Tesla Motors Recommendation Report a3x6u

1

RECOMMENDATION REPORT: TESLA MOTORS, INC. Prepared by Troy Maynes INTRODUCTION Tesla Motors, a company with small ambitious roots, has some big potential for shaking up quite a few longstanding industries. Although Tesla currently focuses on the luxury car market, it is planning to turn the electric car into a mass-marketable product over the next few years. It is a quickly expanding business with a lot of opportunities on the horizon, but it also faces a lot of potential challenges. This recommendation report will conduct a SWOT analysis on the company’s expansion efforts, and provide key recommendations to help achieve those goals. While refining its current car lineup is certainly an important focus, the expansion of the business to a broader audience is the main goal over the next several years. In order to achieve this, the development of an affordable electric vehicle must be a key priority for Tesla Motors. The company has already announced plans to build such a car, nicknamed the BlueStar or the Model E, for a base price of $30,000.1 This ambitious goal has many different steps needed along the way. In order to scale up production to achieve that price point, Tesla Motors is planning on building a multi-billion dollar “Gigafactory” to produce the Lithium-Ion batteries at an economy of scale.2 Additionally the company is currently building a large-scale Supercharger network, which is comprised of a series of free-charging stations for owners of Tesla vehicles.3 These measures are high in upfront liabilities, but have major long-term benefits for the company’s outlook. When analyzing the outlook of Tesla Motor’s expansion efforts, there is a lot to consider about the risks and rewards of the key decisions the company will make. It has a lot of potential strengths: large inflows of investor capital, higher demand than supply, and ambitious plans for expansion. However the company has some key weaknesses, such as a production disadvantage from being a new company and capital intensive projects. The Gigafactory, Supercharger network, and car models serve as great opportunities for expanding future markets. There are some potential threats on the horizon too; mostly in the form of competing car companies in the EV market, but there are also a growing number of states ing legislation against the company’s direct-sales practices.4 In order to navigate through these challenges and get the best results, there are some important recommendations to take note of. First of all there are some key incentives that need to be 1

“Tesla’s lithium-ion plant a paradigm shift for graphite demand,” International Mining, March 11, 2014, , accessed on March 12, 2014 2 P. E. Schumpeter, “Tesla’s Gigafactory, Driving Ahead,” The Economist, March 3, 2014, , accessed on March 18, 2014 3 Christopher DeMorro, “Free Tesla Supercharger Network Now Covers Cross-Country Driving”, Clean Technica, January 27, 2014, , accessed on March 4, 2014 4 Kirsten Korosec, “Tesla’s Elon Musk: State ban on direct sales of EVs is ‘twisted’,” CNN Money, March 14, 2014, , accessed on March 16, 2014

2

focused on to improve potential sales of the Model E. Secondly Tesla should work diligently to quickly lower the cost of production for mass-marketability. Lastly the company should focus on timing the Gigafactory to begin production early enough to lower costs on the Model E. If correctly implemented, these recommendations will help Tesla Motors to properly expand their business and take on the mass-market auto manufacturers. STRENGTHS Financial Advantages Tesla Motors has generated quite a financial advantage when compared with other companies in the electric vehicle market. It has transitioned into a very financially stable company, which has great investment backing for its planned expansion efforts. Its sales figures are growing and signify a very healthy demand for its products.5 The financials are looking very good for a company of its size and age, at just over $2.01 billion dollars in total revenue last year and the first annual profit in the company’s history.6 The market-value of the company has risen to almost ten times its original valuation after its Initial Public Offering, which has given the company a substantial amount of capital to use for expansion efforts. Tesla Motors has also recently issued $2.2 billion by issuing Convertible senior notes in order to raise additional capital.7 This puts the company in a fantastic position to be able to bear the burden of upfront costs on the Gigafactory and Supercharger network. The company has produced some great sales figures recently, and has generated a lot of interest in its cars. Tesla’s current showcase car, the Model S, is selling quite well at over 22,000 sales in 2013 alone and is expected to nearly double those sales in 2014.8 Even at the high price point of $70,000 for the base model of the Model S, demand is completely outstripping the supply of the vehicles.9 Although this high demand is very good for the company, it does present a unique set of challenges for such a young company to scale up production. Additionally, Tesla Motors is scheduled to roll out an SUV known as the Model X towards the end of 2014.10 While this vehicle is still at a price point targeting the luxury car market, it does signify the companies drive to diversify and expand. The current and car lineups show that the company is able to produce very in-demand cars and turn a profit while doing so. Supercharger Network There are also important strengths worthy of note with regard to marketing incentives and demand for cars. The development of the Supercharger network serves as a powerful incentive to help justify the higher cost of the cars. With the increasing cost of gas, having a network that provides free charging to all Tesla owners acts as a major cost-saving tool for the cars. Although this already is becoming an important incentive at the $70,000 price point, this strength is going to be exponentially more valuable in the coming years with cheaper models coming out. 5

