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MKTG 301-005 Project: Tesla

Brian Augustine, Mohamed Diab, Daniel Guzman,

Muhammad Iftikhar, Anh Le, Aleksandr Ternovski, Stan Wladyka

Tesla Motors, Inc.

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY & INTRODUCTION / PAGE #
II. COMPANY DESCRIPTION, COMPETITIVE ADVANTAGE, AND STRATEGY / #
III. PRODUCT DESCRIPTION, KEY USERS, AND BRAND FACTORS / #
IV. MARKET TRENDS / #
V. COMPETITOR ANALYSIS / #
VI. INDUSTRY DYNAMICS / #
VII. SWOT TABLE, ANALYSIS, AND INTERPRETATION / #
VIII. SEGMENTS SELECTION, EVALUATION, AND TARGETING / #
IX. POSITIONING STATEMENT & PERCEPTUAL MAP / #
X. MARKETING MIX / #
XI. MARKETING METRICS / #
XII. COMPETITOR’S REACTIONS / #
XIII. REFERENCE LIST / #
  1. EXECUTIVE SUMMARY & INTRODUCTION

Tesla Motors, Inc. (Tesla) was founded by a group of engineers in San Carlos, California, in Silicon Valley 2003. They believed in the method of running cars with lithium-ion batteries used for laptops. They set to prove this idea by creating fully electric vehicles and believed that this will be the new future of mobility. Tesla is a company based on developing, designing, manufacturing, and selling full electric high performance vehicles and vehicle powertrain components ("Tesla motors," 2012). The company is model after the National Association of Securities Dealers Automated Quotations (NASDAQ) for public trades of stock exchange under the symbol of TLSA. Following the NASDAQ model allowed the company to gain widespread attention for the production of the Tesla Roadster (Roadster). The Roadster was the first fully electric sport vehicle to hit the streets in early 2008. This car was set to have no rival and equal. After four years of its release in 2008 more than 2300 Roadsters were sold nationwide ("Tesla motors," 2012). Tesla is not just known for the Roadster but also known for its batteries and powertrains which is said “to help lessen global dependence on petroleum-based transportation” meaning that they care about our global economic resources ("Tesla motors," 2012). Therefore, they encourage buyers to help the world by purchasing their products such as the Roadsters, powertrains, and batteries which are the company’s primary source of revenues. Tesla is now in the process of developing new vehicles, the Model S and Model X (or known as the secret plan). Developing and producing these new cars are set to increase global transitions of electric vehicles. According to Tesla Motors their new vehicles Model S and Model X will be the future for the world and will bring the company one step closer to reaching their expected goals ("Tesla motors," 2012). Tesla is heavily depending in these vehicles. Therefore, they are heavily implementing marketing strategies to help increase their expected revenue sales when they are launch. Tesla is currently headquarters at Palo Alto, California with a 31 franchise stores located in 37 different nations and hoping to grow even bigger.

II. COMPANY DESCRIPTION, COMPETITIVE ADVANTAGE, AND STRATEGY

II. (A) COMPANY DESCRIPTION

Tesla Motors, Inc. is an electric vehicle design and production company founded in 2003 by a group of Silicon Valley engineers currently headquartered in Palo Alto, California. Their goal was to bring electric powered cars to the mainstream market and to prove that an electric car can be “awesome”. Many would argue that they have proven their point and made an awesome electric car with the design and development of the first electric vehicle offered by Tesla, the Roadster sports car. During its production, 2300 units were sold worldwide in 37 countries. Once establishing validity in the market with the Roadster, this allowed Tesla to shift focus to design and development from the ground up of their current model, dubbed the Model S. The current formula looks to be quite a success since Automobile Magazine has named the 2013 Tesla Model S its automobile of the year ("Tesla motors," 2012).

