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RECOMMENDATION REPORT:
TESLA MOTORS, INC.
Prepared by Troy Maynes
INTRODUCTION
Tesla Motors, a company with small ambitious roots, has some big potential for shaking up quite
a few longstanding industries. Although Tesla currently focuses on the luxury car market, it is
planning to turn the electric car into a mass-marketable product oer the next few years. !t is a
quickly expanding business with a lot of opportunities on the hori"on, but it also faces a lot of
potential challenges. This recommendation report will conduct a #$%T analysis on the
company&s expansion efforts, and proide key recommendations to help achiee those goals.
$hile refining its current car lineup is certainly an important focus, the expansion of the business
to a broader audience is the main goal oer the next seeral years. !n order to achiee this, the
deelopment of an affordable electric ehicle must be a key priority for Tesla Motors. The
company has already announced plans to build such a car, nicknamed the 'lue#tar or the Model
(, for a base price of )*+,+++.
,
This ambitious goal has many different steps needed along the
way. !n order to scale up production to achiee that price point, Tesla Motors is planning on
building a multi-billion dollar -.igafactory/ to produce the 0ithium-!on batteries at an economy
of scale.
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Additionally the company is currently building a large-scale #upercharger network,
which is comprised of a series of free-charging stations for owners of Tesla ehicles.
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These
measures are high in upfront liabilities, but hae ma2or long-term benefits for the company&s
outlook.
$hen analy"ing the outlook of Tesla Motor&s expansion efforts, there is a lot to consider about
the risks and rewards of the key decisions the company will make. !t has a lot of potential
strengths3 large inflows of inestor capital, higher demand than supply, and ambitious plans for
expansion. 4oweer the company has some key weaknesses, such as a production disadantage
from being a new company and capital intensie upcoming pro2ects. The .igafactory,
#upercharger network, and upcoming car models sere as great opportunities for expanding
future markets. There are some potential threats on the hori"on too5 mostly in the form of
competing car companies in the (6 market, but there are also a growing number of states
passing legislation against the company&s direct-sales practices.
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!n order to naigate through these challenges and get the best results, there are some important
recommendations to take note of. 8irst of all there are some key incenties that need to be
,
-Tesla&s lithium-ion plant a paradigm shift for graphite demand,/ International Mining, March ,,, 1+,7,
9http3::www.im-mining.com:1+,7:+*:,,:teslas-lithium-ion-plant-a-paradigm-shift-for-graphite-demand;, accessed
on March ,1, 1+,7
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P. (. #chumpeter, -Tesla&s .igafactory, <riing Ahead,/ The (conomist, March *, 1+,7,
9http3::www.economist.com:blogs:schumpeter:1+,7:+*:teslas-gigafactory;, accessed on March ,=, 1+,7
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>hristopher <eMorro, -8ree Tesla #upercharger ?etwork ?ow >oers >ross->ountry <riing/, >lean Technica,
@anuary 1A, 1+,7, 9http3::cleantechnica.com:1+,7:+,:1A:free-tesla-supercharger-network-now-coers-cross-country-
driing:BwAC,clhkmoxyx>*$.DD;, accessed on March 7, 1+,7
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Eirsten Eorosec, -Tesla&s (lon Musk3 #tate ban on direct sales of (6s is Ftwisted&,/ >?? Money, March ,7, 1+,7,
9http3::tech.fortune.cnn.com:1+,7:+*:,7:teslas-elon-musk-state-ban-on-direct-sales-of-es-is-twisted:;, accessed on
March ,C, 1+,7
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focused on to improe potential sales of the Model (. #econdly Tesla should work diligently to
quickly lower the cost of production for mass-marketability. 0astly the company should focus
on timing the .igafactory to begin production early enough to lower costs on the Model (. !f
correctly implemented, these recommendations will help Tesla Motors to properly expand their
business and take on the mass-market auto manufacturers.
