TESLA’S ENTRY INTO THE U.S.

AUTOMOBILE INDUSTRY
Case Study

Hazel Faith S. Maac

Jhomel D. Romero
Jana Dominique D. Sena
Mariel A. Tenedero
Rica Vive M. Turay

POINT OF VIEW

This case study is to focus on the outline of the Tesla engine and how it entered the

market of the USA. Elon Musk, the CEO of Tesla, promoted the Model 3 electric car,

which was priced at $35,000. The vehicle was known for its efficiency, long battery life,

and energy-saving capabilities. However, in 2018, Musk's reputation was damaged when

the New York Times revealed the treatment of Tesla employees. The article revealed that

employees worked 120 hours a week, sometimes sleeping on the floor, and were supervised

by Musk himself. This led to a toxic work environment and a loss of 5,000 vehicles a week.

MAIN PROBLEM

The main problem in the case study of Tesla's entry into the U.S. auto industry, as

identified by Sull and Reavis, is the challenge of disrupting an established industry that is
resistant to change. The traditional car industry has been dominated by a select few

powerful players with substantial financial resources and long-standing corporate cultures.

For Tesla to enter the market, considerable entry barriers, including as high capital

expenditures, complicated supply chains, and legal challenges, had to be removed.

SECONDARY PROBLEMS

The creation of a charging infrastructure for electric vehicles (EVs) was a challenge

Tesla encountered while entering the American auto industry. While Tesla concentrated on

creating high-performance electric vehicles, potential customers' major worry was the

scarcity of charging outlets.

For Tesla, creating a thorough charging network across the United States was a big

issue. The company's early charging infrastructure was inadequate, which led to range

anxiety among potential users. They were worried about getting trapped on longer journeys

with no charging options.

Supercharger stations, which are high-speed charging stations specifically created

for Tesla automobiles, required a significant investment by Tesla. These charging stations

were thoughtfully positioned along main thoroughfares and travel routes to offer Tesla

drivers convenient charging alternatives. Although it took some time, the network

eventually expanded to include a sizable percentage of the nation.

Lack of compatibility with other EV models was another issue with the charging

infrastructure. The Tesla Connector, also known as the Tesla Supercharger Connector, was

the charging connector that Tesla initially used. As a result, owners of other electric vehicle
brands were unable to use Tesla's Supercharger network, while Tesla customers found it

difficult to utilize other networks' charging stations.

Tesla makes steps to resolve this problem over time. They introduced an adapter,

but it wasn't a fully integrated solution, so other EV owners couldn't utilize Tesla's

Supercharger stations. Additionally, Tesla revealed intentions to switch to the CCS

(Combined Charging System), a new charging standard that is more commonly used by

other automakers. However, this change requires planning with charging infrastructure

providers and other stakeholders, which will take some time.

Tesla had to build a strong charging infrastructure for electric vehicles when it

entered the U.S. auto business. To do this, a network of Supercharger locations had to be

established, and compatibility difficulties with other EV brands had to be resolved. Even

though Tesla has improved compatibility and expanded its charging network, there are still

barriers to a wider uptake of electric vehicles in the US.

OBJECTIVES

Promote and hasten the adoption of electric vehicles (EVs) as a sustainable

substitute for conventional gasoline-powered cars was one of Tesla's main goals. Tesla's

other major goals included promoting and hastening the transition to sustainable

transportation. According to Tesla, EVs may drastically lower carbon emissions and

reliance on fossil fuels, resulting in a cleaner and more environmentally friendly

transportation system.

Disrupt the traditional auto business: Established manufacturers now dominate the

traditional auto sector, which Tesla wanted to disrupt. The corporation sought to upend the
existing quo, shatter the mold of traditional auto manufacture and design, and offer novel

business models. One element of this innovative strategy was Tesla's direct-to-consumer

sales technique, which avoided conventional dealerships.