Tesla Motors, Form 10-K Annual Report for FY 2013, , accessed on March 3, 2014 6 Ibid 7 Tesla Motors, Prospectus Filed Pursuant to Rule 424, , accessed on March 3, 2014 8 Tesla Motors Form 10-K Annual Report for FY 2013 9 Hoover’s Online “Tesla Motors Inc.: Company Overview,” Hoover’s, Inc., 2014, accessed on March 3, 2014 10 Tesla Motors, Form 10-K Annual Report for FY 2013

3

The Supercharger network also leaves a key revenue source on the table in the future. Tesla Motors could potentially use the chargers as a form of “electric gas station”, where the public at large could charge non-Tesla EV’s for a fee. Another option would be to charge other EV companies a royalty fee to let customers use the station for free. Either way it could serve as a powerful revenue source down the road. This becomes especially lucrative considering the fact that Elon Musk, the CEO of Tesla Motors, is also the CEO of its partner company SolarCity which provides solar power for the network’s charging capabilities.11 WEAKNESSES Financing Projects There are two key projects that are crucial to the future success of Tesla Motors’ expansion plans, the Supercharger network and the “Giga factory”. Unfortunately those two projects are extremely costly, and will likely require over $10 billion to complete. While Tesla Motors has engaged in some key financing measures to make these projects more easily afforded, it is still going to need to get a large amount of capital through traditional loan structures.12 The Giga factory is estimated to potentially cost somewhere between $4 and $7 billion, and it will not result in a return on investment until the entire project is completed.13 Depending on where the factory is going to be built, there could be some potential cost-cutting measures. Many cities, such as Tucson, Arizona, are offering tax incentives in order to entice Tesla Motors into building the factory there.14 Additionally a lot of attention needs to be paid towards the proximity of the factory to key resources, such as Lithium and Graphite mines. While the upfront cost of the factory is high, it is not unaffordable, and the factory will prove to be invaluable for the company for the production of the Model E. Building the Supercharger networks are going to be quite costly as well, especially considering the scale and ambition for developing the networks in North America, Europe, and Asia.15 Because it is an ongoing project, the costs are going to be more continuous. That means that the company will have to continue to generate capital to finance these projects. On the bright side the costs will not be entirely upfront, and the return on investment will start to occur very quickly after the money is spent. While immediately building the networks in Asian and European countries is not essential, it is a very important marketing tool to incentivize buyers in these new markets. Overall the financing of the networks is a bit more nuanced and time-sensitive, but should be easier to afford than the Giga factory. Risks of a New Market

11

Sam Jaffe, “Tesla, SolarCity, and Residential Storage”, American Solar Energy Society, June 2012, Vol. 26 Issue 4, p14-14, Business Source Premier, EBSCOhost, accessed on March 15, 2014 12 Tesla Motors, Prospectus Filed Pursuant to Rule 424 13 Bill Alpert, “Tesla’s Giga-Plan Looks Too Ambitious”, Barron’s, March 29, 2014, , accessed on March 30, 2014 14 Balazs Szekely, “Tucson Proposes to Become Home to Tesla’s 10-Million-Sq.-Ft. Lithium Battery Factory,” Multi-Housing News Online, March 13, 2014, , accessed on March 15, 2014. 15 Christopher DeMorro, “Free Tesla Supercharger Network Now Covers Cross-Country Driving”