The electric car may seem like a novelty to most, but the first electric car can be traced back more than 180 years to the year 1832. The first example was a crude electric horseless carriage powered by batteries that could only be used once before needing replacement (“PBS”, 2013). Fast forward to modern day technology using the latest lithium-ion batteries and quick charge stations and reality provides the Tesla Model S with a driving range possible of more than 300 miles per charge and providing performance on par or exceeding many modern day gasoline powered vehicles.

II. (B) COMPETITIVE ADVANTAGE

Tesla Motors, Inc. has successfully launched a new brand independent of any conglomerate of vehicle manufactures like the big three in the US; GM, Ford, and Chrysler; or even the Volkswagen Audi group who is projected to be the largest vehicle manufacturer in the world in the near future. This gives them an advantage because Tesla is not tied to any other manufacturers supply chain and can act independent of the automotive industry to design, develop, and build its own vehicles. Distribution is not similar to the mainstream market either because the Tesla sales and service are all provided by company owned dealers, not like the typical franchise dealers seen across the states from all other brands.

II. (C) STRATEGY

The strategy of Tesla Motors, Inc. is to produce a product that can differentiate themselves from any other electric car company in product development, performance, and ease of use. The target market is high-end luxury car buyers that have an affinity to purchase a “green” or high tech product and aren’t afraid to spend a little bit more money to do so. The initial release of the Model S has seen only four percent of the orders for the 40 kWh “base model”, entry-level priced unit with the most conversative battery pack. With most sales for the 60 kWh $10,000 higher cost for the next level battery pack, it shows that the affordable unit is not necessary and the plans have been cancelled to produce it. This reinforces the buyer market for higher income consumers who don’t want the entry-level model.

III. PRODUCT DESCRIPTION, KEY USERS, AND BRAND FACTORS

III. (A) PRODUCT DESCRIPTION

Tesla Motors, Inc. offers two models of high-end, fully electric vehicles, with a third one scheduled to be released sometime in 2014. First of the available models is the Tesla Roadster, introduced in 2008 and is now sold in over 37 countries worldwide. The Roadster is an electric, battery-powered, two seat, hard-drop-top convertible with a 0-60 time of 3.7 seconds, 0 emissions, and a claimed range of 245 miles per charge ("Tesla motors," 2012). It was designed to showcase performance possibilities of an electric motor and compete with the likes of Porsche Boxters or Lotus Elises. Four variations of the electric motor are available: 1.5, 2.0, 2.5, and 2.5 Sport. The most powerful is the 2.5 Sport, with an estimated 248 hp and 295 lb·ft of torque ("Tesla motors," 2007). The vehicle requires no gasoline to operate and can be fully charged in about 3.5 hours using any standard 110 or 220 volt power outlet. Base price for the Roadster is $109,000, but the car is currently sold out in North America ("Tesla motors," 2012) and production was halted to allow the company to focus on the Model S.

The second product from Tesla, launched in 2012, is the Model S: a fully electric, full-size, premium sports sedan, which continues the company's trend of creating zero-emission vehicles. The Model S focuses on luxury, comfort, and convenience. It comes with seating for 5, but at a cost to performance, dropping 0-60 time to 4.2 seconds for the Performance version. Three choices of batteries are available to drive the electric motor, the most powerful being the 85 kW·h Performance option, which is rated at 420 hp with 443 ft·lb of torque (Marcus, 2012). Tesla claims a range of 300 miles on the 85 kW·h battery ("Tesla motors," 2012), whereas EPA rated it at 265 miles. The 50/50 weight distribution, rear-motor, RWD layout of the Model S promises sports-car-like feel, yet the top speed of the Performance model is only 130 mph. Some of the other notable features of the car are an all glass panoramic sunroof, active air suspension, and an interior with Alcantara and carbon fiber accents on the Performance model ("Tesla motors," 2012). Base price for the standard Model S is $59,900 and the Performance model is $79,900, before any of the available options are added.