Create a robust charging infrastructure: Tesla understood the value of a reliable

charging infrastructure for the wide adoption of electric automobiles. To give Tesla owners

quick and easy charging alternatives, the business planned to build its own network of

Supercharger stations and site them strategically along important thoroughfares. Tesla

sought to reduce range anxiety and make long-distance driving in electric vehicles more

viable and practical by investing in charging infrastructure.

SWOT ANALYSIS

STRENGTHS:

1. Tesla is recognized as a pioneer in the industry and is known for its cutting-edge electric

vehicle technology. Its distinctive selling offer was developed as a result of its focus on

sustainability and renewable energy.

2. Associated with luxury, performance, and environmental awareness, Tesla has a strong

and identifiable brand image. It benefits from a competitive edge due to this favorable

perception.

3. Tesla offers its customers quick and simple charging options through the development

of a vast Supercharger network. Tesla has an advantage over its rivals in terms of long-

distance transportation thanks to this infrastructure.

4. Tesla has a considerable advantage over its competitors in terms of experience, market

presence, and customer loyalty as one of the first businesses to mass-produce electric

automobiles.

WEAKNESSES:

1. Tesla has encountered difficulties with increasing production to keep up with demand,

which has caused delivery delays and backlogs. This flaw might make it more difficult for

it to gain a bigger market share in the fiercely competitive auto sector.

2. Because they are typically more expensive than conventional gasoline-powered cars,

Tesla's vehicles are less accessible to a wider user base. Wider acceptance is still hampered

by price sensitivity.

3. Government subsidies and incentives have played a role in some of Tesla's

achievements. The sales and profitability of the company may suffer if these incentives are

reduced or eliminated.

4. The focus of Tesla's product line remains on high-end, high-performance electric

vehicles, despite the company's expansion over time. Due to this, its market potential is

constrained, and potential customer categories go untapped.

OPPORTUNITIES:

1. The demand for electric vehicles is anticipated to increase as the globe promotes

sustainability and combats climate change. Tesla may benefit from this trend by increasing

its market share and focusing on new client groups.

2. Tesla has the chance to further expand in developed international markets where the use

of electric vehicles is rising. By entering new markets, a business can diversify its revenue

sources.

3. Tesla has the chance to develop its products and provide better features, such greater

range and quicker charging times, as a result of ongoing improvements in battery

technology and charging infrastructure.

4. Tesla is able to expand its business beyond automobiles thanks to its vertical integration

model, which includes its battery manufacture and energy storage solutions. It can improve

its position and revenue sources by diversified into adjacent businesses.

THREATS:

1. The auto industry is fiercely competitive, and both established automakers and recent

arrivals have made significant investments in electric vehicles. Tesla may see its market

share decline as a result of the increased competition it confronts from both existing

companies and new entrepreneurs.

2. Changes in government rules and policies, such as pollution requirements, subsidies,

and tariffs, may have an effect on Tesla's business and the wider market for electric

vehicles. It's critical to adapt to changing regulatory conditions.

3. Tesla is vulnerable to potential interruptions because to its reliance on a worldwide

supply chain, including component shortages, trade disputes, and transportation issues.

Timelines for production and delivery may be impacted by these problems.

4. Despite advancements, some areas continue to struggle with charging infrastructure,

which hinders the ease and general acceptance of electric vehicles. Tesla's potential for

expansion in some markets may be limited by a lack of charging facilities.

ALTERNATIVE COURSE OF ACTION

1. Focus on high-end luxury vehicles

Pros:

- Higher profit margins on luxury vehicles can help fund future growth initiatives.

- Establishes Tesla as a premium brand in the market, potentially attracting more wealthy

customers.

- Less competition in the luxury segment relative to the mass market.

Cons:

- Limited market size due to the higher price point, reducing total growth potential.

- Risk of losing potential customers who may see the brand as exclusive or unreachable.

- Due to a more limited market, there is more focus on the success of smaller models.

2. Expand into mass-market vehicles

Pros:

- Larger addressable market, increasing growth potential.

- Greater impact on the overall adoption of electric vehicles, aligning with Tesla's mission.

- Potential to leverage economies of scale and drive down production costs.

