Introduction

In the world of cars and energy, Tesla, Inc. shines as a symbol of progress, caring for
the environment, and bold entrepreneurship. Started in 2003 by Martin Eberhard
and Marc Tarpenning, Tesla has grown into a major player worldwide, thanks to the
visionary Elon Musk. Their goal is to speed up the switch to clean energy globally,
which has led them to develop innovative electric cars and renewable energy
solutions tirelessly.

Early Years and Foundation:

Tesla embarked on its journey with a bold vision to revolutionise the automotive
sector through the production of electric cars. Martin Eberhard and Marc
Tarpenning, inspired by the promise of electric power, established the company in
San Carlos, California. Elon Musk, a forward-thinking entrepreneur passionate about
sustainable technology, came on board as an investor and chairman of the board in
2004.

Initially, Tesla aimed to develop a high-performance electric sports car that would
challenge traditional perceptions of electric vehicles. In 2008, the company reached
a significant milestone with the introduction of the Tesla Roadster. This sleek sports
car, built on the Lotus Elise chassis and powered by an all-electric drivetrain,
showcased not only the viability of electric propulsion but also shattered the
misconception that electric cars were confined to dull designs and limited ranges.

Market and Product Range

Tesla stands out as a company dedicated to creating a sustainable future, challenging

the dominance of gasoline-powered vehicles with its electric technology. Despite
being a relatively small player compared to industry giants like Toyota, General
Motors, and Daimler AG, Tesla holds promise for the future, even as it grapples with
the scale advantages enjoyed by its competitors. Its market presence spans North
America, Europe, and Asia.

In 2008, Tesla introduced its debut vehicle, the all-electric "Roadster," boasting an
impressive range of 245 miles on a single charge. Priced around $109,000, it
appealed to affluent consumers seeking eco-friendly sports cars powered by lithium-
ion batteries with zero emissions. Transitioning to 2012, Tesla shifted focus to the
production of the "Model S," renowned for its performance, design, and efficiency,
targeting luxury car enthusiasts and disrupting the conventional automotive
landscape. By March 2014, the Model S claimed the title of Norway's best-selling car,
followed by dominating the all-electric car market in the US by 2017.

Expanding its lineup, Tesla introduced the "Model X" in 2015, a crossover vehicle
boasting a battery range exceeding 295 miles, catering to consumers seeking
versatility and sustainability. Finally, in 2017, Tesla launched the "Model 3,"
designed for mass-market appeal with a price tag starting at $35,000, aiming to
make electric vehicles accessible to a wider audience. The diverse range of Tesla
models and their impact on the automotive industry are detailed in Annexure: 1(b).

Financial Challenges and the Road to Success

Even though Tesla experienced some initial triumphs, it encountered financial

difficulties during its early stages. Elon Musk, understanding the significance of
Tesla's potential in advancing sustainable energy, injected personal finances and
pursued external funding to sustain the company. The 2008 financial downturn
compounded Tesla's challenges, but the company successfully obtained a vital loan
from the Department of Energy, which proved essential for its survival.

Tesla is forcing the auto industry to change rapidly

While Tesla didn't invent the electric car (credit goes to Scottish inventor Robert
Anderson in 1832), it's Tesla that brought it into the mainstream since its
establishment in 2003. Prior to Tesla's entry, major automotive manufacturers
weren't focusing on electric cars. However, Tesla changed the game in 2008 with the
introduction of the Tesla Roadster, the first luxury electric car, which made electric
vehicles appealing.

Following Tesla's lead, established automakers with ample resources and established
supply chains quickly jumped into the electric car market as consumer and
government demand for eco-friendly, low-emission transportation grew. Mitsubishi
Motors released the next electric car in 2010.

Data from the Bureau of Transportation Statistics indicates that sales of hybrid EVs
in the U.S. didn't surpass 100,000 until 2005. The bureau started tracking EV sales
in 2011, which stood at 9,750. Since then, the EV market has seen explosive growth.
By 2015, 71,044 EVs were sold in the U.S., along with 384,404 hybrid EVs. Between
January and September 2017, Tesla led in EV sales with 73,227 units sold, followed
by Chinese automaker BYD with 69,094 units.

According to Brian Loh from McKinsey&Company, the auto industry is experiencing

an unprecedented level of innovation. Historically slow to evolve, the industry has
been propelled forward largely due to Tesla's disruptive influence. Tesla's vehicles
have a "cool factor" that traditional automakers lack, generating hype that other
brands struggle to match.

