Tesla: Revolutionizing Sustainable Transportation and Renewable Energy Solutions

INTEGRATED CASE STUDY
ACC 4291 SEMESTER 2, 2022/2023
CASE ANALYSIS REPORT:
TESLA
PREPARED BY
GROUP 4, SECTION 2
NO. NAME MATRIC NO.
1. NUR AIN NASUHA BT ZAHAMAN 1911586
2. NOR AMIERAH BINTI MOHAMMAD RAFIQ MUBAN 1824456
3. NUR AIN BT ABU BAKAR 1919006
4. FARHATUL HANIM BINTI ZULKIFLI 1917040
PREPARED FOR
PROF DR NIK NAZLI BINTI NIK AHMAD
DATE OF SUBMISSION
13th JUNE 2023

TABLE OF CONTENT
1.0 Introduction..............................................................................................................................1
1.1 Executive Summary............................................................................................................. 1
1.2 Protagonist........................................................................................................................... 1
1.3 Megatrends...........................................................................................................................3
1.4 Major Issues and Symptoms................................................................................................ 5
2.0 Alternatives Available..............................................................................................................6
2.1 Status Quo - Fully Autonomous Production with Lean Manufacturing Principles............. 6
2.2 Collaborative Robots Production Model............................................................................. 7
3.0 Analytical Tools........................................................................................................................ 8
3.1 Fishbone Analysis................................................................................................................8
3.2 Critical Success Factors..................................................................................................... 11
4.0 Evaluation of Alternatives & Decision.................................................................................17
5.0 Recommendations.................................................................................................................. 19
6.0 References............................................................................................................................... 23

