Tesla Motors Company: Analysis of Success Milestones and Strategies

This report provides an in-depth analysis of Tesla Motors' success, examining the company's journey from its inception to its current position as a leader in the electric vehicle market. The report highlights key milestones, including the development of innovative technologies like battery electric veh...Read More

Running head: TESLA MOTORSCOMPANY SUCCESS MILESTONES 1
Tesla Motors Company success milestones
Student’s Name
Institutional Affiliation

TESLA MOTORSCOMPANY SUCCESS MILESTONES 2
Contents
Contents...........................................................................................................................................2
1.0 Executive summary...................................................................................................................4
2.0 Introduction................................................................................................................................4
3.0 Problem statement.....................................................................................................................5
4.0 Research aim..............................................................................................................................5
5.0 Research question......................................................................................................................5
6.0 Literature review.....................................................................................................................5
6.1 Direct sales............................................................................................................................6
6.2 Service...................................................................................................................................7
6.3 Supercharger network:.......................................................................................................7
6.4 World’s car makers by market value...........................................................8
7.0 Methodology:.............................................................................................................................9
7.1 Data collection.......................................................................................................................9
7.2 Data analysis and presentation...............................................................................................9
8.0 Study findings..........................................................................................................................10
8.2 Broadening the network through direct sales.....................................11
8.3 Heightening brand value...................................................................................11
9.0 Discussion of findings.............................................................................................................12
9.1 Simple user friendly technology..........................................................................................12

TESLA MOTORSCOMPANY SUCCESS MILESTONES 3
9.2 Broadening the network through direct sales.....................................13
9.3 Heightening brand value...................................................................................14
10. Conclusion...............................................................................................................................15

TESLA MOTORSCOMPANY SUCCESS MILESTONES 4
1.0 Executive summary
The aim of this paper is to access different new technologies associated with success of
automotive industries. Tesla Motors Company was used as a case study. The company has gone
viral in the global market amidst a number of challenges warranting a need to establish its top
secrets leading to such a tremendous growth despite stiff competition from other motor vehicle
companies .The paper seeks to answer questions like; how Tesla has become so successful in the
industry after going through hard times, and establish Tesla’s continuous innovating and
improving technology.The problem that prompted the study is automotive industries are faced
with large fixed costs diminishing their profit margins. Most companies therefore spend a lot of
money in innovative technologies to maintain their status quo at the expense of their budgets
Data was generated using document analysis and analyzed through discussion. Descriptive
statistics was used to record the findings of the study. A review of literature on automotive
companies was done to measure different components with respect to the aim of the study.
2.0 Introduction
sTesla Motors Company has created a new dimension to the mechanical industry
following its tremendous innovative technology. The company has survived major challenges
such as high production cost, and network effects. It is therefore a perfect choice in this study
since it gives a true reflection of new technologies used within automotive industries to cut on
the costs and increase product worth. To overcome insurmountable economic problems, Tesla
invented battery electric vehicles which replaced fuel vehicles (Oak Ridge National Laboratory,
United States, & United States, 2011). The company is continuously improving the energy sector
into green energy. This initiative has made Tesla to gain much popularity having high-end
encroachment marketing strategy against giant players in the market like Toyota, Ford, Honda,

TESLA MOTORSCOMPANY SUCCESS MILESTONES 5
Mercedes, BMW, Volkswagen and so on(Hardman et al., 2014). The Space X technology has
also helped Tesla to reduce the cost of space travel. These milestones define the success of Tesla
Motors Company (Hardman & Steinberger, 2015).
3.0 Problem statement
The problem that prompted the study is automotive industries are faced with large fixed
costs diminishing their profit margins. Most companies therefore spend a lot of money in
innovative technologies to maintain their status quo without making further improvement on
their current market products. Such a move causes a stretch on their budgets (Liu & Bloomberg
News (Firm), 2013). Some have even lost network with their potential clients due to poor records
of financial management and bankruptcy.
4.0 Research aim
The aim of this paper is to access different new technologies associated with success of
automotive industries specifically, product improvement, customer control and networking.
5.0 Research question
What strategies can be used to cut down on fixed costs in automobile industries?
6.0 Literature review
Tesla Motors is an electrical car making company based in Palo Alto, California under
the flagship founder of Elon Musk and Martin Eberhard. It came into existence in 2003. Its major
success dates back to 2016 when it received a global recognition after delivering approximately
22,200 vehicles (Knox & McCarthy, 2012).Since then, the company has been on top of the
market share towards power trains in passenger vehicles. The company is well known for its

