Tesla Motors Case Study

Case study: Tesla Motors
Question 1: What is the strategy of Tesla Motors ?
The strategy adopted by Tesla Motors could be described as a mix between Microsoft's strategy at
his beginning and Apple's positioning on the market.
The reference to Microsoft makes sense since, in the electric car market, Tesla is a precursor
since they marketed the first 100% electric vehicle. Moreover, while Tesla is constantly at the forefront of
automotive innovation in terms of technology and its brand image is really based on this "Fintech" side,
the head of Tesla announced that the company would not sue anyone regarding the intellectual property of
its technologies. Quite a surprising strategy since this remains Tesla's main competitive advantage, but we
can see a similar desire to that of Microsoft: let competitors adopt its technology to become essential to
the market and be the epicenter of the market like Microsoft when talking about computers.
The comparison to Apple is the one we hear the most. Indeed, in terms of brand image, Tesla is
positioned in a similar way on the automotive market:
- a luxury technology brand based on the latest technologies
- a star manager in Elun Musk who has become one of the most influential men, if not the most
influential man in the world
- a devotion of the Tesla community during the release of new products similar to the craze around new
Apple products
- the design which is a central element of the product marketing
Beyond these characteristics,Tesla has also made the choice to cut out the intermediaries, in
this case the dealers, to deliver directly to its customers (BtoC). This is absolutely not what is
conventionally done in the automotive market.
Also, Tesla has shown its will to be the leader of innovation not only in the automotive market
with its cars but also in the market of complementary products to them: lithium batteries. That's why they
have partnered to build the largest battery manufacturing plant in the world. This will allow Tesla to take
advantage of reduced prices and to ensure a stock for its own products. Tesla seeks to develop competitive
advantages on its leading position.
We can also highlight the communication strategy of Tesla: no advertising. They rely solely on
their community (word of mouth), their reputation which speaks for itself and on the media coverage
surrounding their star manager.
We can underline the fact that 2020 is the first year where Tesla is profitable. Indeed, until
now, all revenues were reinjected into future projects: R&D is one of the departments where Tesla invests
the most. Tesla is looking to diversify both in terms of product (batteries) and in terms of target (luxury
car to more family car).
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Question 2: At the end of 2015, Tesla shares are trading at 240$, giving Tesla a market
capitalization of $30 billion( General Motors market cap was $54 billion). Would you buy or short
Tesla’s shares ?
Long argument ✅ Short argument ❌
Ambitious vision of renewable energy and self- Struggles to maintain an important production
driving vehicles (20K model 3 promise per month, 1,5K in 4
months in the reality)
First 100% electric car player, first mover The risk could be high given the pressure from
advantage oil company lobbies and other car
manufacturers to delay its arrival and entry into
the market
Growing pain but it is more than a car company Big projects were presented but they are a risk
if goals are not met
Sense of urgency regarding electric and Low number of electrical plugs available in
autopilot public places and the need to install an
electrical plug at home
Price of gasoline in 2015 was on a peak and
consumer were very sensitive about it
many projects to come
Strategy of continuous reinvestment in its future
technology improvement projects (R&D)
Anticipated the demand (electric, big screen,
luxury) and care about the design
Additional points :
- The presence of Elon Musk can represent a real strength for the company because he has a real
vision and is one of the most influential men in the world, but the over-medialization of a
manager can represent a risk in case of scandal for exemple
- Tesla has a very particular model: is it a technology company or a car company? Very few real
comparables so it's complicated to evaluate the real value of the company. Offers significant
growth potential but generates a risk of overvaluation
Conclusion :
In 2015, YES we would have long in Tesla’s shares. Indeed, the market of electric cars was
already fantasized but nobody was convinced because of the constraints such as the autonomy and
the number of available electric plugs.
However, the imminent issue of global warming and the increasing cost of petrol would allow a
bright future. Moreover, the vision of its creator, his projects and the support of many investment
funds allow him to move forward by reinvesting profits in R&D so that future Tesla cars will be
even more efficient and less expensive.
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Case study: Tesla Motors

Question 1: What is the strategy of Tesla Motors ?

Long argument ✅ Short argument ❌

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