Tesla's Autopilot technology, which enables semi-autonomous driving, has stirred

controversy. While some consumers misuse the technology, other automakers are
following Tesla's lead in developing autonomous vehicles (AVs). This has sparked
debates in Washington as policymakers balance safety concerns with the industry's
drive for innovation.

Despite its innovative prowess, Tesla also exemplifies the challenges of success in the
auto industry, highlighting the importance of stable supply chains.

The Turning Point: Model S and Gigafactories:

The pivotal moment for Tesla arrived with the introduction of the Model S sedan in
2012. With its state-of-the-art technology, sleek aesthetics, and impressive range, the
Model S signalled a significant shift in the automotive landscape. Its success
positioned Tesla as a major contender in the luxury car market, demonstrating the
potential of electric vehicles to outshine traditional gasoline-powered cars.
Concurrently, Tesla pursued another crucial aspect of its mission: sustainable energy
production and storage. The company embarked on an ambitious project to
construct Gigafactories, large-scale manufacturing facilities dedicated to producing
batteries, electric drivetrains, and energy storage solutions. These strategically
located Gigafactories not only reduced manufacturing expenses but also played a
vital role in expanding Tesla's production capacity.

Business Model of Tesla

The Business Model Canvas, developed by Alex Osterwalder and Yves Pigneur,
provides a comprehensive framework for understanding how a company operates
across various dimensions such as key partners, key activities, and value proposition,
as depicted in Annexure: 1(a). Tesla's business model deviates from the conventional
approach by vertically integrating processes throughout the value chain, from
sourcing materials to final delivery, notably excluding dealerships from vehicle sales.

In addition to manufacturing electric cars, Tesla has diversified into scalable clean
energy generation and storage products, as outlined in their corporate profile. The
Tesla Gigafactory, operational since 2016 in Nevada, USA, is a prime example. This
facility focuses on large-scale production of lithium-ion batteries for electric vehicles,
with the aim of achieving cost efficiencies through in-house manufacturing while also
stimulating local economic growth by creating job opportunities.

Tesla's strategic focus on building an ecosystem centred around sustainable energy is

evident. By vertically integrating processes, Tesla aims to reduce its dependence on
external suppliers while furthering its commitment to sustainable energy solutions.

Tesla Supply Chain Strategy

Tesla places significant emphasis on automation, procurement, and logistics as key
components of its supply chain strategy. Automation plays a central role in Tesla's
approach, aimed at enhancing efficiency and cost reduction throughout the supply
chain. By leveraging automated processes, Tesla can streamline operations and
minimise expenses. Moreover, automated parts manufacturing ensures that each
component meets the company's stringent quality standards, contributing to overall
product excellence.

Tesla's supply chain strategy encompasses procurement and logistics as integral

components. Procurement is a vital aspect, involving close collaboration with
suppliers to secure quality parts at competitive prices. Tesla sources components
globally, maintaining rigorous quality standards for each part.

Logistics is equally crucial, with Tesla operating its own delivery service to expedite
the transportation of parts and finished products efficiently and safely. Additionally,
the company partners with third-party delivery services to ensure swift and cost-
effective delivery to customers.

Tesla's success is significantly attributed to its innovative supply chain management

approach. Leveraging automation, procurement, and logistics, Tesla efficiently
delivers parts and products to customers, contributing to its position as the world's
most valuable automaker.

The Importance of Environmental Sustainability in Tesla’s

Supply Chain Strategy

Tesla places a strong emphasis on fostering a healthy and sustainable environment

within its supply chain strategy. The company is dedicated to mitigating the
environmental impact of its operations, spanning production processes and supply
chain activities. To achieve this, Tesla has implemented a comprehensive
Environmental, Social, and Governance (ESG) program, focusing on responsible
sourcing, waste reduction, and the promotion of renewable energy sources.

Tesla has taken proactive measures to minimise its carbon footprint and prioritise
sustainable sourcing practices. This includes investing in renewable energy solutions
like solar and wind power, as well as integrating recycled and biodegradable
materials into its manufacturing processes. Furthermore, Tesla collaborates closely
with its suppliers to encourage environmentally responsible practices, such as
reducing emissions, waste, and water usage, while also advocating for the sustainable
utilisation of natural resources.

