The overall electric vehicle industry has grown significantly in the last five years. One of many reasons for that was the introduction of Tesla`s first electric vehicle in 2009 with a strong differentiation strategy. Tesla is now focused on its entry into the mass automotive market. To achieve that, the company is committed to invest heavily in its production capacity and model line-up, most recently with the introduction of Model 3.
Tesla’s competitive advantages for this strategic goal include a superior electric vehicle technology and recharging infrastructure, brand recognition, a first mover market position, and a strong network of strategic partnerships. However, since the company entered the industry in the premium sport and luxury sedan vehicle niche segment, it has a resource disadvantage in regards to know-how, large-scale manufacturing processes and model line-up when it comes to the mass automotive market. Additionally, the company is relying on an overall growth of the EV demand, technological improvements and a high number of customer referrals in the near future.
There is a large number of existing premium manufacturers in this space, several of which already enjoy major manufacturing and economies of scale advantages that will make this endeavor highly costly and risky. However, the combination of Tesla’s competitive advantages and aggressive marketing could result in the capture and sustainment of a significant percentage of market shares in the mass automotive segment.
Table of Contents
Summary of Analysis
Porter`s four corner Analysis
Current Strategies
Drivers
Management Assumptions
Capabilities
Recommendations
Objectives and Key Themes
This report provides a competitive assessment of Tesla Motors Inc., specifically examining the company's strategic transition from a luxury niche manufacturer to a major player in the mass automotive market. The analysis investigates how Tesla aims to balance its established differentiation strategy with the operational challenges of large-scale production.
- Strategic shift to the mass automotive market
- Evaluation of competitive advantages vs. resource disadvantages
- Impact of the "Model 3" launch and production scaling
- Analysis of market drivers and management assumptions
- Recommendations for existing automotive competitors
Excerpt from the Book
Current Strategies
Tesla Inc. currently follows a differentiation strategy to establish a superior brand recognition in the industry for its electric vehicles. The company entered the automotive industry with the introduction of a high-priced premium electric sedan (Model S) (Tesla, 2016). A look at the price point of the Model S and the number of total sales in 2015 puts the focus of the company to a clear differentiation strategy (Heisler, 2016). Tesla’s goal is to differentiate its small product line by innovative technology and a luxury design. Therefore, the recent focus of the company lied in the high end sports car and luxury vehicle sedan market (Mangram, 2012). The company uses this small niche market of high end sports cars with high margins to introduce the brand to the whole automotive industry. The luxury vehicle sedan market is targeted for a broader consumer adaption. The goal is to generate high demands for its cars, drive leads to sales teams and to build a long-term brand recognition (Tesla, 2011).
Tesla works on its scalability to be able to enter new market segments. The company invests in further expansion of its production capacity to be able to enter the mass automotive market. The goal is to leverage its brand for a mainstream vehicle adaption with its recently introduced Model 3 (Welch & Behrmann, 2016). The focus of Model 3 will also lie on a differentiation strategy (large range, luxury design, modern cockpit, Autopilot), but at a more affordable price point of approx. $35,000 (Price, 2016). Overall, Tesla works towards a high market penetration in the mainstream market with Model 3 as well as an overall increased demand in EVs in the industry. Therefore, the company is committed to increase its production capacity to 500,000 cars per year by 2018 (Heisler, 2016a). One major step to achieve that aggressive goal was the investment in a Gigafactory, which will start in 2016 to produce enough batteries for up to 500,000 Tesla cars per year (Sparks, 2016).
Summary of Chapters
Summary of Analysis: Provides an overview of Tesla's historical growth and its strategic pivot toward the mass-market automotive segment.
Porter`s four corner Analysis: Visualizes the strategic position of Tesla using Porter's framework to identify strengths, weaknesses, and competitive responses.
Current Strategies: Details Tesla's transition from high-margin luxury vehicles to mass-market penetration via the Model 3 and increased production capacity.
Drivers: Examines the push for a broader model line-up and the necessity of achieving positive financial performance through economies of scale.
Management Assumptions: Explores Tesla's reliance on projected EV demand growth, government support, and the success of future technological advancements.
Capabilities: Highlights the role of strategic partnerships and the unique "Supercharger" network as key competitive assets.
Recommendations: Offers strategic advice for established automotive competitors on how to leverage their own manufacturing expertise to compete with Tesla.
Keywords
Tesla Motors, Electric Vehicles, Differentiation Strategy, Mass Automotive Market, Porter's Four Corner Analysis, Model 3, Production Capacity, Gigafactory, Competitive Advantage, Brand Recognition, Scalability, Automotive Industry, Market Penetration, Sustainable Mobility, Strategic Partnerships.
Frequently Asked Questions
What is the primary focus of this report?
The report provides a competitive assessment of Tesla Motors Inc., focusing on its transition strategy from a premium niche vehicle producer to a competitor in the mass automotive market.
What are the central themes of the analysis?
Key themes include Tesla's differentiation strategy, the challenges of scaling production for the mass market, the importance of infrastructure like the Supercharger network, and the impact of the Model 3.
What is the main goal or research question?
The report aims to evaluate whether Tesla can successfully leverage its brand recognition and technology to gain significant market share in the mass-market segment despite its resource disadvantages in manufacturing.
Which scientific methodology is utilized?
The work employs Porter’s "Four Corner Analysis" as a primary framework to evaluate the competitor's drivers, management assumptions, strategies, and capabilities.
What is covered in the main body of the text?
The body covers current business strategies, the primary drivers behind the company's growth, underlying management assumptions regarding the EV industry, and an evaluation of Tesla's internal capabilities.
Which keywords characterize this document?
Primary keywords include Tesla Motors, Electric Vehicles, Differentiation Strategy, Mass Automotive Market, Scalability, and Competitive Advantage.
Why is the "Supercharger" network significant for Tesla?
It acts as a unique selling proposition and a major competitive asset that addresses the "range anxiety" barrier, which is critical for the widespread adoption of electric vehicles.
How do established automakers have a potential advantage over Tesla?
Established competitors benefit from significant manufacturing know-how, existing economies of scale, and established brand loyalty, which Tesla currently struggles to match in the mass-market segment.
What risks does Tesla face according to the report?
Tesla faces risks related to high production costs, the difficulty of scaling manufacturing processes, and the pressure to fulfill high customer expectations with the mass-market Model 3.
- Quote paper
- Dennis Schindeldecker (Author), 2016, Competitor Assessment. The electric vehicle industry. Tesla's strategic focus lies on establishing its brand in the mass automotive market, Munich, GRIN Verlag, https://www.grin.com/document/368184