4

Whenever a company is pioneering into uncharted territory there is a lot of room for reward, but that inevitably is paired with quite a bit of risk. Tesla Motors is no exception to this rule; it faces a lot of potential for failure in this regard. Analysts have speculated that the cost of Lithium-Ion batteries is always going to put electric vehicles at a higher cost than internal combustion cars.16 While this claim is disputable, it could pose a very real risk for Tesla Motors. Most of the company’s long-term prospects are based on the idea that it can produce an electric car at extremely competitive prices. So if this claim is true, it could potentially destroy the long-term viability of the company. Fortunately this type of issue is somewhat mitigated by the building of the Gigafactory, by simplifying the production line and increasing the scale of production. However, given the capital-intensive nature of auto manufacturing, Tesla Motors needs to be very careful in planning future models around certain price structures. OPPORTUNITIES: The Gigafactory When considering the prospects of the production of its mass-market car, the Model E, there are a lot of aspects of the company that strengthen its standing compared to other companies. Tesla Motors has quite an extensive patent-portfolio, especially on EV-specific powertrain technologies.17 These technologies are being put to good use too, as the company has a very mature production line on these powertrains. As an original equipment manufacturer (OEM), Tesla Motors has established partnerships with other companies to manufacture powertrain components.18 This puts the company at a unique advantage in controlling the entire production process, and avoiding being forced to rely on other companies for key aspects of manufacturing. In addition to its current manufacturing process, Tesla is planning on the construction of the Gigafactory, which will significantly expand the company’s production capacity. The 5 billion dollar factory is planned to add a wide variety of assets to the company’s portfolio. It is estimated that by the year 2020 the company will be able to produce over 500,000 lithium-ion battery packs per year with this factory.19 So in order to achieve mass-market scales of production, this factory is absolutely essential. Additionally the factory is planned to become the majority-supplier of batteries in the lithium-ion market worldwide,20 so it will help boost revenue and aid in company expansion. Most importantly the factory will dramatically reduce the manufacturing cost of the battery packs, which will be crucial in achieving the $30,000 base price of the Model E. One of the major cost advantages that Tesla Motors has when compared with other companies is that it is striving to reduce the distances of supply-lines as much as possible. Tesla Motors is currently negotiating with 3 states in the south-west US to determine where to locate the 16

Myles Mangram, “The globalization of Tesla Motors: a strategic marketing plan analysis,” Journal of Strategic Marketing, Vol. 20, No. 4, July 2012, 289-312, Taylor and Francis, EBSCOhost, accessed on March 2, 2014 17 “Tesla’s lithium-ion plant a paradigm shift for graphite demand,” International Mining, March 11, 2014, , accessed on March 12, 2014 18 Ibid 19 Jon Gertner, “The Risk of a New Machine”, Fast Company. April 2012, Issue 164, p104-133, Business Source Premier, EBSCOhost, accessed on March 18, 2014 20 ITT Takeshita, “Gigafactory Attachment,” , accessed on March 12, 2014

5

Gigafactory: Arizona, New Mexico, or Nevada. The reason for these states is simple; it has a very close proximity to its California based production facilities, as well as the major Lithium and Graphite mines in those states.21 While the exact locations are up for debate, the general cost-savings are going to remain the same. By reducing the cost of transportation from the main battery-manufacturers in Asia, Tesla can increase the potential profitability of the Model E in the future. Another key cost savings measure for the company is the method by which the factory will obtain its electricity. The proposed plan is to produce the majority of the factory’s power through solar s installed in a nearby field, with the remaining power coming from wind turbines. There will be great cost-savings because of a unique partnership with a company called SolarCity. Both Tesla Motors and SolarCity share the same owner/CEO, and there is quite an extensive history of codependency between the two businesses.22 Because of this alliance, Tesla Motors is able to negotiate a very good price on the installation of the solar s. This means that one of the key costs of the Lithium-Ion batteries will be much cheaper than the competition. Overall when analyzing the benefits that the Gigafactory will bring to Tesla Motors, it appears to be a great opportunity for bringing costs down to mass-marketable levels. Given the current global battery pack output of 34 Gigawatts per year, the sheer scale of productivity from this factory is going to be groundbreaking in of cost-reduction. The planned output of the factory is going to be 35 Gigawatts per year by the year 2020.23 This should be more than enough to produce its target of 500,000 vehicles per year, and should make it the company to beat in of cost-efficiency. Tesla currently is planning on beginning production by the year 2017, and slowly ramping up from there to full capacity by 2020.24 By timing the release date of the Model E to coincide with the start of production of cheaper and more efficient batteries, the company will be able to make its mass-marketable car both affordable and profitable.