Latest addition to Tesla’s lineup of fully electric vehicles, due in 2014, is the Model X: an SUV with seating for seven. Model X is designed with function and utility as the top priorities. New feature for Tesla is an optional dual motor all-wheel drive, which promises 0-60 time of less than 5 seconds and up to 50% more torque ("Tesla motors," 2012). Radical new styling includes four gull wing style doors, which Tesla calls “falcon wings,” sliding second row seats to allow easier access to the third row, and Tesla’s iconic touch screen panel that fills the center of the instrument panel. Three drivetrain options will be offered, starting with the base rear-motor, RWD layout and up to the Performance 85 kW·h dual motor, AWD ("Tesla motors," 2012). Prices have not yet been released, but are expected to compete with other high-end SUVs.

III. (B) KEY USERS

In today’s value based marketing environment, targeting consumers is a tactic vital to many companies. Tesla is no exception and, like many other auto makers, relies on celebrity endorsements to generate interest in its electric vehicles. Because a fully electric, premium grade automobile is a novel concept, Tesla is testing a broad range of target markets to identify those with the greatest potential. Key users of Tesla are well-known and respected individuals with appeal to various target markets. Owners of Tesla listed on TeslaMotorClub website revealed that “a growing list of politicians, artists, musicians, and wealthy folk is starting to take shape” (Destries, 2008). Some of the key users from the entertainment industry include George Clooney, Matt Damon, Michael “Flea” Balzary, Arnold Schwarzenegger, Will.i.am, Aaron Wills, and Leonardo DiCaprio. Other well-known Tesla owners are Google founders – Larry Page and Sergey Brin, Dell computers founder – Michael Dell, San Francisco Mayor – Gavin Newsom, and Hyatt Hotels CEO – Nicholas Pritzker (Destries, 2008). As the list of celebrity owners is growing, Tesla is relying on these key users to help promote brand awareness and increase popularity of the electric car.

III. (C) BRAND FACTORS

From the inception of the company, Tesla Motors has distinguished itself from other automakers through several distinct brand factors. By bringing the first mass-produced, fully electric, premium vehicles into the market, Tesla has achieved the first-mover advantage, which has been unrivaled until the recent introduction of the Fisker Karma. Tesla’s second successful brand factor is market positioning. From the beginning, Tesla set out to deliver zero-emissions vehicles without any sacrifices to performance or luxury. In achieving this, Tesla positioned its products to appeal to environmentally conscious consumers with a taste for high-end automobiles. This brings up Tesla’s third brand factor: long-term perspective. The Roadster, Model S, and the upcoming Model X are seen as the future of motoring – producing no pollution, yet providing consumers with all the performance and functionality expected from a modern, luxury automobile. Communication is another important brand factor Tesla has adopted. Because the market for electric vehicles is only emerging, Tesla heavily communicates the benefits of its products through advertising and the aforementioned celebrity endorsements. Lastly, two more vital brand factors are quality and innovation. Since Tesla is priced to compete with high-end cars, the Roadster, Model S, and X are built to very high standards to ensure complete customer satisfaction. Technical support is top-of-the-line as well, with self-updating and self-monitoring software built into the vehicles to automatically notify a technical center should any problem arise ("Tesla motors," 2012). Owners are then able to bring their cars to a Tesla Service Center or even request a “Tesla Ranger” – an on-call Tesla specialist who will come and service the vehicle at the owner’s location and convenience.

