of it backing and everyone feels like it is going to take off and
that is reflected in its stock price how it is just climbing.




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Financial Numbers
Tesla 12/31 year end
Year Sales Earnings Stock Price EPS ROE ROA P/E
2013 $ 2,012,496.00 $ (61,283.00) 150.43
-
0.13 -17.18% -4.24% N/A
2012 $ 413,256.00 $ (394,283.00) 33.87
-
0.78
-
368.90%
-
47.45% N/A
2011 $ 204,242.00 $ (251,488.00) 28.56
-
0.78
-
102.50%
-
44.58% N/A


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Honda 12/31 year end
Year Sales Earnings Stock Price EPS ROE ROA P/E
2013 $ 10,488,900.00 $ 3,899,000.00 41.35 4.27 7.29% 2.69% 15.49
2012 $ 96,581,000.00 $ 2,570,000.00 36.94 2.46 4.80% 1.80% 19.84
2011 $ 107,829,000.00 $ 6,444,000.00 30.55 6.21 12.00% 4.62% 10.34

Toyota 12/31 year end
Year Sales Earnings Stock Price EPS ROE ROA P/E
2013 $ 234,289,000.00 $ 14,026,000.00 121.92 3.33 13.98% 2.71% 14.98
2012 $ 225,818,000.00 $ 4,321,000.00 93.25 0.90 7.30% 93.00% 40.03
2011 $ 229,171,000.00 $ 5,650,000.00 66.13 1.18 1.90% 1.37% 19.75

BMW 12/31 year end
Year Sales Earnings Stock Price EPS ROE ROA P/E
2013 $ 76,058,000.00 $ 5,340,000.00 85.22 2.02 16.16% 3.93% 10.09
2012 $ 76,848,000.00 $ 5,111,000.00 72.93 1.94 17.82% 3.99% 6.25
2011 $ 68,821,000.00 $ 4,907,000.00 51.76 1.88 19.33`% 4.38% 17.38
All numbers are in thousands





















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Work Cited

'Dying' EV Industry Set for Growth (Forbes)
By: Gartner, John.
http://www.forbes.com/sites/pikeresearch/2013/02/06/dying-ev-industry-set-for-growth/

Federal Safety Agency Ends Its Investigation of Tesla Fires (The New York Times)
By: Ivory, Danielle.
http://www.nytimes.com/2014/03/29/business/safety-agency-ends-investigation-of-tesla-
fires.html?_r=1

Incentives (Tesla)
http://www.teslamotors.com/incentives/US/California

Press Release (Advertising Age names Tesla one of "America's hottest brands")
http://www.teslamotors.com/about/press/releases/advertising-age-names-tesla-one-
%E2%80%9Camerica%E2%80%99s-hottest-brands%E2%80%9D

Press Release (Tesla Model S Achieves Best Safety Rating of Any Car Ever Tested)
http://www.teslamotors.com/about/press/releases/tesla-model-s-achieves-best-safety-rating-
any-car-ever-tested

Tesla Model S sells 6,900 units in Q4 (AutoblogGreen)
http://green.autoblog.com/2014/01/14/tesla-model-s-sells-6900-units-q4/

Tesla vs. the auto dealers of America (msnbc.com)
By: Puschak, Evan.
http://www.msnbc.com/the-last-word/tesla-vs-the-auto-dealers-america6

Tesla Sales Rules Must Favor Consumers, Not Dealers: FTC (forbes.com)
By: Kohn, Bernard.
http://www.bloomberg.com/news/2014-04-24/tesla-sales-rules-must-favor-consumers-not-
dealers-ftc

The High Stakes Race By Southwest States For Tesla's $5 Billion Gigafactory (Forbes)
By: Maynard, Micheline.
http://www.forbes.com/sites/michelinemaynard/2014/02/27/the-high-stakes-race-by-
southwest-states-for-teslas-5-billion-gigafactory/