TESLA MOTORSCOMPANY SUCCESS MILESTONES 6
diverse products ranging from Tesla Model S, Tesla Model 3, Tesla Roadster, and Tesla Model
X. The company’s products are aimed at customers in the high-end market sphere. This company
has established its markets in North America, Asia and Europe (Oak Ridge National
Laboratory, United States, & United States, 2015). In 2016, Tesla’s Model S was at the lead as
the best sold car in the United States of America after selling 29,421 units. It was closely
followed by model X with 17,129 units. In 2016 alone, the two models generated 4.2 billion US
dollars to the company. These models remain outstanding up to date in Norway and the United
States. However, Tesla faced a stiff completion from BMW which sold 20,576 units in the same
year (Bohnsac, Pinkse & Kolk, 2014).
The company operates its own power train segment and Toyota RAV4 electric vehicles.
In July 2014, Tesla was ranked as the largest battery factory in the US. It is also known for
developing driverless cars. Statistics show that the demand of electrical cars is projected to rise
over from $84billlion to $272 billion in 2019 ( Mangram, 2012). This has been enhanced by
increased need of environmental friendly cars, infrastructure improvements, and increase in
gasoline prices. With such a projection, automotive companies should be at pace to reap big from
the projection. This can be enhanced through emulating Tesla’s business model categorically
placed into selling, servicing, and charging electric vehicles (Oak Ridge National Laboratory,
United States, & United States, 2014).Tesla commands a huge market due to its overwhelming
innovative technology and networking strategies achieved through; direct sales, service, and
supercharger network (Mangram, 2012).
6.1 Direct sales
Unlike other car industries that rely on franchised dealers to sale their brands, Tesla
invests in direct sales via international show rooms and galleries (Halderman, 2010). In doing so,

TESLA MOTORSCOMPANY SUCCESS MILESTONES 7
Tesla enjoys product development, better customer buying experience, and no conflict of
interest. Customers deal with Tesla staff one on one creating a mutual understanding. Equally,
Tesla Motors sales its products to customers via online platforms.
6.2 Service
Chaston (2017) identifies that Tesla uses its service centers to deal with customer needs.
For example, the newly opened Service Plus initiative allows customers to charge or service their
vehicles. Mobile technicians are also standby to offer assistance in areas where need arises
(Pride, 2017). The high tech in the Module S cars that supports wireless internet access, gives
clients an easy time since problematic issues can be uploaded to technicians and offer solutions
online without physically touching the car.
6.3 Supercharger network:
Supercharger network stations help drivers to charge their vehicles faster at no fee. The
initiative encourages most people into engaging with the company thus a strong brand loyalty.
However, these stations are not enough in United States, Europe, and Asia which commands a
huge population of electric car users (Gilles, 2012).

TESLA MOTORSCOMPANY SUCCESS MILESTONES 8
6.4 World’s car makers by market value
Table 6.4 showing automobile industries market value comparison (Chris, 2015)
According to figure 6.4 above, Tesla runs along the top 3 world car makers by market
capitalization ahead of other competitors such as BMW, General Motors, and Ford Motor
Company. The company’s value stands at $59.7 billion after Toyota Motor Corp at $172billion
and Daimler AG at $78 billion. The success has been attributed to new technological
advancements and improvements on the current market products (Eberhard &Tarpenning, 2006).
Tesla’s technology has beaten other automotive companies by far in that other car
companies rely on it. For example, Daimler General Motors depend on Tesla for battery packs.
Mercedes-Bend uses Tesla’s power train (Doeden, 2015). According to consumer reports, the S
model is a technological marvel associated with numerous benefits ranging from cost, class,
comfort, and durability. The company is further expanded this concept with the

TESLA MOTORSCOMPANY SUCCESS MILESTONES 9
Model S to its third-generation car, the Model 3 which equally attracted a
massive market share.
7.0 Methodology:
7.1 Data collection
Data collection is gathering empirical evidence in order to gain new insights about a
situation and answer questions that prompt undertaking of the research (Carlson & Robertson,
2014).The study used document analysis and questionnaires to establish market trends of
automotive industries in the past years with Tesla in sight as a major case of study. Majorly,
market analysis on competition, production processes and policies, innovative technologies, and
costs of operations were well anchored from companies’ archives and websites (Berdichevsky,
Kelty, Straubel &Toomre, 2006). Both qualitative and quantitative approaches were used to
obtain data for a period dating from July 1st to August 14th 2017. The methods were efficient
since they allowed the researcher to access all possible factors of growth in a locomotive
industry.
7.2 Data analysis and presentation
Data analysis is the process of systematically searching, arranging, organizing, and
breaking data into manageable units, synthesizing the data, searching for pattern, discovering
what is important and what is to be learned (Carlson, 2015).Data was presented in figures,
graphs, and tables. Percentages were equally calculated followed by brief explanations to
describe the numerical figures obtained.