Tesla has introduced several measures to minimise its packaging footprint,

emphasizing the adoption of recycled and recyclable materials while phasing out
single-use plastics. The company actively encourages its suppliers to follow suit by
reducing their packaging material usage and transitioning to more sustainable
alternatives.

Beyond addressing its own environmental impact and that of its suppliers, Tesla
advocates for a sustainable supply chain. Initiatives like the Tesla Energy Plan are
designed to curtail fossil fuel consumption and advocate for renewable energy
adoption. Moreover, Tesla collaborates with suppliers to endorse responsible
sourcing practices, encompassing fair labour standards and ethical material usage.

In essence, Tesla's dedication to sustainability lies at the core of its supply chain
strategy. Through initiatives aimed at minimising its own environmental footprint
and that of its suppliers, as well as advocating for the adoption of renewable energy
sources and ethical materials, Tesla is actively contributing to the creation of a more
sustainable future.

Advantages of Tesla’s Supply Chain Strategy

Tesla's unique supply chain strategy represents an innovative approach to supply

chain management, resulting in notable cost reductions and accelerated time-to-
market. Central to this strategy are three key elements: real-time visibility, flexible
inventory management, and automation.

Real-Time Visibility
Tesla prioritises real-time visibility across all aspects of its supply chain operations.
This allows the company to promptly identify and address potential issues such as
component shortages or delivery delays. By swiftly taking corrective actions, Tesla
ensures efficient inventory management and timely provision of parts for vehicle
production.

Flexible Inventory Management

Tesla capitalises on its ability to swiftly adjust inventory levels, enabling rapid
responses to fluctuations in customer demand. This agility ensures that Tesla
maintains optimal stock levels, meeting customer requirements amidst short
production and delivery cycles.

Automation
Automation plays a pivotal role in Tesla's supply chain strategy. Leveraging
automated systems for inventory management, order processing, and part tracking
enhances operational efficiency and reduces labour costs. Moreover, automation
provides Tesla with comprehensive visibility into its supply chain activities,
facilitating streamlined operations.
By integrating these three elements, Tesla has established a robust and cost-effective
supply chain model, enabling significant cost savings and expedited time-to-market,
essential for its success in the automotive industry.

Challenges Faced by Tesla’s Supply Chain

Although Tesla's Unconventional Supply Chain strategy offers numerous benefits,

the company still encounters several challenges that need to be addressed:

Quality Control
Tesla heavily relies on automated systems for inventory management and order
processing, posing a risk to quality control if these systems are not properly
maintained or become outdated. Ensuring the maintenance and modernization of
these systems is crucial for upholding product quality.

Logistical Challenges
Tesla's supply chain heavily depends on efficiently shipping parts from suppliers to
its factories. Any disruptions in this complex logistics network can lead to delays in
parts delivery, impacting production schedules.

Resource Constraints
As Tesla's supply chain model is relatively new, the company may face limitations in
resources. This can hinder its ability to handle unforeseen changes in customer
demand or swiftly adopt new technologies.

Despite these challenges, Tesla has achieved significant cost savings and time-to-
market advantages through its supply chain strategy. By investing in its supply chain
infrastructure and addressing these challenges, Tesla can maintain its competitive
edge in the automotive industry.
Tesla’s Customer Segments

Tesla has diversified its vehicle offerings to cater to a wide range of customers. It
offers mid-market vehicles with affordable pricing, as well as high-end luxury and
sports cars, competing with brands like Porsche and Ferrari. Furthermore, Tesla has
ventured into the commercial vehicle sector, providing environmentally friendly
options for transportation and shipping. It's important to note that Tesla's customer
base includes not only fast and eco-friendly car enthusiasts who appreciate features
like autopilot but also followers of Elon Musk, who are drawn to the company's
visionary leadership.

Tesla’s Value Propositions

In the realm of automobiles, Tesla offers a value proposition centred around
environmental sustainability coupled with high performance, innovative design,
enhanced functionality, efficiency, extended range, flexibility, and cost-effective (or
complimentary) recharging options. Beyond its vehicle lineup, Tesla also markets
home batteries and solar panels to both residential and commercial clients, offering
convenient power solutions. Furthermore, Tesla continues to supply systems and
components to other automotive manufacturers, along with providing financial
services such as loans and leases.

Tesla’s Customer Relationships

At the core of Tesla's philosophy lies a strong emphasis on customer relationships,
which has been evident since its inception. The company has diligently focused on
enhancing the customer experience, exemplified by its decision to adopt a direct-to-
customer sales model through company-owned stores instead of traditional
dealerships. Moreover, customers have the convenience of browsing, selecting, and
customising their vehicles directly through Tesla's website.