STRENGTHS
Financial Advantages
Tesla Motors has generated quite a financial adantage when compared with other companies in
the electric ehicle market. !t has transitioned into a ery financially stable company, which has
great inestment backing for its planned expansion efforts. !ts sales figures are growing and
signify a ery healthy demand for its products.
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The financials are looking ery good for a
company of its si"e and age, at 2ust oer )1.+, billion dollars in total reenue last year and the
first annual profit in the company&s history.
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The market-alue of the company has risen to
almost ten times its original aluation after its !nitial Public %ffering, which has gien the
company a substantial amount of capital to use for expansion efforts. Tesla Motors has also
recently issued )1.1 billion by issuing >onertible senior notes in order to raise additional
capital.
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This puts the company in a fantastic position to be able to bear the burden of upfront
costs on the .igafactory and #upercharger network.
The company has produced some great sales figures recently, and has generated a lot of interest
in its cars. Tesla&s current showcase car, the Model #, is selling quite well at oer 11,+++ sales in
1+,* alone and is expected to nearly double those sales in 1+,7.
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(en at the high price point of
)A+,+++ for the base model of the Model #, demand is completely outstripping the supply of the
ehicles.
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Although this high demand is ery good for the company, it does present a unique set
of challenges for such a young company to scale up production. Additionally, Tesla Motors is
scheduled to roll out an #H6 known as the Model I towards the end of 1+,7.
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$hile this
ehicle is still at a price point targeting the luxury car market, it does signify the companies drie
to diersify and expand. The current and upcoming car lineups show that the company is able to
produce ery in-demand cars and turn a profit while doing so.
Supercharger Network
There are also important strengths worthy of note with regard to marketing incenties and
demand for cars. The deelopment of the #upercharger network seres as a powerful incentie
to help 2ustify the higher cost of the cars. $ith the increasing cost of gas, haing a network that
proides free charging to all Tesla owners acts as a ma2or cost-saing tool for the cars. Although
this already is becoming an important incentie at the )A+,+++ price point, this strength is going
to be exponentially more aluable in the coming years with cheaper models coming out.
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Tesla Motors, 8orm ,+-E Annual Jeport for 8K 1+,*, 9http3::ir.teslamotors.com:secfiling.cfmLfiling!<M,,D*,1G-
,7-G=AA=N>!EM,*,=C+G;, accessed on March *, 1+,7
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Tesla Motors, Prospectus 8iled Pursuant to Jule 717, 9http3::ir.teslamotors.com:secfiling.cfmLfiling!<M,,D*,1G-
,7-AA1==N>!EM,*,=C+G;, accessed on March *, 1+,7
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Tesla Motors 8orm ,+-E Annual Jeport for 8K 1+,*
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4ooer&s %nline -Tesla Motors !nc.3 >ompany %eriew,/ 4ooer&s, !nc., 1+,7, accessed on March *, 1+,7
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Tesla Motors, Form 10-K Annual Report for FY 2013
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The #upercharger network also leaes a key reenue source on the table in the future. Tesla
Motors could potentially use the chargers as a form of -electric gas station/, where the public at
large could charge non-Tesla (6&s for a fee. Another option would be to charge other (6
companies a royalty fee to let customers use the station for free. (ither way it could sere as a
powerful reenue source down the road. This becomes especially lucratie considering the fact
that (lon Musk, the >(% of Tesla Motors, is also the >(% of its partner company #olar>ity
which proides solar power for the network&s charging capabilities.
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WEAKNESSES
Financing Upcoming Projects
There are two key pro2ects that are crucial to the future success of Tesla Motors& expansion plans,
the #upercharger network and the -.iga factory/. Hnfortunately those two pro2ects are
extremely costly, and will likely require oer ),+ billion to complete. $hile Tesla Motors has
engaged in some key financing measures to make these pro2ects more easily afforded, it is still
going to need to get a large amount of capital through traditional loan structures.
