Business strategy review of Tesla Motors.

1. Joseph Baker Erica Long Jithu Krishnan
Asaf Korkut Salomon Camhi Melody Tang

2. Tesla’s Mission
Strategy Challenge
Recommendations
Company Profile
Industry Conditions
Detailed Recommendations

3. “We set out to prove that electric vehicles
could be awesome.” Tesla Website
“To create affordable mass market electric
vehicles in order to have a material impact
on oil consumption.” Elon Musk
“…expedite the move from a mine-and-burn
hydrocarbon economy towards a solar electric
economy.” Elon Musk

4. Competing head to
head with mass market
auto makers hampers
Tesla’s mission and has
the potential to exploit
vulnerabilities in the
company.

5. Luxury Auto Market Research, Development, Invention
Maintain position as industry
Only target luxury market
leader in battery and electric
segment with Tesla EV
engine technology
Charging Stations Alliances
Deliver technology to consumers
Integrate Tesla into EV
through strategic alliances with
infrastructure
established auto makers

6. Tesla Formed Roadster Model S Future…
Two teams come together to form Tesla with the mission to commercialize T-Zero.
Roadster is released. Achieves enormous publicity. First electric vehicle with
sports car performance.
Model S- First all electric luxury sports sedan. Lower price point than
Roadster model.
Tesla in the Future
• Model X- est. release in 2013
• Est. price- $60K-$100K
• Pursue $30K priced mass market electric sedan
• Expanded product line across vehicle styles and prices
• Continued R&D for future models
• Proliferation of supercharger stations
• Continue alliances

7. Relevant Financial Ratios 2009 2010 2011 2012 Q1-3
Auto COGS/ Sales 91.5% 82.4% 77.7% 101.8%
Dev. COGS/ Sales N/A 30.7% 48.8% 49.8%
R&D/ Sales 17.2% 79.7% 102.3% 191.9%
SG&A/ Sales 37.7% 72.4% 50.9% 97.7%
Debt/ Equity -0.26 0.86 2.18 -30.03
Asset Turnover 28.9% 16.4% 25.2% 13.2%
Fixed Asset Turnover 74.5% 34.3% 38.9% 20.3%
Car production is currently estimated to be 10K per year. Tesla forecasts a
need to achieve production levels of 20K per year.

8. Historic Net Income and Retained Earnings
$20,000
2009 2010 2011 2012Q1-3
-$180,000
-$380,000
Dollars
-$580,000 Net Income
Accumulated Deficit
-$780,000
-$980,000
-$1,180,000
Years

9. 2009 2010 2011 2012 Q1-3
% sales Dev
% sales Dev
Serv.
Serv.
16.8%
14.6%
% sales
Dev Serv.
27.3%
% sales Auto
% sales 72.7% % sales Auto
% sales Auto
90% Auto 85.4%
83.2%
100%
70% Auto Sales GPM
69.3%
Gross Profit Margin (%)
Development Services GPM
50%
51.2% 50.2%
30%
22.3%
17.6%
10%
8.5% 0.0% -1.8%
2009 2010 2011 2012Q1-3
-10%
Year

10. US Auto Sales To Date 2012
Internal
Combustion 96.77%
Cross
Over All Hybrids 2.89%
22 Cars
% Plug in EV 0.34%
9% 55
SUV
% Tesla S (est.) 3.3%
14
Others 7.6%
%
Trucks Prius PHV 25.0%
Chevy Volt 45.8%
Nissan Leaf 18.3%

11. Projected US Auto Sales
18
16
Forecasted Auto Sales (millions)
14
12
10
2012 2013 2014 2015 2016 2017
Year

12. Threat of New Entry
Intensity of Competitive
Rivalry
Auto Industry
Power of Customers Threat of Substitutes
Power of Suppliers*
Positive Neutral Negative

13. Threat of New Entry
Intensity of Competitive
Rivalry
EV Auto
Industry
Power of Customers Threat of Substitutes
Power of Suppliers
Positive Neutral Negative