Furthermore, Tesla has been steadily expanding its charging infrastructure to

facilitate faster and more affordable charging for Tesla vehicle owners. This
investment underscores Tesla's commitment to providing a seamless and convenient
ownership experience.

Tesla has also cultivated a highly favourable brand image and reputation among the
public, synonymous with luxury, cutting-edge technology, and innovation, all while
prioritising environmental sustainability.

Tesla’s Key Activities

Tesla's primary activities encompass:

Car Manufacturing: Tesla remains dedicated to delivering on its promise of

electric vehicles. This entails investing in the production of not only cars but also
batteries and solar energy panels.
Research and Development (R&D): Constant innovation drives Tesla's quest for
advanced and environmentally friendly technology.

Design: Tesla prioritises design as a distinguishing factor for its products. Elon
Musk emphasised early on that, given the inherent costliness of its technology, Tesla
would invest in design rather than engaging in price competition.

Infrastructure Development and Maintenance: Tesla is actively expanding its

network of recharge stations globally, aiming to facilitate wider adoption of electric
vehicles.

Software Development: Agile principles guide Tesla in the continual

development and improvement of its software systems.

Sales and Marketing: Tesla adopts a customer-centric approach, focusing on

delivering exceptional customer experiences rather than traditional advertising
methods.

Tesla’s Key Partners

Tesla's key partnerships and alliances play a crucial role in its operations:
1. Suppliers: While Tesla manufactures the majority of its car components in-
house, it relies on third-party suppliers for certain parts like windshields and brakes.
These suppliers are essential partners enabling Tesla to produce and deliver its
vehicles efficiently.

2. Alliances: Tesla has formed strategic alliances to strengthen its position in the
electric vehicle market. For instance, it collaborated with Toyota to co-develop
electric vehicle parts and systems, enhancing its market presence. Additionally, Tesla
has partnered with Panasonic in the construction of a manufacturing facility in New
York focused on large-scale battery and solar cell production.

3. Government: Tesla benefits from tax incentives provided by the U.S. federal
government due to its emphasis on eco-friendly vehicle and energy development.
These incentives, coupled with the company's contribution to job creation in the U.S.,
further support Tesla's growth initiatives.

4. Charging Points: Tesla collaborates with various establishments such as hotels,

resorts, restaurants, and shopping centres to establish fast car charging stations.
These partnerships enable Tesla to expand its charging network, providing
convenient recharging options for its customers.

Tesla’s Cost Structure

Tesla's cost structure encompasses various components typical of any manufacturing

entity, such as:

1. Manufacturing expenses, covering the production processes.

2. Sales-related costs, including marketing and distribution expenditures.
3. Administrative expenses, encompassing overhead costs associated with general
operations.
4. Research and development (R&D) expenditures, focusing on innovation and
product enhancement.

Tesla’s Competitors

Nio: Established in 2014, Chinese automaker Nio specialises in manufacturing high-

end electric vehicles for global markets. While experiencing sales growth exceeding
100% annually, the company operates fewer than 200 battery stations in China,
indicating significant potential for expansion.
Ford: Venturing into the electric vehicle market, traditional automaker Ford has
witnessed sales of electric cars surging by over 70% yearly. Notably, a majority of
these customers are new to the Ford brand, leveraging the company's extensive
experience as one of the oldest players in the automotive industry.

Volkswagen: Despite launching its first electric vehicles a decade after Tesla,
German giant Volkswagen anticipates that half of its U.S. sales will comprise electric
vehicles by 2025, aiming to manufacture 1.5 million units within that time frame.
Benefitting from its long standing brand heritage, Volkswagen represents a
formidable competitor.

Li Auto: Emerging in 2015, Chinese newcomer Li Auto has impressed with its rapid
technological advancements, achieving remarkable growth by selling over 10,000
electric vehicles in its inaugural year in China.

Nikola Corp: Pioneering a hybrid approach, Nikola Corp integrates electric battery
and hydrogen fuel cell technologies in its vehicles, primarily focusing on large trucks.
Founded in 2014 in the U.S., Nikola maintained zero emissions from 2016 to 2020.

Workhorse Group: U.S.-based Workhorse Group specialises in electric vans

tailored for delivery services. Having fulfilled a substantial order of 950 vans for
UPS, the company, established in 1998, transitioned into electric vehicles in 2015.