21

“Tesla’s lithium-ion plant a paradigm shift for graphite demand,” International Mining Sam Jaffe, “Tesla, SolarCity, and Residential Storage” 23 ITT Takeshita, “Gigafactory Attachment,” 24 Ibid 22

6

25

By 2020 the output of the Gigafactory (measured in GWh/Year) is estimated to exceed 2013 worldwide production levels, allowing for over 500,000 vehicles to be produced per year. Releasing the Model-E There has been a lot of speculation with regard to the details of the Model-E. This is primarily due to the lack of concrete details about a lot of aspects of the car. The cost of the car is estimated to have a base price between $30-40K, with upgrade options that would increase the price.26 Although this is not necessarily the cheapest car on the market, it is intended to be still marketed as a luxury-vehicle. The lower price point should dramatically expand the potential market for the car, and increased sales will follow as a result. While the lower price point should serve as a great incentive to increase sales, there are other cost-reduction factors to consider as well. The American Recovery and Reinvestment Act created a $7500 income tax credit for plug-in electric vehicles (PEVs).27 This means that anyone living in the US can effectively lower the price an additional $7500, which puts it in a very competitive range when compared with mass-market combustion cars. The other main priceincentive is the Supercharger network. By offering charges for Tesla owners for free, it essentially eliminates a gas bill for that car. For the average car owner this could result in savings of over $1500-2000 per year.28 Overall the Model-E will provide Tesla with the means to truly achieve mass-marketability and the ability to compete with large-scale auto manufacturers. 25

Ibid Richard Lane, “Electric Tesla Model E to be half the price and 20 percent smaller than $70,000 Model S,” Ecomento, March 4, 2014, < http://ecomento.com/2014/03/04/electric-tesla-model-e-half-price-20-percent-smaller70000-model-s/>, accessed on March 16, 2014 27 C. Ashtiani, et. al., “Plug-in electric vehicles: A practical plan for progress,” Expert Report, February 2011, < http://www.indiana.edu/~spea/pubs/TEP_combined.pdf>, accessed on March 2, 2014. 28 Ibid 26

7

THREATS: The Nissan Leaf Nissan has positioned itself in the industry as one of the companies to beat in the low-priced EV market. In late 2010 Nissan released the Nissan Leaf, an electric car, at an affordable price of $35,000 before the Federal EV tax credit. Since its introduction it has seen sales of over 100,000 vehicles worldwide,29 which is approximately 300% of the Model S global sales. Nissan has also managed to reduce the price to $28,900 for the 2014 model.30 When analyzing the car specifications, it has some major advantages but also some key drawbacks compared to Tesla’s current and future lineup. The key advantage of the Nissan Leaf is that it is the only vehicle in that price range which is allelectric, meaning that it controls the entire low-budget market for EV’s. However its main drawback is the short range of the vehicle, at only 70 miles per charge.31 This means that the vehicle is nearly impossible to use for any form of road trips or longer commutes. This is a place where the Model E will be able to create a key niche in the market, as Tesla Motors is planning on offering models with 200+ mile ranges per charge.32 Tesla also offers a major advantage with its supercharger network, both in cost-savings and in extending the range of travel for its vehicles. The Chevrolet Volt General Motors also has stepped into the ring with its 2011 debut of the Chevrolet Volt in late 2010. Although not a true all-electric vehicle, the Volt offers a key feature that helps it compete with Tesla and Nissan on the EV front. It takes advantage of a hybrid powertrain that operates purely on electric charge for the first 35-40 miles; at that point the combustion engine maintains the battery charge for the rest of the vehicle’s 370 mile range.33 While not as affordable as the Nissan Leaf, the Volt is currently priced at a very competitive $35,000.34 However, one major issue with the pricing of the Volt is that it is not nearly profitable for General Motors, and some estimate that GM still loses over $40,000 per vehicle over 3 years after its debut.35 This has drastically limited the vehicle’s availability and scale of production, and some think of the car more as a marketing tactic than an actual product. Even with these drawbacks, GM is certainly a company that Tesla needs to watch out for, as the Volt is quite competitive in of driving range and pricing. 29

