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Tesla - Porter Five Forces Analysis (Harvard)

Article · June 2018

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Rakesh Naga Naidu Chinta

University of Michigan
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Competitive Rivalry
-Naga Rakesh Chinta

PORTER FIVE FORCES

Supplier power
Engineering are produced by tesla and Lithium ions cells are supplied by Panasonic with
which tesla conclude a partnership to build a Gigafactory in Nevada decreasing battery final
cost by 30% from here to 2018.The individual cost prices for an IC car is given by Exhibit 1.
– Solar panels for Solar Roof are provided by solar city which will soon merge with Tesla. –
demand is growing with the accessible model 3 (35 000$) and tesla forecast a production
growth from 100 000 in 2015 to 500 000 in 2020. Competition is important in various car
engine supplier but a necessity to shift could cost tesla a lot in delivery postponing.

Buyer power
Collective actions in order to push price down have consequently low probability to occur. –
In case of important defaults, they could gather their discontent to force tesla decrease its
prices. Due to an aggressive price strategy, arguments to push prices even lower are rare.
Delivery processes are long and deadline often delayed what could make customers
claiming for discount.

Threat of substitution
Considering electric car market (no matter H2, biofuel, biogas), medium potential of
substitution driven by common transports, bicycle trends or low cost car subscription
programs, considering widely sustainable lifestyle market, low potential of substitution
evidenced by small amount of available alternatives in providing intelligent energy
management services to consumers.

Threat of new entry

High financial barriers for new entrants in the car industry making new entrant very
occasional. – Traditional car manufacturer will entry the electric car market as soon as 2017
or already did. They embody a high short-term threat on electric car market.

Government and Law

Safety norms for electronic products empower the government to legally delay deliveries. –
Ethical issues concerning Self-driving decision making empower the government to sue tesla
for AI problematic decisions – Financial participation and help provided by governments
make tesla’s activities leveraged by public decisions. A study in 2009 conducted by
DOJ,found consumers would save approximately $2200 on vehicles that are sold directly
from manufacturers to consumers.
So what is stopping them? In 2013, the U.S. federal government gave a $7,500 tax credit
for the purchase of EVs such as the Leaf or the Model S. Individual states often have
additional incentives. Manufacturers that fell short could buy ZEV credits from others who
were above the mandated minimum. The rule encouraged the production of EVs directly and
by giving producers of EVs an extra source of income. However, the price of such credits
was expected to drop quickly as all producers started selling more EVs.