IV. MARKET TRENDS

V. COMPETITOR ANALYSIS

VI. INDUSTRY DYNAMICS

VII. SWOT TABLE, ANALYSIS, AND INTERPRETATION

VII. (A) / SWOT TABLE FOR TESLA MOTORS, INC.
I
N
T
E
R
N
A
L / STRENGTHS
- Innovative technology and radical styling
- High performance and balanced chassis
- Self-monitoring, self-updating software
- Fully electric vehicles require no gas
- Zero emissions, very low noise
- Highest range of any electric vehicle
- Ability to recharge battery from any standard power outlet
- 24/7/365 technical support, on-call “Tesla Ranger” technicians / WEAKNESSES
- High build cost (innovation – new technology development and testing)
- Self-updating software has known glitches
- Recharging takes significantly longer than gas fill-ups (hours vs. minutes)
- Untested reliability (on the road for only the last 5 years, no comparable alternatives)
- While highest in its class, maximum range is only 265 miles, per EPA ratings
- Lack of history and heritage (new brand)
E
X
T
E
R
N
A
L / OPPORTUNITIES
- Government in favor of “green” vehicles, provides tax cuts and incentives
- First-mover advantage in the market
- Support from environmentalists
- Praise from consumers and respected sources; celebrity endorsements
- Positive future prospects (emerging market for electric vehicles) / THREATS
- Customer lack of confidence from little to no experience with electric vehicles
- Uninformed consumer base and limited knowledge of electric vehicles
- Niche market due to high price and lack of convenience (charging vs. filling-up)
- New entrants into the market (Fisker Karma, Nissan Leaf, Honda Fit EV, etc.)

VII. (B) ANALYSIS & INTERPRETATION

Performing the SWOT analysis reveals Tesla’s greatest strengths: innovation, performance, and appeal to upper class consumers. Unlike the electric vehicles (EV) offered by Mitsubishi, Honda, or Toyota, only Tesla can claim numbers from 0-60 of less than 5 seconds. Additionally, none of the aforementioned brands offer the same appealing styling as the Roadster or Model S. These attributes give Tesla a competitive advantage only Fisker Karma may be able to match in the near future. Since Tesla achieved a first-mover advantage in the high-end EV market, the company has many opportunities. The government is providing new Tesla buyers tax cuts and incentives for having zero emission vehicles ("Tesla motors," 2012) and the cars are also widely praised in the press for achieving such high standards of quality and innovation. The name “Tesla” has now become synonymous with a greener future and is likely in the evoked set of brands of any environmentalist. The general public, however, constitutes a threat to the company’s success. Many potential buyers are reluctant to buy into the electric car craze due to the lack of experience and information on reliability of these vehicles. Tesla itself has only been mass producing its cars from 2008. Innovation – one of Tesla’s greatest strengths – has also been the source of a weakness: the self-updating software caused glitches in the vehicle’s on-board computer, the center console touch screen, and even the door handles (George, 2013). The lack of road presence or sufficient testing is not only a weakness, but a major threat that will cause consumers to doubt Tesla’s products. To make matters worse, Tesla’s cars are priced to compete with the likes of high-end Mercedes, Lexus, and BMW models; the general appeal of the vehicle is to upper middle and lower upper class consumers. While Tesla’s cars appeal to various market segments for their features, styling, or performance, only the upper, well-off, classes of society will consider a purchase, let alone follow it through. Upon analyzing the reservations for the 2012 Model S, Green Car Reports found that “most of these reservation holders were between 45 and 65 years of age” (Gordon-Bloomfield, 2011), indicating that Tesla has claimed a fairly limited, niche market segment. Lastly, both a threat and an opportunity, is the growing market for EV vehicles. While popularity may increase, it will also draw in new competitors that will force Tesla to reconsider the high price for owning their EV.

VIII. SEGMENTS SELECTION, EVALUATION, AND TARGETING

IX. POSITIONING STATEMENT & PERCEPTUAL MAP

X. MARKETING MIX

XI. MARKETING METRICS

The financial and gross sales performance metrics for Tesla motors shows positive growth as demonstrated by the recent press release showing sales for the Model S have exceeded plan by 250 units. The plan was for 4500 units but sales have already exceeded 4750 units (“Tesla Motors”, 2013).

What you thought

What they thought

What they did

XII. COMPETITOR’S REACTIONS

XIII. REFERENCE LIST

Destries, M. (2008, March 12). Semi-confirmed owners list for tesla roadster adds brad pitt,