Our Choice of Industry: The Plug-In Electric CarEssay Preview: Our Choice of Industry: The Plug-In Electric CarReport this essayOur Choice of Industry: The Plug-in Electric CarThe electric car is over a hundred years old. At the beginning of the 20th century, electric cars were considered to be “ideal” by the New York Times . Unlike their gasoline powered counterparts, they were clean, easy to drive and they did not vibrate nor did they smell. However, the electric car required a heavy battery packs that took long to charge, greatly limiting its effective range. At the turn of the century, there was a need for automobiles that could accommodate the American infrastructural landscape. Highways that connected American cities required vehicles that could travel great distances and the gasoline car, which could refuel easily at any gas station, eventually came to dominate the automotive industry. The electric car disappeared until the 1990s when interest was rejuvenated by the Californian governments policies forcing automobile manufacturers to create and sell them. But a short time later, the policies were retracted and the electric car once again disappeared from the market place.
More recently, we are witnessing a resurgence of the electric vehicle (EV). Big auto manufacturers have invested heavily to bring to production cars like the Nissan Leaf, the Mitsubishi i MiEV and the Renault Kangoo Z.E. But is the electric car here to stay this time? We want to examine factors that contributed to past failures of the electric car industry. It will be interesting to look at whether the political and technological constraints still exist today and what companies today are doing differently. Certain aspects of consumer behaviour such as the motives that drive the distaste or interest for electrics cars would be examined and how companies could overcome these obstacles. We also want to examine how the industry can compete against traditional gas powered cars and other technologies currently in development such as hydrogen powered cars and hybrids. While the market for EVs is an exciting issue in itself, we are also interested in the environmental aspect, including the potential impact on global warming and air pollution because corporate social responsibility plays such an important role in corporate strategy in todays environmentally conscious culture. At the end of our analysis, we hope to be able to conclude that EV performance will continue to improve, their prices will continue to fall to match gasoline cars and that the EV will grow to become much more than a niche car for green consumers.
Should the electric car become accessible to the masses, we would also like to analyze how the value chain would be affected. The value chain does not end when the automobile is driven off the lot, but continues through the life of the car. Service companies, gas stations, and repair shops will all have to change their strategies to accommodate the electric models. The advent of the electric will bring a drastic change to the automobile value chain.
Our Choice of Competitor: TeslaTesla is a particularly interesting competitor to examine because it is a small start up that only offers electric vehicles. On May 28, 2013 Teslas stock price closed at an all time high of 110$, more than three times its stock price at the same time last year and more than five times its July, 2010 IPO price. Tesla and its sporty Roadster model has become a symbol for a sexy “new” industry of plug-in electric vehicles. In an industry where scope and scale give enormous competitive advantages and where barriers to entry are extremely high, it seems hard to believe that a small Silicon Valley start up could gain so much success in the short 9 years of its existence. Moreover, though it is currently not making a profit, with an EPS of -2.84, its stock price and 12.75B market cap indicate that investors are very optimistic about its future.
In contrast, the Tesla Model S has a good and reasonably efficient car. It comes with low cost lithium 3L batteries, but is available to people with high mobility needs. It has a higher fuel efficiency and, unlike the BMW i3, does not require any additional power. Furthermore, all of its technology is developed on-site at the factory. The battery is extremely efficient and does not require electricity outside of the factory.
With these features of EV technology, as well as Tesla-provided technologies, Tesla is able to offer customers new and attractive designs with very limited and costly cost to customers that do not have the cost of traditional automobile charging services. In addition, Tesla has built a large network of retail locations in Southern California with the most successful retailing networks of any major utility. This may not be an easy proposition, due to the limited number of new customers in that segment.
Tesla’s sales model is a “toy car” with limited mobility, low cost and cost-effectiveness to a company that is focused on high speed charging. The new Model S has all of these aspects that make it a perfect candidate for a Tesla Model S retailing business, especially after a strong start-up with its Model X in late 2014.
Tesla expects it to earn $6 billion in gross sales from selling and leasing its Model S to customers in the fourth quarter, with nearly 200,000 total Model S buyers. In the second quarter of this year Tesla predicted a total valuation of $4.2 billion and the current $11 billion range for the first year. With the new Model S, Tesla has sold more Model Ss than any other local powertrain manufacturer in North America.
The Model S now has the capability of driving a range of up to 10 kilometers in an 800 mile range of the Model S and it has the capability of walking under water and able to get around on short detours under extreme conditions.
Tesla sold more than 30,000 Tesla Model S cars in the year ended June 30 2017. On June 7, 2017, Tesla sold more than 5,500 Model S cars worldwide – more than doubled to 5,100 in May 2017.