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The .iga factory is estimated to potentially cost somewhere between )7 and )A billion, and it
will not result in a return on inestment until the entire pro2ect is completed.
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<epending on
where the factory is going to be built, there could be some potential cost-cutting measures.
Many cities, such as Tucson, Ari"ona, are offering tax incenties in order to entice Tesla Motors
into building the factory there.
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Additionally a lot of attention needs to be paid towards the
proximity of the factory to key resources, such as 0ithium and .raphite mines. $hile the
upfront cost of the factory is high, it is not unaffordable, and the factory will proe to be
inaluable for the company for the production of the Model (.
'uilding the #upercharger networks are going to be quite costly as well, especially considering
the scale and ambition for deeloping the networks in ?orth America, (urope, and Asia.
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'ecause it is an ongoing pro2ect, the costs are going to be more continuous. That means that the
company will hae to continue to generate capital to finance these pro2ects. %n the bright side
the costs will not be entirely upfront, and the return on inestment will start to occur ery quickly
after the money is spent. $hile immediately building the networks in Asian and (uropean
countries is not essential, it is a ery important marketing tool to incentii"e buyers in these new
markets. %erall the financing of the networks is a bit more nuanced and time-sensitie, but
should be easier to afford than the .iga factory.
Risks of a New Market
,,
#am @affe, -Tesla, #olar>ity, and Jesidential #torage/, American #olar (nergy #ociety, @une 1+,1, 6ol. 1C !ssue
7, p,7-,7, 'usiness #ource Premier, ('#>%host, accessed on March ,G, 1+,7
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Tesla Motors, Prospectus 8iled Pursuant to Jule 717
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'ill Alpert, -Tesla&s .iga-Plan 0ooks Too Ambitious/, 'arron&s, March 1D, 1+,7,
9http3::online.barrons.com:news:articles:#'G+++,717+G*,,,D+*G*C++7GAD7C,AA1C,G*+D,C+;, accessed on March
*+, 1+,7
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'ala"s #"ekely, -Tucson Proposes to 'ecome 4ome to Tesla&s ,+-Million-#q.-8t. 0ithium 'attery 8actory,/
Multi-4ousing ?ews %nline, March ,*, 1+,7, 9http3::www.multihousingnews.com:cities:tucson:tucson-proposes-
to-become-home-to-teslas-,+-million-sq-ft-lithium-battery-factory:,++7+DD1=1.html;, accessed on March ,G, 1+,7.
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>hristopher <eMorro, -8ree Tesla #upercharger ?etwork ?ow >oers >ross->ountry <riing/
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$heneer a company is pioneering into uncharted territory there is a lot of room for reward, but
that ineitably is paired with quite a bit of risk. Tesla Motors is no exception to this rule5 it faces
a lot of potential for failure in this regard. Analysts hae speculated that the cost of 0ithium-!on
batteries is always going to put electric ehicles at a higher cost than internal combustion cars.
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$hile this claim is disputable, it could pose a ery real risk for Tesla Motors. Most of the
company&s long-term prospects are based on the idea that it can produce an electric car at
extremely competitie prices. #o if this claim is true, it could potentially destroy the long-term
iability of the company. 8ortunately this type of issue is somewhat mitigated by the building of
the .igafactory, by simplifying the production line and increasing the scale of production.
4oweer, gien the capital-intensie nature of auto manufacturing, Tesla Motors needs to be
ery careful in planning future models around certain price structures.
OPPORTUNITIES:
The igafactor!
$hen considering the prospects of the production of its mass-market car, the Model (, there are
a lot of aspects of the company that strengthen its standing compared to other companies. Tesla
Motors has quite an extensie patent-portfolio, especially on (6-specific powertrain
technologies.
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These technologies are being put to good use too, as the company has a ery
mature production line on these powertrains. As an original equipment manufacturer O%(MP,
Tesla Motors has established partnerships with other companies to manufacture powertrain
components.