Cons:

- Increased competition from established automakers, who may have more resources and

brand recognition.

- Lower profit margins on mass-market vehicles, which could affect Tesla's financial

stability.

- Requires significant investment in manufacturing capabilities and infrastructure to meet

demand.

3. Partner with established automakers

Pros:

- Accelerates Tesla's growth by leveraging the resources and distribution networks of

established partners.

- Reduces the risk of failure by sharing the burden of growth with a partner.

- Allows Tesla to focus on core competencies such as electric vehicle technology and

design.

Cons:

- Potential loss of control over the brand and product direction, as partners may have

differing strategic objectives.

- As it becomes affiliated with other automakers, there is a chance that Tesla's brand

identity will be decreased.

- Dependence on partner's success and decisions, which may not always align with Tesla's

best interests.

DECISION CRITERIA

Market Potential: The decision should consider the growth potential and market

demand for different vehicle segments, taking into account factors such as customer

preferences, competition, and market trends.

Profitability: The decision should evaluate the potential profitability of each

alternative, considering factors such as profit margins, production costs, and economies of

scale.

Brand Identity: The decision should consider the impact on Tesla's brand identity

and image, including the perception of exclusivity, environmental sustainability, and

innovation.

Resources and Capabilities: The decision should assess Tesla's internal resources

and capabilities, including manufacturing capacity, supply chain management, and

technological expertise.

Risk and Competition: The decision should analyze the risks associated with each

alternative, including competition from established automakers, potential market

saturation, and regulatory changes.

Long-term Viability: The decision should evaluate the long-term viability and

sustainability of the chosen strategy, considering factors such as market dynamics,

technological advancements, and changing consumer preferences.

RECOMMENDATION AND IMPLEMENTATION

Recommendation:

Based on the analysis, it is recommended that Tesla should pursue a combination

of expanding into mass-market vehicles while maintaining a focus on high-end luxury

vehicles. This dual approach allows Tesla to tap into the larger market potential and drive

the adoption of electric vehicles through mass-market offerings. At the same time, focusing

on luxury vehicles helps to establish Tesla as a premium brand and generate higher profit

margins to support future growth initiatives.

Implementation:

Manufacturing and Infrastructure: Tesla should invest in expanding its

manufacturing capabilities to meet the demand for mass-market vehicles. This includes

increasing production capacity, improving supply chain management, and establishing

efficient distribution networks.

Product Development: Tesla should continue to innovate and improve its electric

vehicle technology, range, and charging infrastructure. This includes investing in battery

technology advancements, reducing charging times, and expanding the Supercharger

network.

Marketing and Branding: Tesla should strengthen its brand identity by emphasizing

its commitment to sustainability, innovation, and premium quality. This can be achieved

through targeted marketing campaigns, partnerships with environmental organizations, and

highlighting the unique features and benefits of Tesla vehicles.

 Partnerships and Collaborations: Tesla should explore strategic partnerships with

established automakers to leverage their resources, distribution networks, and market

expertise. This can help accelerate growth and overcome some of the challenges associated

with competition and market entry.

Regulatory Engagement: Tesla should actively engage with regulators and

policymakers to shape favorable policies and incentives for electric vehicles. This includes

advocating for charging infrastructure investments, tax credits, and other initiatives that

promote the adoption of electric vehicles.

Regular monitoring of market dynamics, consumer preferences, and technological

advancements is essential to ensure that Tesla remains agile and adaptable in the rapidly

evolving auto industry

CONCLUSION

Tesla’ CEO Musk has a high vision to make Tesla as the strongest automobiles

provider, and he was able to control the process of production with the other subordinates.

Though Tesla received high revenue every time they release new supplies of automobiles,

they still encounter receiving low ROI every other quarter. Different investors also give

them a second thought of making it to the top by establishing long term viability. Given

this matter, Tesla remains well stablished and continue to provide quality automobiles by

having the strategy of entering the high-end market where people are able to pay premium

automobiles through diving high volume for the market with low prices every model.