TESLA MOTORSCOMPANY SUCCESS MILESTONES 10
8.0 Study findings
This includes non-linear text presented in form of graphs, statistical figures, tables and
percentages based on the study objective.
8.1 Simpler user friendly technology
The figure shows Tesla’s profit margin witnessed after the company introduced Module S
cars that are user friendly and easy to operate. This attracted more unit sales with increase in time
from 25 in 2011 to 261.33 in 2014. The X axis represents time in years and the Y axis represents
total average units sold.
Figure 8.1 Graphical representation of Tesla’s profit margin (Source, author, 2017)

TESLA MOTORSCOMPANY SUCCESS MILESTONES 11
8.2 Broadening the network through direct sales
Figure 8.2: Impact of direct sales on buying experience, product development and conflict of
interest (Source, author, 2017)
8.3 Heightening brand value
RESPONSE N/A AVERAGE GOOD BAD TOTAL
TOTAL 8 5 23 4 40
PERCENTAGE 19% 13% 58% 10%

TESLA MOTORSCOMPANY SUCCESS MILESTONES 12
Table 8.3: Response rate on contribution of adding value to brand (source, author ,2017)
Figure 8.3: Response rate to contribution of adding value to the brand (Source, author, 2017)
9.0 Discussion of findings
9.1 Simple user friendly technology
From figure 8.1 (Graphical representation of Tesla’s profit margin), it is clear that Tesla
Motors Company has maintained a steady growth in its revenue since 2011. Specifically, Tesla’s
success is attributed to the’ one thing at a time’ strategy echoed by the management where one
product is dealt with at a time. According to the U.S. National Highway Safety Traffic
Administration, Model S outscored Buick, Jaguar, Porsche, Fiat, Land Rover, and other cars in

TESLA MOTORSCOMPANY SUCCESS MILESTONES 13
terms of safety. Tesla manages its brands by dealing with one product at a time hence giving the
best car quality that is friendly to both the user and the environment.
The non-smooth curve shows evidence that Tesla has undergone a
number of recession and peak seasons. However, despite all the economic
challenges, the company has maintained its market share and further
increased its profit margin due to increased innovation of highbred electrical
vehicle models. The simplicity of technology counts a lot in manufacturing
automotives and should be emulated by manufacturers. For example, Model
S is controlled by voice on the central touch screen (Carbaugh, 2013). The
system is equally easy to use and has instant response. It also connects to
3G wireless internet allowing users to update car systems and receive help
from technicians via online system. Tesla screen are also big to allow easy
controlling of car options while driving. Tesla has made their cars quick and
efficient to use, a goal other car manufacturers should hit.
9.2 Broadening the network through direct sales
Figure 8.2 (impact of direct sales on buying experience, product development and conflict
of interest shows that an increase in direct sales leads to a substantive increase in product
development and customer buying experience. From the figure we can also deduct that there is
no conflict of interest in direct sales since clients interact directly with the staff who work at the
capacity of the company (Cahill & System Design and Management Program).
Ideally, Tesla has invested much in service centers and stores in major
states of Ohio, New Jersey, and New York. Therefore, there is less dealer

TESLA MOTORSCOMPANY SUCCESS MILESTONES 14
business due to massive outlets that connect the end users directly to the
company representative. This has necessitated the company in terms of
customer experience giving them firsthand information on the expectations,
complains, and other issues affecting their brand. This move strengthens
Tesla’s brand and saves the company’s money in the long run (Cahill, 2015).
9.3 Heightening brand value
The magic of meaning theory defines the nature perceptions ranging from good, average
and bad depending on personal tests and preferences. We tend to perceive things on the basis of
experiences, usefulness, cognitive ability and moral judgment. Figure 8.3 shows 58% of
customers believe adding value to products would lead to a tremendous growth of automotive
business. According to this category, value addition increases product usefulness creating a
strong brand loyalty due to product reliability, huge audience reach, durability, brand adjustment,
cost effectiveness and less labor requirements. 10% believe that there is no relationship between
value addition and increased product use. They believe value addition attracts extra costs and can
make reliable clients shift their loyalty to competitors’ products (Adam, 2016). 13% hold a belief
that digital marketing can either be good or bad hence gives it an average score. The undecided
population commands 19%. Majorly, this is due to lack of knowhow on value addition strategy.
Flexibility in testing new marketing trends is also a concern that shuts out majority who belong
to this school of thought.
Creating high quality cars would increase sales to firms investing in car
business. Similarly, exceeding consumers’ expectations works for the good of
the company. Practically, getting more than what is paid for attracts most
clients. For example, Tesla uses supercharger network station technology to help drivers

TESLA MOTORSCOMPANY SUCCESS MILESTONES 15
charge their vehicles faster at no fee (Karamitsios, 2013). This attracts customers into doing
business with the company more and more. Additionally, keeping contact with clients
to remind them of maintenance, recalls, sending out service vans for
checkup would place automotive industries at the top bar due to increased
customer satisfaction.
10. Conclusion
Concisely, Tesla has successfully addressed the issue of large fixed costs on automotive
industries giving possible solutions such as use of consumer friendly technology systems to solve
customers’ dilemma, heightening brand value, and broadening the network
through direct sales. These methods have proved successful in Tesla Motor
Company hence effective to other automotive companies such as BMW,
General Motors, Honda, Ford Motor Company and others (Allen, 2005).The only
recommendation for Tesla is that it should also invest in corporate affairs of the general public to
reap more clients and attract traffic on their website. Otherwise, its current position is well set for
the future growth with$272 billion electrical cars demand projection in 2019.

TESLA MOTORSCOMPANY SUCCESS MILESTONES 16
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