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This puts the company at a unique adantage in controlling the entire production
process, and aoiding being forced to rely on other companies for key aspects of manufacturing.
!n addition to its current manufacturing process, Tesla is planning on the construction of the
.igafactory, which will significantly expand the company&s production capacity. The G billion
dollar factory is planned to add a wide ariety of assets to the company&s portfolio. !t is
estimated that by the year 1+1+ the company will be able to produce oer G++,+++ lithium-ion
battery packs per year with this factory.
,D
#o in order to achiee mass-market scales of
production, this factory is absolutely essential. Additionally the factory is planned to become the
ma2ority-supplier of batteries in the lithium-ion market worldwide,
1+
so it will help boost reenue
and aid in company expansion. Most importantly the factory will dramatically reduce the
manufacturing cost of the battery packs, which will be crucial in achieing the )*+,+++ base
price of the Model (.
%ne of the ma2or cost adantages that Tesla Motors has when compared with other companies is
that it is striing to reduce the distances of supply-lines as much as possible. Tesla Motors is
currently negotiating with * states in the south-west H# to determine where to locate the
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Myles Mangram, -The globali"ation of Tesla Motors3 a strategic marketing plan analysis,/ Journal of Strategic
Marketing, 6ol. 1+, ?o. 7, @uly 1+,1, 1=D-*,1, Talor an! Franci", ('#>%host, accessed on March 1, 1+,7
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-Tesla&s lithium-ion plant a paradigm shift for graphite demand,/ International Mining, March ,,, 1+,7,
9http3::www.im-mining.com:1+,7:+*:,,:teslas-lithium-ion-plant-a-paradigm-shift-for-graphite-demand;, accessed
on March ,1, 1+,7
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@on .ertner, -The Jisk of a ?ew Machine/, Fa"t #ompan. April 1+,1, !ssue ,C7, p,+7-,**, $u"ine"" Source
%remier, ('#>%host, accessed on March ,=, 1+,7
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!TT Takeshita, -.igafactory Attachment,/
9http3::www.teslamotors.com:sites:default:files:blogQattachments:gigafactory.pdf;, accessed on March ,1, 1+,7
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.igafactory3 Ari"ona, ?ew Mexico, or ?eada. The reason for these states is simple5 it has a
ery close proximity to its >alifornia based production facilities, as well as the ma2or 0ithium
and .raphite mines in those states.
1,
$hile the exact locations are up for debate, the general
cost-saings are going to remain the same. 'y reducing the cost of transportation from the main
battery-manufacturers in Asia, Tesla can increase the potential profitability of the Model ( in the
future.
Another key cost saings measure for the company is the method by which the factory will
obtain its electricity. The proposed plan is to produce the ma2ority of the factory&s power through
solar panels installed in a nearby field, with the remaining power coming from wind turbines.
There will be great cost-saings because of a unique partnership with a company called
#olar>ity. 'oth Tesla Motors and #olar>ity share the same owner:>(%, and there is quite an
extensie history of codependency between the two businesses.
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'ecause of this alliance, Tesla
Motors is able to negotiate a ery good price on the installation of the solar panels. This means
that one of the key costs of the 0ithium-!on batteries will be much cheaper than the competition.
%erall when analy"ing the benefits that the .igafactory will bring to Tesla Motors, it appears to
be a great opportunity for bringing costs down to mass-marketable leels. .ien the current
global battery pack output of *7 .igawatts per year, the sheer scale of productiity from this
factory is going to be groundbreaking in terms of cost-reduction. The planned output of the
factory is going to be *G .igawatts per year by the year 1+1+.
1*
This should be more than
enough to produce its target of G++,+++ ehicles per year, and should make it the company to
beat in terms of cost-efficiency. Tesla currently is planning on beginning production by the year
1+,A, and slowly ramping up from there to full capacity by 1+1+.
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'y timing the release date of
the Model ( to coincide with the start of production of cheaper and more efficient batteries, the
company will be able to make its mass-marketable car both affordable and profitable.