Nikki Gordon-Bloomfield, "Power Institute Study: Total Cost of Ownership Cheaper for Electric Cars," PluginCars, June 13, 2013, , accessed on March 23, 2014 30 Ibid 31 John Voelcker, "2013 Nissan Leaf gets 75-mile range (actually 84) in new EPA test," Green Car Reports, Feb 26, 2013, , accessed on March 15, 2014 32 Richard Lane, “Electric Tesla Model E to be half the price and 20 percent smaller than $70,000 Model S,” 33 Nikki Gordon-Bloomfield, "Power Institute Study: Total Cost of Ownership Cheaper for Electric Cars," 34 Ibid 35 Bernie Woodall, et al. “Insight: GM's Volt: The ugly math of low sales, high costs”, Reuters, Sep 10, 2012, < http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-volt-idUSBRE88904J20120910>, accessed on March 4, 2014

8

“Second-Wave” EV Manufacturers Although Tesla Motors is leading the way in the luxury electric vehicle (EV) market, there are many companies who have begun to compete by producing more mass-marketable electric cars. Furthermore, it is highly likely that once the market has already been pioneered then the largescale manufacturers will jump on board with producing electric vehicles. Similar to how phone and electronic manufacturers waited until the popularity of the iPhone and iPad until the companies released new smartphone models to compete in those markets.36 Although Tesla might get a First-Mover Advantage with the future introduction of the Model E, it could easily be beat out by competitors in the future. Fortunately this threat is going to be slightly mitigated by the Gigafactory. This move will position Tesla Motors as the largest producer of key components of EV powertrains, which will be essential for cost-competitiveness within the market. RECOMMENDATIONS: In order for Tesla Motors to be able to out compete the other mass-market EV manufacturers in the future, there are some key details the company should consider. The large-scale investments in the Supercharger network and the Gigafactory are crucial to this expansion; therefore the recommendations are specific to the execution of these investments. First, Tesla Motors should focus on utilizing the Supercharger network as a buyer incentive. The network acts as a price incentive due to eliminating the cost of gas, but it also gives the vehicle nearly unlimited range. Secondly the construction of the Gigafactory needs to coincide with the scheduled release timing of the Model E. By making the factory operational at an earlier time, Tesla will be able to save money as well as lowering the price of the Model E. Lastly the Model E should be tailored to be very cost-competitive with the Nissan Leaf and the Chevrolet Volt. These recommendations should help give Tesla Motors a major leg up on the mass-market competition. Marketing the Supercharger Network Due to the impending rise in competition, Tesla Motors is going to need to continue to incentivize buyers to pick its product over the competition. It is currently doing quite well at appealing to the luxury consumer by offering the highest rated electric vehicle currently on the market. As it tries to expand to the more average consumer, it will increasingly face pressure to bolster incentives for buying Tesla’s cars. The primary incentive for purchasing a Tesla is going to be the Supercharger network, and the free charging that is associated with it. The current plan is to focus on rapid expansion of this network from 2014-2016.37 This network will span across North America, Europe, and quite a few Asian markets. Given the higher price point of Tesla’s lineup when compared to competitors such as the Nissan Leaf, the expansion of this network will be very critical to appealing to certain buyers. It will also be a very key distinguishing feature of the company, so the marketing strategy must be tailored to highlight the advantages that the network will provide. A key way to this would be to point out the fact that the Supercharger network makes its cars the only longdistance capable electric vehicles. Comparatively the Nissan Leaf has a range of 70 miles, and 36

Karray, S., “Effectiveness of retail t promotions under different channel structures,” European Journal of Operational Research, 2011, 210, 745, , accessed on March 2, 2014 37 Christopher DeMorro, “Free Tesla Supercharger Network Now Covers Cross-Country Driving”