1.0 Introduction
1.1 Executive Summary
This report discussed Tesla which operates primarily in the automotive industry. Tesla
designs, manufactures and sells electric vehicles and energy storage systems. The mission of
Tesla is to accelerate the world's transition to sustainable energy. While Tesla is widely known for
its electric vehicles (EVs), their mission goes beyond just producing EVs. They are committed to
developing and promoting various renewable energy solutions, such as solar energy generation
and energy storage systems. Tesla aims to make electric vehicles accessible to a larger market by
offering Model 3 as a cheaper alternative to previous models. Their pricing strategy initially
targets premium customers who are willing to pay higher prices, then quickly expand to reach
larger volumes and lower prices with each new model.
Tesla has taken a strategic approach by establishing in-house manufacturing capabilities
allowing for greater control over quality, efficiency, and innovation. Tesla has constructed
Gigafactories dedicated to producing electric vehicles, batteries, and energy products. Tesla
follows a unique distribution model compared to traditional automotive manufacturers, where it
sells its cars directly to customers through its own physical store and online channels. The case
study highlights the difficulties of Tesla in scaling up production to meet the demand for its
vehicles. The high cost of manufacturing EVs led to concerns about the company's financial
viability in the long run.
1.2 Protagonist
Elon Musk, the CEO of Tesla Motors, is a versatile entrepreneur and innovator with a
wide range of accomplishments. He has a diverse educational background, holding Bachelor of
Science degrees in both physics from the College of Arts and Sciences and economics from the
Wharton School of Business at the University of Pennsylvania. These academic foundations have
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provided a strong basis for his various ventures. As of May 31, 2023, Musk's net worth stands at
$195.6 billion, making him the second wealthiest individual globally. Alongside his role at Tesla,
he also serves as the founder, CEO, and chief engineer of SpaceX, demonstrating his ambitious
pursuit of revolutionizing space exploration. Moreover, Musk is an angel investor and holds key
positions, including CEO and product architect at Tesla, Inc., owner and CEO of Twitter, Inc.,
founder of the Boring Company, co-founder of Neuralink and OpenAI, and president of the Musk
Foundation, a philanthropic organization. His substantial ownership stake of approximately 23%
in Tesla, encompassing both stock and options, further underscores his dedication to the
company's success and his vision for a sustainable future. Musk has established Tesla as a leader
in the electric vehicle market with his passion and audacious vision, upending established
conventions and changing how we think about transportation. Tesla has become a representation
of cutting-edge technology as a result of his persistent dedication to innovation and sustainability.
Musk's visionary leadership motivates a global shift towards renewable energy, driving society
towards a more sustainable and greener future. It seems that Elon Musk's primary concern was
ensuring Tesla's ability to meet the increasing demand for its electric vehicles and reduce its
reliance on external suppliers. Musk recognized the importance of achieving self-sufficiency in
terms of vehicle components and parts to expand Tesla's manufacturing capabilities and stay
competitive in the market. Although Tesla faced production delays due to capacity constraints, it
managed to boost production significantly by implementing higher levels of automation and
increasing its workforce. However, there were also challenges related to delivery logistics,
including transportation and quality control issues, that needed to be addressed. Initially, Tesla's
strategy of offering differentiated products proved successful in attracting a niche market
segment, but there was a growing demand for Tesla's more affordable vehicles in the mass
market.
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1.3 Megatrends
1.3.1 Changing Customer Behavior
Consumer behaviour and awareness are changing as more people recognize the benefits
of alternative and sustainable mobility modes such as electric vehicles, cycling, and public
transportation (Accenture, 2022). As a result, the demand for sustainable mobility solutions is
increasing, and companies in the automobile industry are adapting to this shift in consumer
behaviour by developing and marketing more sustainable technologies. This change in behaviour
is not only beneficial for the environment but also provides opportunities for Tesla to innovate
and grow by offering sustainable alternatives to traditional transportation. However, the expected
growth rate of the electric vehicle market would decline from the previous 3.6 percent in the past
five years to approximately 2 percent by the year 2030. The decline in growth is projected to be
primarily influenced by macroeconomic factors and the growth of new mobility services, like car
sharing and e-hailing, in the market (McKinsey Insights, 2016). This can be due to the changes in
consumer behaviors in preferences, as many millennials approach car purchases more
pragmatically by focusing on factors such as safety, fuel efficiency, and high-quality features.
Additionally, they are more inclined to give priority to other modes of transportation like public
transportation and ride-sharing services.
Therefore, Tesla should give high importance to innovation and consider it as a
continuous journey rather than a singular occurrence. It is a process that develops new concepts
and gives them physical form. It's crucial for businesses that want to expand and endure over the
long term. A supportive corporate framework is also crucial, and innovation should be based on
market and consumer expectations so that it may be easily applied at every stage of making
various products.
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1.3.2 Growing Electrical Vehicle Market
Many developed countries have responded to the environmental crisis, energy security
issues, and an increase in the demand for automobiles, especially in the electronic vehicle
industry. According to Figure 1, as per Appendix 2, the market share of electric vehicles
worldwide experienced a remarkable increase trend between 2010 and 2016, and the sector is
currently in a growth stage (Zhao et. al., 2020). This could be seen through the rapid growth of
the electric vehicle (EV) industry, especially in China. One crucial aspect is the growing
purchasing power of the country's population, which has made electric vehicles more affordable
for a larger number of consumers. Additionally, the government has introduced incentives such as
subsidies and tax advantages to encourage the adoption of EVs and tackle environmental issues.
The combination of increasing consumer interest, government backing, and environmental
pressures has led to significant advancements in China's electric vehicle sector, garnering
attention from researchers and industry experts. However, having a sufficient and accessible
charging infrastructure is vital to encourage the widespread use of electric vehicles. If there are
not enough charging stations or limited access to them, it can cause inconvenience and anxiety
for EV owners, which ultimately hampers the overall rate of EV adoption because potential
purchasers have range anxiety due to a shortage of charging stations. Expanding the charging
infrastructure is of utmost importance to sustain the increasing electric vehicle market (Livemint,
2022). Tesla has gradually shifted from producing exclusive products to mass manufacturing in
response to the increasing demand for electric vehicles. Tesla is also upgrading its services by
adding charging stations with 120 kW capacity, an improvement above the industry's standard 50
kW fast charging stations. Additionally, Tesla develops a competitive edge in leveraging
renewable energy by setting up free solar-powered charging stations close to its sales areas. Solar
panels initially have carbon dioxide emissions during their manufacturing process. Still, they
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achieve carbon neutrality within two years and can last for more than 20 years, making them vital
in reducing carbon emissions and will help the nation reach the proposed US federal plan of a
30% reduction in 2005 carbon emission levels from the electric power sector by 2030 (Robinson
et al., 2014, p. 7360). Tesla can take advantage of the rising demand for electric vehicles by
developing its network of charging infrastructure and collaborating with local organizations to
increase accessibility and convenience for EV owners.
1.4 Major Issues and Symptoms
This case study revealed three primary symptoms influenced by both external and internal
factors: Tesla's production, financial stability, and competition. Regarding Tesla's production, the
company encountered significant challenges and difficulties in scaling up production, leading to
what was commonly referred to as "production hell." Tesla faced various obstacles, including
paused production, as they worked on addressing bottlenecks in their highly automated factory.
CEO Elon Musk acknowledged that excessive automation was part of the problem, resulting in
issues along the production line. In an attempt to meet production targets, Tesla even skipped
some production processes to save time. However, despite these efforts, they fell behind their
production goal by more than six months. This lag in production is a concerning issue as it
hampers their ability to meet market demands. The second symptom revolves around Tesla's
financial aspect. The company experienced instability in terms of its financial performance.
Although Tesla managed to generate profits in March 2013 and October 2016, it faced cost
overruns for its first electric vehicles and incurred losses in other quarters. The case study
indicates that Tesla recorded a net loss of $743 million, emphasizing the need for the company to
increase production and generate profits to avoid running out of cash. The final symptom focuses
on competition within the electric vehicle industry. Tesla entered the market relatively late,
already populated with strong competitors such as General Motors, Toyota, and Ford, key players
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in the industry. These competitors actively engage in research and development as well as market
penetration, intensifying the competition for Tesla.
Considering all these symptoms, we conclude that the major issue is how Tesla can ensure
its survival as it moves towards mass production of electric vehicles (EVs) while grappling with
production bottlenecks. One mistake made by Tesla is the over-reliance on automation without
initially perfecting the automation process, resulting in an incorrect approach to production. As a
result, Tesla has struggled to meet production targets, leading to extended waiting times for
customers and a backlog of orders. This negatively impacted the company's reputation and
created losses in revenue. The production constraints have prevented Tesla from maximizing
sales, and the situation is worsened as the prolonged production delays have resulted in the
depletion of the company's cash reserves. To make it worse, Tesla faces intense competition in
the industry, where competitors have the advantage of higher market share, extensive
manufacturing experience, and substantial financial resources, enabling them to produce more
EVs compared to Tesla. Nonetheless, it is crucial for Tesla to prioritize robust production
efficiency. By doing so, they can address their concerns about financial stability and
simultaneously enhance their competitiveness in the industry. Efficient production processes will
enable Tesla to meet market demands more effectively, optimize its resource utilization, and
increase profitability. By streamlining its production operations, Tesla can navigate the challenges
posed by competition and establish itself as a leader in the electric vehicle market.
2.0 Alternatives Available
2.1 Status Quo - Fully Autonomous Production with Lean Manufacturing Principles
Tesla has employed a vertical integration strategy to in-source their essential components,
which sets them apart from conventional automakers who often rely on external suppliers.
Furthermore, Tesla's current production model involves a fully autonomous system for
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