1,
-Tesla&s lithium-ion plant a paradigm shift for graphite demand,/ International Mining
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#am @affe, -Tesla, #olar>ity, and Jesidential #torage/
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!TT Takeshita, -.igafactory Attachment,/
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$ 2020 t&e output of t&e 'igafactor (mea"ure! in ')&*Year+ i" e"timate! to e,cee! 2013
-orl!-i!e pro!uction le.el"/ allo-ing for o.er 000/000 .e&icle" to 1e pro!uce! per ear2
Releasing the Model"#
There has been a lot of speculation with regard to the details of the Model-(. This is primarily
due to the lack of concrete details about a lot of aspects of the car. The cost of the car is
estimated to hae a base price between )*+-7+E, with upgrade options that would increase the
price.
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Although this is not necessarily the cheapest car on the market, it is intended to be still
marketed as a luxury-ehicle. The lower price point should dramatically expand the potential
market for the car, and increased sales will follow as a result.
$hile the lower price point should sere as a great incentie to increase sales, there are other
cost-reduction factors to consider as well. The American Jecoery and Jeinestment Act
created a )AG++ income tax credit for plug-in electric ehicles OP(6sP.
1A
This means that anyone
liing in the H# can effectiely lower the price an additional )AG++, which puts it in a ery
competitie range when compared with mass-market combustion cars. The other main price-
incentie is the #upercharger network. 'y offering charges for Tesla owners for free, it
essentially eliminates a gas bill for that car. 8or the aerage car owner this could result in
saings of oer ),G++-1+++ per year.
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%erall the Model-( will proide Tesla with the means
to truly achiee mass-marketability and the ability to compete with large-scale auto
manufacturers.
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Jichard 0ane, -(lectric Tesla Model ( to be half the price and 1+ percent smaller than )A+,+++ Model #,/
(comento, March 7, 1+,7, 9 http3::ecomento.com:1+,7:+*:+7:electric-tesla-model-e-half-price-1+-percent-smaller-
A++++-model-s:;, accessed on March ,C, 1+,7
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>. Ashtiani, et. al., -Plug-in electric ehicles3 A practical plan for progress,/ 3,pert %anel Report, 8ebruary 1+,,,
9 http3::www.indiana.edu:Rspea:pubs:T(PQcombined.pdf;, accessed on March 1, 1+,7.
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THREATS:
The Nissan $eaf
?issan has positioned itself in the industry as one of the companies to beat in the low-priced (6
market. !n late 1+,+ ?issan released the ?issan 0eaf, an electric car, at an affordable price of
)*G,+++ before the 8ederal (6 tax credit. #ince its introduction it has seen sales of oer ,++,+++
ehicles worldwide,
1D
which is approximately *++S of the Model # global sales. ?issan has also
managed to reduce the price to )1=,D++ for the 1+,7 model.
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$hen analy"ing the car
specifications, it has some ma2or adantages but also some key drawbacks compared to Tesla&s
current and future lineup.
The key adantage of the ?issan 0eaf is that it is the only ehicle in that price range which is all-
electric, meaning that it controls the entire low-budget market for (6&s. 4oweer its main
drawback is the short range of the ehicle, at only A+ miles per charge.
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This means that the
ehicle is nearly impossible to use for any form of road trips or longer commutes. This is a place
where the Model ( will be able to create a key niche in the market, as Tesla Motors is planning
on offering models with 1++T mile ranges per charge.
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Tesla also offers a ma2or adantage with
its supercharger network, both in cost-saings and in extending the range of trael for its
ehicles.
The %hevrolet &olt
.eneral Motors also has stepped into the ring with its 1+,, debut of the >herolet 6olt in late
1+,+. Although not a true all-electric ehicle, the 6olt offers a key feature that helps it compete
with Tesla and ?issan on the (6 front. !t takes adantage of a hybrid powertrain that operates
purely on electric charge for the first *G-7+ miles5 at that point the combustion engine maintains
the battery charge for the rest of the ehicle&s *A+ mile range.