9

with the Supercharger network Tesla vehicles have a theoretically infinite range. Tesla Motors has done some demonstrations to this, such as a recent road trip from LA to New York.38 However with a more targeted advertising approach, it could use this as a key selling point to expand its audience. In addition to the range incentive, the supercharger network will act as an invaluable price incentive as well. Because Tesla Motors will be the only company offering a charging option virtually anywhere, and at no cost at all to the consumer, it is essentially eliminating the gas bill for Tesla owners. While that sort of incentive would not necessarily convince an average consumer to purchase a Model S at 70,000 dollars, it becomes a lot more appealing at the 30-40k price range of the Model E. With the debut of the Model E expected to be around 2016, it should be a major priority to complete the Supercharger network before that time. Rapidly Scaling Up Production Tesla Motors faces a multitude of difficult challenges in the coming years, the most important one is going to be remaining profitable while developing a truly mass-marketable vehicle. While the company has seen great sales and profitability for the luxury market, it is planning on moving in on the territory of the Nissan Leaf and Chevrolet Volt. The mixed success and profitability of these vehicles demonstrates the challenge inherent in making a mass-marketable electric car. If Tesla is truly planning on rising to the occasion, the cost of production and economy of scale is going to be extremely important. Tesla Motors has demonstrated a willingness to rise to this occasion with the construction of the Gigafactory, but the devil is in the details. So what can be done to help promote success and minimize the chances of failure? In order to achieve Tesla’s ambitious goals with the Model E, the Gigafactory should be up and running as soon as possible. The current timeline would not have production begin until 2017 at the earliest, but with quick decision-making and efficient construction Tesla Motors could potentially begin production by mid-2016. This type of schedule would allow for much higher profitability of the Model E, as well as an earlier release date. Because the company is substantially reducing the cost of all of its Lithium-Ion battery packs, it would improve the profitability and pricing of the Model S and Model X cars as well.

38

Ibid

10

39

The production launch for the Gigafactory is estimated above to begin in early 2017, with additional factors and schedules illustrated. Location of the factory is also very important, while there are multiple states that would work; some locations have more advantages than others. Tucson, AZ seems to be a very good candidate for the final location. The city and state have offered some key tax incentives that would help, it is in a very good proximity to Lithium and Graphite mines, and it’s quite close to Tesla’s final assembly factory in Fremont, CA.40 While other manufacturers tend to utilize cheaper foreign labor by locating factories offshores, that would be a bad decision for Tesla for several reasons. First of all this manufacturing process is heavily automated and thus would require significantly less labor than other products. Additionally the batteries are quite heavy, so it would be very capital intensive to ship a long distance. Lastly there are some key tariffs that a lot of countries, especially China and India, have regarding exporting mined goods like Lithium and Graphite.41 Model E Release Details While there are a number of potential advantages from an earlier release date, ultimately a 2016 debut of the Model E would be in Tesla Motors’ best interest. It would allow them to maintain profitability via the Gigafactory, while releasing the car before the market is saturated. Although both GM and Nissan have competing cars, the lack of profitability of the Volt means that Nissan is one of Tesla’s only true competitors. Despite Nissan’s great sales figures, the limited range of the car has hindered its potential audience. This gives Tesla a window of opportunity to release the Model E before Nissan is able to increase the range of the Nissan Leaf. If Tesla can maintain profitability and range of the Model E at the 30-40k price point, then the company should be able to secure a very captive audience for its car. In order to strike that balance Tesla Motors needs to 39

ITT Takeshita, “Gigafactory Attachment,” Balazs Szekely, “Tucson Proposes to Become Home to Tesla’s 10-Million-Sq.-Ft. Lithium Battery Factory,” 41 “Tesla’s lithium-ion plant a paradigm shift for graphite demand,” International Mining 40