14. Threat of New Entry
Intensity of Competitive
Rivalry
Battery
Industry
Power of Customers Threat of Substitutes
Power of Suppliers
Positive Neutral Negative

15. Strength Opportunity:
- Innovative Technology - Growing Market
- Brand Image - Increasing Oil & Gas Prices
+ - Time Compression - Rising Consumer Sentiment
Advantage - Government Support
- Positive Strategic - Young Industry with No Set
Partnership Track Record Standards
Weakness Threat
- Scale of Operations - Increasing IC Engine
- Dependent on Continuing Efficiency
Innovation - Limited EV Support
- - Financial Profile Infrastructure
- Deep Pocket Competition - Concentrated Industry
- Auto Buying Dynamics
Internal External

16. Tesla Tesla Auto Service & Distribution
Brand Technology Manufacturing Support Model
Valuable
Rare
Costly to
Imitate
Organized
to Capture
Value
Positive Neutral Negative

17. Luxury Auto Market Research, Development, Invention
Only target luxury market Maintain position as industry
segment with Tesla EV leader in battery and electric
engine technology
• Leverage manufacturing
• Continue R&D to maximize
volume constraints
technology capabilities
• Maintain market leadership in
• Patent new technologies
the premium segment
Charging Stations Alliances
Integrate Tesla into EV Deliver technology to consumers
infrastructure through strategic alliances with
established auto makers
• Goal is to make Tesla
technology and platform the • Leverage alliances to establish
de facto industry standard efficient supply chain
• Achieve economies of scale

18. Tesla
Luxury Auto Tesla Autos
Segment
Newest EV Technology and Design- Include in Tesla
Brand vehicles and push industry standards.
As Tesla’s technology advances the innovation
included in Tesla made vehicles will fall through to
Mass Market partners to utilize.
Standard Auto Mass Market Autos
Segment
Pervious Tesla EV Technology- Partner with mass market auto manufactures to
provide battery, powertrain, and electric motors for mass market EV manufacturing

19. Tesla
Luxury Auto Tesla Autos
Segment
Standard Auto
Mass Market Autos
Segment
- Sets industry standards
- Creates single charging system
Electric Vehicle Tesla Charging Station - Provides incentive for mass market
Systems auto manufacturers to sell EV
Support - Brand Development
Infrastructure - Highly effective method of
advancing company’s mission

20. Strategic Alliances To Date
Daimler: 2007 – Present
• Supplies Batteries and Charging Systems • February 2012- New Expanded Partnership
‒ Mercedes A-Class ‒ Entire electric powertrain
‒ Smart For Two
Toyota: 2010 – Present
• Strategic Partnership
• Supplies Batteries and Power Components
• Rav4 EV
Panasonic: 2010 - Present
• Battery Cell Research and Development Partner
‒ Goal is to develop the next generation of EV battery cell
Forward Strategy
Partner with Traditional Look for New
Complete Expansion
Auto Makers Applications of Tech
• Achieve 20K Model S • Continue Current • Battery technology and
Production Goal Relationships electric motors have broad
• Expand to all auto application potential
makers • Actively search for new
⁻ “Tesla Inside” areas of technology
• Standardize EV Parts for deployement
efficient manufacturing ⁻ “Honda”

21. 6
100+

22. Economical Tesla EV
Effect of pursuing low cost EV:
• Existing Competition
Tesla & Industry Econ EV
‒ Competitors currently exist within
Effect of partnering with established the Economical EV segment
auto makers:
• Capital Deployment
• Leverage Individual Firms’ ‒ Additional need for capital to build
Strengths: new, required infrastructure
‒ Tesla: Technology and Innovation
• R&D Pull Backs
‒ Auto Industry: Economies of Scale
‒ High Potential:
• Focus on Core of Tesla • Reduce innovation as a company
• Affect premium segment sales
‒ Majority of workforce developing • Dilute Tesla brand
core product rather than focusing
efforts on vehicle manufacturing
efficiencies
• Increased Cash Flow

23. Joseph Baker Erica Long Jithu Krishnan
Asaf Korkut Salomon Camhi Melody Tang