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$hile not as affordable as the
?issan 0eaf, the 6olt is currently priced at a ery competitie )*G,+++.
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4oweer, one ma2or
issue with the pricing of the 6olt is that it is not nearly profitable for .eneral Motors, and some
estimate that .M still loses oer )7+,+++ per ehicle oer * years after its debut.
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This has
drastically limited the ehicle&s aailability and scale of production, and some think of the car
more as a marketing tactic than an actual product. (en with these drawbacks, .M is certainly a
company that Tesla needs to watch out for, as the 6olt is quite competitie in terms of driing
range and pricing.
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?ikki .ordon-'loomfield, UPower !nstitute #tudy3 Total >ost of %wnership >heaper for (lectric >ars,U
Plugin>ars, @une ,*, 1+,*, 9http3::www.plugincars.com:total-cost-ownership-cheaper-electric-cars-study-proes-
,1AG+*.html;, accessed on March 1*, 1+,7
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@ohn 6oelcker, U1+,* ?issan 0eaf gets AG-mile range Oactually =7P in new (PA test,U .reen >ar Jeports, 8eb 1C,
1+,*, 9http3::green.autoblog.com:1+,*:+1:1,:1+,*-nissan-leaf-reealed-gets-AG-mile-range-actually-=7-in-n:;,
accessed on March ,G, 1+,7
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Jichard 0ane, -(lectric Tesla Model ( to be half the price and 1+ percent smaller than )A+,+++ Model #,/
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?ikki .ordon-'loomfield, UPower !nstitute #tudy3 Total >ost of %wnership >heaper for (lectric >ars,U
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'ernie $oodall, et al. -!nsight3 .MVs 6olt3 The ugly math of low sales, high costs/, Jeuters, #ep ,+, 1+,1, 9
http3::www.reuters.com:article:1+,1:+D:,+:us-generalmotors-autos-olt-idH#'J(==D+7@1+,1+D,+;, accessed on
March 7, 1+,7
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'Second"(ave) #& Manufacturers
Although Tesla Motors is leading the way in the luxury electric ehicle O(6P market, there are
many companies who hae begun to compete by producing more mass-marketable electric cars.
8urthermore, it is highly likely that once the market has already been pioneered then the large-
scale manufacturers will 2ump on board with producing electric ehicles. #imilar to how phone
and electronic manufacturers waited until the popularity of the iPhone and iPad until the
companies released new smartphone models to compete in those markets.
*C
Although Tesla
might get a 8irst-Moer Adantage with the future introduction of the Model (, it could easily be
beat out by competitors in the future. 8ortunately this threat is going to be slightly mitigated by
the .igafactory. This moe will position Tesla Motors as the largest producer of key
components of (6 powertrains, which will be essential for cost-competitieness within the
market.
RECOMMENDATIONS:
!n order for Tesla Motors to be able to out compete the other mass-market (6 manufacturers in
the future, there are some key details the company should consider. The large-scale inestments
in the #upercharger network and the .igafactory are crucial to this expansion5 therefore the
recommendations are specific to the execution of these inestments. 8irst, Tesla Motors should
focus on utili"ing the #upercharger network as a buyer incentie. The network acts as a price
incentie due to eliminating the cost of gas, but it also gies the ehicle nearly unlimited range.
#econdly the construction of the .igafactory needs to coincide with the scheduled release timing
of the Model (. 'y making the factory operational at an earlier time, Tesla will be able to sae
money as well as lowering the price of the Model (. 0astly the Model ( should be tailored to be
ery cost-competitie with the ?issan 0eaf and the >herolet 6olt. These recommendations
should help gie Tesla Motors a ma2or leg up on the mass-market competition.