On June 13, 2016, Tesla completed the final three phases of a purchase and expansion of the Model S. The first phase of that expansion was held at the factory in California and consisted of the installation of more than 8,500 battery cells. The second phase of that expansion began in the United States with assembly of the Model S on location. In the third phase of the expansion Tesla began to deliver the Model S to dealers, with Tesla making deliveries to retailers in the United States until July 30, 2017. The deliveries were due to begin in 2023 or 1 month following the end of Model S production. Tesla now expects to generate $5 billion in gross sales on the first and second phases of the expansion. In addition to the manufacturing of more than 6 million battery cells, Tesla plans to ship 611,000 Model Ss to customers by the third quarter of 2017. Tesla will also be selling more Model S models than any other large car manufacturer in North America. Tesla predicts its total investment to be $7.5 billion, or $1.2 billion per Model S. Tesla also expects its retail sales to grow from $3.6 billion in 2017 to 1 billion by 2020.
In contrast, the Tesla Model S has a good and reasonably efficient car. It comes with low cost lithium 3L batteries, but is available to people with high mobility needs. It has a higher fuel efficiency and, unlike the BMW i3, does not require any additional power. Furthermore, all of its technology is developed on-site at the factory. The battery is extremely efficient and does not require electricity outside of the factory.
With these features of EV technology, as well as Tesla-provided technologies, Tesla is able to offer customers new and attractive designs with very limited and costly cost to customers that do not have the cost of traditional automobile charging services. In addition, Tesla has built a large network of retail locations in Southern California with the most successful retailing networks of any major utility. This may not be an easy proposition, due to the limited number of new customers in that segment.
Tesla’s sales model is a “toy car” with limited mobility, low cost and cost-effectiveness to a company that is focused on high speed charging. The new Model S has all of these aspects that make it a perfect candidate for a Tesla Model S retailing business, especially after a strong start-up with its Model X in late 2014.
Tesla expects it to earn $6 billion in gross sales from selling and leasing its Model S to customers in the fourth quarter, with nearly 200,000 total Model S buyers. In the second quarter of this year Tesla predicted a total valuation of $4.2 billion and the current $11 billion range for the first year. With the new Model S, Tesla has sold more Model Ss than any other local powertrain manufacturer in North America.
The Model S now has the capability of driving a range of up to 10 kilometers in an 800 mile range of the Model S and it has the capability of walking under water and able to get around on short detours under extreme conditions.
Tesla sold more than 30,000 Tesla Model S cars in the year ended June 30 2017. On June 7, 2017, Tesla sold more than 5,500 Model S cars worldwide – more than doubled to 5,100 in May 2017.
On June 13, 2016, Tesla completed the final three phases of a purchase and expansion of the Model S. The first phase of that expansion was held at the factory in California and consisted of the installation of more than 8,500 battery cells. The second phase of that expansion began in the United States with assembly of the Model S on location. In the third phase of the expansion Tesla began to deliver the Model S to dealers, with Tesla making deliveries to retailers in the United States until July 30, 2017. The deliveries were due to begin in 2023 or 1 month following the end of Model S production. Tesla now expects to generate $5 billion in gross sales on the first and second phases of the expansion. In addition to the manufacturing of more than 6 million battery cells, Tesla plans to ship 611,000 Model Ss to customers by the third quarter of 2017. Tesla will also be selling more Model S models than any other large car manufacturer in North America. Tesla predicts its total investment to be $7.5 billion, or $1.2 billion per Model S. Tesla also expects its retail sales to grow from $3.6 billion in 2017 to 1 billion by 2020.
We want to examine how Tesla has been able to grow and compete in an industry completely dominated by the Big Three (Ford, GM and Chrysler), since the last American independent automaker, American Motors, was acquired by Chrysler 1987. We also want to identify the factors that will be crucial in contributing to its long term survival. We feel that there are important lessons to be learned on how to create a market where none exists as well as how to break into a market with extremely high barriers to entry.
Planned Table of Contents:Industry AnalysisBrief Summary and History of the Electric Auto-IndustryPast Failures and Recent SuccessesAn analysis of why the EV had previously entered and disappeared from the marketplace.An analysis of why the EV can be expected to stay for good this time.Competitor AnalysisTeslas Role in the Resurgence of EV popularity:Brief Summary and History of Tesla.Reasons for Success: How Tesla Creates Value for StakeholdersProduct DifferentiationA value chain analysis of Teslas products.And comparison of Teslas products against competitors.Teslas Direct-to-Consumer business modelA look how Teslas business model differs from competitors including the advantages and challenges the model faces.Tesla Management & StrategyAn analysis of Elon Musks management style and how closely Tesla has been following the strategy outlined in its 2010 prospectus.What the Future holds for TeslaTeslas ability to meet market expectations and its own lofty goals against industry giants.TimelineResearch Tools to be Utilized:Tesla Website: Investor Information SectionTo look for statements