Canoo Holdings: A recent entrant, Canoo Holdings introduces a unique business

model set to debut on roads in 2022. Offering a distinctive value proposition, Canoo
will offer its vehicles through a subscription-based service, diverging from traditional
ownership or leasing models.
Tesla’s SWOT Analysis

Tesla’s Strengths

Tesla stands out in several key areas:

1. Energy Efficiency: Tesla leads the market not only in sales volume but also in
its commitment to renewable energy sources such as solar power.

2. Partnerships: The company collaborates with major energy firms, expanding its
efforts in renewable energy.

3. Top Employer: Recognized by Forbes as one of the best employers in 2019,

Tesla boasts a diverse corporate culture that appeals to young professionals.

4. Leadership: With its exceptional growth and dominance in electric vehicle (EV)
sales, Tesla emerged as the most valuable automotive company in 2020.

5. Innovation: Tesla's significant investments in research and development drive

the creation of new technologies and ensure superior design and comfort, enhancing
its appeal to consumers.

6. Brand: Tesla established itself as the foremost electric vehicle manufacturer in a

market with limited competition at its inception. The company enjoys a strong
reputation for both developing clean energy solutions and delivering profitable
products, fostering trust among consumers.

Tesla’s Weaknesses

Tesla faces several challenges:

1. Manufacturing Constraints: Tesla operates with a smaller manufacturing

footprint compared to traditional automakers, leading to production limitations and
distribution delays.

2. Limited Global Presence: While experiencing growth, Tesla's primary market

remains the United States, with over 70% of its revenue generated there. Expansion
efforts face challenges in establishing a strong presence worldwide.

3. Premium Brand Positioning: As a premium brand in the clean energy sector,

Tesla targets a niche market segment due to its high-priced products, limiting its
customer base.
4. Financial Concerns: Tesla's high operational costs contribute to cash burn,
posing a threat to its profitability and investor confidence.

5. Dependency on Elon Musk: The prominent role of CEO Elon Musk has
become synonymous with Tesla's brand, raising concerns about succession planning
and the company's long-term stability.

Tesla’s Opportunities

Tesla has opportunities in several key areas:

1. Global Expansion: While the United States and China currently drive the
majority of Tesla's sales, there is significant potential for expansion into other
markets, particularly in Asia, including China and India.

2. Autopilot Technology: Tesla's autonomous driving technology, known as

Autopilot, has garnered widespread attention for its safety and convenience.
Continued development and improvement of this technology present opportunities
for further market penetration and adoption.

3. Sustainability Trend: With increasing awareness and concern about

environmental issues, there is a growing demand for sustainable products. Tesla's
focus on sustainability aligns well with this trend, offering opportunities for
continued growth in market share.

4. Battery Production: Tesla's efforts to vertically integrate battery production by

manufacturing its battery cells in-house offer opportunities to reduce production
costs and create new job opportunities while ensuring a consistent and reliable
supply of batteries for its vehicles.

Tesla’s Threats

Tesla faces several challenges:

1. Competition: Established automotive companies, with centuries of experience,

are rapidly investing in electric car technology, potentially offering more affordable
products that could challenge Tesla's market dominance.

2. New Technologies: The automotive industry is evolving rapidly with innovative

technologies and alternative energy sources, which may increase Tesla's operational
costs and reduce profit margins as it strives to stay at the forefront of innovation.
3. Regulatory Uncertainty: The lack of adequate regulations for autonomous
vehicles poses a risk to Tesla's future plans, particularly regarding its development of
self-driving technology.

4. Long-term Sustainability: Clean energy companies require robust long-term

sustainability strategies, and Tesla's limited infrastructure may not be sufficient to
support its ambitious goals in the long run.

5. Elon Musk's Image: While Musk is widely regarded as a visionary, his

controversial behaviour and erratic public statements have sometimes tarnished
Tesla's reputation and raised concerns among investors and the public alike.

Conclusion

While Tesla didn't pioneer the electric car, it significantly revitalised the market by
introducing vehicles with distinctive designs, durable batteries, and an extensive
technological infrastructure for support and maintenance. Moreover, Tesla adopted a
unique business model by directly selling to consumers, bypassing traditional
middlemen. Consequently, Tesla has emerged as one of the most successful players
in the automotive industry today. With Elon Musk and his team at the helm, the
company continues to explore innovative transportation methods, solidifying its
position as an industry leader.