Definition and Market Analysis of the Tesla Motors Model S

Table of contents

List of figures

1 Introduction

2 The Company Tesla Motors
2.1 Mission & Vision
2.2 The Model S

3 Business Analysis
3.1 External Business Environment
3.1.1 Political
3.1.2 Economical
3.1.3 Social
3.1.4 Technological
3.2 SWOT-Analysis
3.2.1 Strength
3.2.2 Weaknesses
3.2.3 Opportunities
3.2.4 Threats

4 Market Analysis
4.1 Competitive Strategy
4.2 Competitor Analysis
4.3 Customer Analysis

5 Market Positioning and Strategy

6 Conclusions

List of references

List of figures

Fig 1.: The Tesla Model

Fig. 2: Market position of Tesla Motors

1 Introduction

Within the last 10 years the automobile industry experienced a slow change. Steadily growing gas prices as well as increasing awareness concerning the climate change and the necessity of a sustainable dealing with our planet leads to a rising demand for fuel-efficient cars and alternative drive concepts. Especially the development of electrical motors was of importance. However, solely the hybrid- models depicting cars with a normal engine that is complemented by an electric motor became marketable. The example of Germany where in 2015 the share of registered alternative drives only made about 1,7 percent of all vehicles (Kraftfahrtbundesamt, n.d.) illustrates the lack of a breakthrough within the industry. The benefits of an alternative drive in relation to the superior price seem to appear not large enough to the consumer.

Still, the alternative automotive industry experienced a small revolution in the past five years caused by the company Tesla Motors. In opposition to the market trend the company focused on pure electric cars, particularly within the market segment of upper class and sports cars.

The purpose of this document is to analyse the strategic marketing positioning of Tesla Motors with the focus on its premium electric car, “Model S”.

2 The Company Tesla Motors

Tesla Motors (Tesla) is a global enterprise designing, producing and marketing electric powered vehicles and its components e.g. lithium-ion battery packs, and electric vehicle powertrains. The company was founded in 2003 by a group of engineers in Palo Alto, USA. The Name “Tesla” originated in memory of Nikolas Tesla, who first built and patented an electrical induction motor in 1888 (Tesla Motors, Inc, n.d. a). The firm is currently the only vehicle manufacturer selling zero- emission sports cars in serial production (Mangram, 2012, P. 1). After establishing in 2003 Tesla started the mass production of the first model Tesla Roadster, a solely electric operated sports car, on March 17th in 2008. On January 12th in 2010 Tesla sold his 1000t Roadster (Kirmasch, 2010).

Thereafter Tesla used its technological advantage and expanded to the luxury sedan market leading to the introduction of their second electric vehicle in 2012: Model S, a zero emission, sustainable luxury sedan (Liu et al, 2014).

2.1 Mission and Vision

Elon Musk, Co-Founder and CEO of Tesla already published a Tesla Masterplan in 2006. In his plan he explained that despite producing a high performance electric car at first their long term plan is to build a wide range of models including affordably priced family cars. He further mentioned the overarching mission and fundamental reason of the company’s foundation, which is helping to drive change from an economy with fuel-operated vehicles to an economy with solar electric cars. Since Tesla's approach seems to be contradictory to this mission, he clarifies:

"Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars. The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.

Since new technologies are usually very expensive, it made sense for Tesla to start out with a high-end and high-priced product. This strategy better accommodates the high unit costs/low unit volume of a typical new technology marketing model (Wynn & Lafleur, 2009). However, this approach is completely different to the common automobile industry which focuses on mass production as well as mass marketing in order to offer a preferably low priced car.

2.2 The Model S

The Model S is a four-door premium sedan electric car with a range of up to 300 miles on a single charge. Right from the start the car was intended to be constructed as an electric vehicle, but at the same time designed as an upper class and sporty luxury vehicle (Mitra, 2012). It provides a modern design, a sporting appearance (see fig. 1) and a lot of technical extras such as a 17 inch touchscreen to control most of the car's functions, a high definition backup camera, an automatic keyless entry, wifi, navigation with real time traffic information and an autopilot. Depending on battery size and equipment the price ranges between $80.000 and $130.000 (Tesla Motors, Inc, n.d. b).

illustration not visible in this excerpt

Fig 1.: The Tesla Model S (Source: Hearst Communications, Inc., n.d.)

3 Business Analysis

3.1 External Business Environment

The business environment of a firm consists of all the external influences that affect its decisions and performance (O’Riordan, 2015, p. 80). A useful tool to analyse these factors is the PEST analysis. PEST stands for Political, Economical, Social and Technological, which are the most important external influencing factors (O’Riordan, 2015).

3.1.1 Political

There are a couple of very important political influences that have a large impact on the electrical-car-industry. One of these factors is the deployment of electric charging infrastructure. Even though the Tesla Model S has a range of 300 Miles and more, it will not become suitable for daily use without a nationwide coverage of charging stations. According to calculations of Becker T. & Sidhu I. (2009) of the University of California Berkeley, the costs for this infrastructure will be around $300 million per 100.000 regional electric car drivers. Naturally these investments can also be made by private investors.

The next aspect is the financial incentive for electric vehicle consumers like rebates, tax credits or tax exemptions. However, unless an econometric reveals a positive impact of state-level financial incentives in general (National Renewable Energy Laboratory, 2015), it is difficult to identify whether such bonuses, have an important effect on the sales numbers of the Tesla Model S. due to its insignificance in proportion to the high price.

Another possible positive influence could be be an increase of the fuel tax. For instance in the course of climate policy in order to improve the CO2 balance.

3.1.2 Economical

Some of the most important economical influencing factors are the prices for gas and electricity. The expected increase of the gas price, due to the limitation of the natural resource of crude oil, can make an electric vehicle more appealing to customers. Since the oil price is currently on an extremely low level, however, and especially those countries, which are shifting from atomic to renewable energies, are expecting increasing electricity prices, the effect could also occur the other way around.

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