Marketing the Supercharger Network
<ue to the impending rise in competition, Tesla Motors is going to need to continue to
incentii"e buyers to pick its product oer the competition. !t is currently doing quite well at
appealing to the luxury consumer by offering the highest rated electric ehicle currently on the
market. As it tries to expand to the more aerage consumer, it will increasingly face pressure to
bolster incenties for buying Tesla&s cars. The primary incentie for purchasing a Tesla is going
to be the #upercharger network, and the free charging that is associated with it. The current plan
is to focus on rapid expansion of this network from 1+,7-1+,C.
*A
This network will span across
?orth America, (urope, and quite a few Asian markets.
.ien the higher price point of Tesla&s lineup when compared to competitors such as the ?issan
0eaf, the expansion of this network will be ery critical to appealing to certain buyers. !t will
also be a ery key distinguishing feature of the company, so the marketing strategy must be
tailored to highlight the adantages that the network will proide. A key way to adertise this
would be to point out the fact that the #upercharger network makes its cars the only long-
distance capable electric ehicles. >omparatiely the ?issan 0eaf has a range of A+ miles, and
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Earray, #., -(ffectieness of retail 2oint promotions under different channel structures,/ 3uropean Journal of
4perational Re"earc&, 1+,,, 1,+, A7G, 9http3::www.scribd.com:doc:GG1,GA1,:A-G;, accessed on March 1, 1+,7
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>hristopher <eMorro, -8ree Tesla #upercharger ?etwork ?ow >oers >ross->ountry <riing/
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with the #upercharger network Tesla ehicles hae a theoretically infinite range. Tesla Motors
has done some demonstrations to adertise this, such as a recent road trip from 0A to ?ew
Kork.
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4oweer with a more targeted adertising approach, it could use this as a key selling
point to expand its audience.
!n addition to the range incentie, the supercharger network will act as an inaluable price
incentie as well. 'ecause Tesla Motors will be the only company offering a charging option
irtually anywhere, and at no cost at all to the consumer, it is essentially eliminating the gas bill
for Tesla owners. $hile that sort of incentie would not necessarily conince an aerage
consumer to purchase a Model # at A+,+++ dollars, it becomes a lot more appealing at the *+-7+k
price range of the Model (. $ith the debut of the Model ( expected to be around 1+,C, it should
be a ma2or priority to complete the #upercharger network before that time.
Rapidl! Scaling Up Production
Tesla Motors faces a multitude of difficult challenges in the coming years, the most important
one is going to be remaining profitable while deeloping a truly mass-marketable ehicle. $hile
the company has seen great sales and profitability for the luxury market, it is planning on moing
in on the territory of the ?issan 0eaf and >herolet 6olt. The mixed success and profitability of
these ehicles demonstrates the challenge inherent in making a mass-marketable electric car. !f
Tesla is truly planning on rising to the occasion, the cost of production and economy of scale is
going to be extremely important. Tesla Motors has demonstrated a willingness to rise to this
occasion with the construction of the .igafactory, but the deil is in the details. #o what can be
done to help promote success and minimi"e the chances of failureL
!n order to achiee Tesla&s ambitious goals with the Model (, the .igafactory should be up and
running as soon as possible. The current timeline would not hae production begin until 1+,A at
the earliest, but with quick decision-making and efficient construction Tesla Motors could
potentially begin production by mid-1+,C. This type of schedule would allow for much higher
profitability of the Model (, as well as an earlier release date. 'ecause the company is
substantially reducing the cost of all of its 0ithium-!on battery packs, it would improe the
profitability and pricing of the Model # and Model I cars as well.
*=
!bid
10
*D
T&e pro!uction launc& for t&e 'igafactor i" e"timate! a1o.e to 1egin in earl 2015/ -it&
a!!itional factor" an! "c&e!ule" illu"trate!2
0ocation of the factory is also ery important, while there are multiple states that would work5
some locations hae more adantages than others. Tucson, AW seems to be a ery good
candidate for the final location. The city and state hae offered some key tax incenties that
would help, it is in a ery good proximity to 0ithium and .raphite mines, and it&s quite close to
Tesla&s final assembly factory in 8remont, >A.
7+
$hile other manufacturers tend to utili"e
cheaper foreign labor by locating factories offshores, that would be a bad decision for Tesla for
seeral reasons. 8irst of all this manufacturing process is heaily automated and thus would
require significantly less labor than other products. Additionally the batteries are quite heay, so
it would be ery capital intensie to ship a long distance. 0astly there are some key tariffs that a
lot of countries, especially >hina and !ndia, hae regarding exporting mined goods like 0ithium
and .raphite.
7,

Model # Release *etails
$hile there are a number of potential adantages from an earlier release date, ultimately a 1+,C
debut of the Model ( would be in Tesla Motors& best interest. !t would allow them to maintain
profitability ia the .igafactory, while releasing the car before the market is saturated. Although
both .M and ?issan hae competing cars, the lack of profitability of the 6olt means that ?issan
is one of Tesla&s only true competitors. <espite ?issan&s great sales figures, the limited range of
the car has hindered its potential audience. This gies Tesla a window of opportunity to release
the Model ( before ?issan is able to increase the range of the ?issan 0eaf. !f Tesla can maintain
profitability and range of the Model ( at the *+-7+k price point, then the company should be able
to secure a ery captie audience for its car. !n order to strike that balance Tesla Motors needs to
*D
!TT Takeshita, -.igafactory Attachment,/
7+
'ala"s #"ekely, -Tucson Proposes to 'ecome 4ome to Tesla&s ,+-Million-#q.-8t. 0ithium 'attery 8actory,/
7,
-Tesla&s lithium-ion plant a paradigm shift for graphite demand,/ International Mining
11
wait until the completion of the .igafactory, and then debut the car as soon as possible
afterwards.
Tesla Motors has historically offered quite a wide range of options for each of its ehicles.
4istorically, Tesla usually gies multiple battery-pack options, which gie the ehicle different
ranges in between charges.
71
There are also arious car customi"ation options that will be
offered as well. 4oweer it will be a bit tougher to achiee the same leel of customi"ation on
the Model (, due to it being a mass-production car. $hen considering the range of the ehicle&s
batteries, cost-control will be one of the most important ariables. !f Tesla Motors made a base-
model car with a range of ,G+ miles, then the )*+,+++ price point would be ery achieable.
.ien the emphasis on the Model ( being a truly mass-market car, the lower range of ,G+ miles
seems like a good idea. !t strikes a good balance between keeping the car ery affordable, while
also differentiating it from the ?issan 0eaf. Although the company will not be able to offer the
same leel of customi"ation, it would be quite easy to still offer higher-range options for the
Model (, such as 1++ and 1G+ mile range ersions. 'y offering the lower range base model, the
Model ( should be ery competitie in the (6 market.
CONCLUSION:
!n terms of 0uxury electric ehicles, Tesla Motors has been leading the way for the past seeral
years. The company is posturing itself to become the frontrunner mass-marketed electric
ehicles with the future release of the Model (. !t has strong sustainable sales figures, and has
amassed significant financial backing to support this expansion effort. 4oweer Tesla Motors
faces the cost intensie pro2ects of the .igafactory and #upercharger network up ahead. $hile
arduous and risky, these pro2ects hae the potential to transform Tesla Motors into a leading
manufacturer of mass-market (6&s. The debut of the Model ( will face some direct competition
from the ?issan 0eaf and the >herolet 6olt, but with the right posturing and tactics it should be
able to find a key niche in the market. The completion of the .igafactory by 1+,C will be ery
important for a timely and profitable release of the Model (. Additionally the completion of the
#upercharger network by that 1+,C release should sere as a key incentie. $hile there are no
guarantees of success, these recommendations will help Tesla Motors to achiee its future goals.
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