11

wait until the completion of the Gigafactory, and then debut the car as soon as possible afterwards. Tesla Motors has historically offered quite a wide range of options for each of its vehicles. Historically, Tesla usually gives multiple battery-pack options, which give the vehicle different ranges in between charges.42 There are also various car customization options that will be offered as well. However it will be a bit tougher to achieve the same level of customization on the Model E, due to it being a mass-production car. When considering the range of the vehicle’s batteries, cost-control will be one of the most important variables. If Tesla Motors made a basemodel car with a range of 150 miles, then the $30,000 price point would be very achievable. Given the emphasis on the Model E being a truly mass-market car, the lower range of 150 miles seems like a good idea. It strikes a good balance between keeping the car very affordable, while also differentiating it from the Nissan Leaf. Although the company will not be able to offer the same level of customization, it would be quite easy to still offer higher-range options for the Model E, such as 200 and 250 mile range versions. By offering the lower range base model, the Model E should be very competitive in the EV market. CONCLUSION: In of Luxury electric vehicles, Tesla Motors has been leading the way for the past several years. The company is posturing itself to become the frontrunner mass-marketed electric vehicles with the future release of the Model E. It has strong sustainable sales figures, and has amassed significant financial backing to this expansion effort. However Tesla Motors faces the cost intensive projects of the Gigafactory and Supercharger network up ahead. While arduous and risky, these projects have the potential to transform Tesla Motors into a leading manufacturer of mass-market EV’s. The debut of the Model E will face some direct competition from the Nissan Leaf and the Chevrolet Volt, but with the right posturing and tactics it should be able to find a key niche in the market. The completion of the Gigafactory by 2016 will be very important for a timely and profitable release of the Model E. Additionally the completion of the Supercharger network by that 2016 release should serve as a key incentive. While there are no guarantees of success, these recommendations will help Tesla Motors to achieve its future goals.

Works Cited:

42

Richard Lane, “Electric Tesla Model E to be half the price and 20 percent smaller than $70,000 Model S,”

12

“Tesla’s lithium-ion plant a paradigm shift for graphite demand,” International Mining, March 11, 2014, , accessed on March 12, 2014 Alpert, Bill, “Tesla’s Giga-Plan Looks Too Ambitious,” Barron’s, March 29, 2014, , accessed on March 30, 2014 Ashtiani, C. et. al., “Plug-in electric vehicles: A practical plan for progress,” Expert Report, February 2011, < http://www.indiana.edu/~spea/pubs/TEP_combined.pdf>, accessed on March 2, 2014. DeMorro, Christopher, “Free Tesla Supercharger Network Now Covers Cross-Country Driving,” Clean Technica, January 27, 2014, , accessed on March 4, 2014 Gertner, Jon, “The Risk of a New Machine,” Fast Company. April 2012, Issue 164, p104-133, Business Source Premier, EBSCOhost, accessed on March 18, 2014 Gordon-Bloomfield, Nikki, "Power Institute Study: Total Cost of Ownership Cheaper for Electric Cars," PluginCars, June 13, 2013, , accessed on March 23, 2014 Hoover’s Online “Tesla Motors Inc.: Company Overview,” Hoover’s, Inc., 2014, accessed on March 3, 2014 Jaffe, Sam, “Tesla, SolarCity, and Residential Storage,” American Solar Energy Society, June 2012, Vol. 26 Issue 4, p14-14, Business Source Premier, EBSCOhost, accessed on March 15, 2014 Karray, S., “Effectiveness of retail t promotions under different channel structures,” European Journal of Operational Research, 2011, 210, 745, , accessed on March 2, 2014 Korosec, Kirsten, “Tesla’s Elon Musk: State ban on direct sales of EVs is ‘twisted’,” CNN Money, March 14, 2014, , accessed on March 16, 2014 Lane, Richard, “Electric Tesla Model E to be half the price and 20 percent smaller than $70,000 Model S,” Ecomento, March 4, 2014, < http://ecomento.com/2014/03/04/electric-teslamodel-e-half-price-20-percent-smaller-70000-model-s/>, accessed on March 16, 2014 Mangram, Myles, “The globalization of Tesla Motors: a strategic marketing plan analysis,” Journal of Strategic Marketing, Vol. 20, No. 4, July 2012, 289-312, Taylor and Francis, EBSCOhost, accessed on March 2, 2014 Mihalascu, Dan, “Tesla Says European and Asian Sales will be Nearly Twice as Much as Those in N.A. in 2014,” Car Scoops, March 11, 2014,

13

, accessed on March 12, 2014 Nelson, Rick, “Getting Your EV on the Road Quickly,” Evaluation Engineering. Aug 2013, Vol. 52 Issue 8, p4-4, Business Source Premier, EBSCOhost, accessed March 13, 2014 Szekely, Balazs, “Tucson Proposes to Become Home to Tesla’s 10-Million-Sq.-Ft. Lithium Battery Factory,” Multi-Housing News Online, March 13, 2014, , accessed on March 15, 2014. Schumpeter, P.E., “Tesla’s Gigafactory, Driving Ahead,” The Economist, March 3, 2014, , accessed on March 18, 2014 Takeshita, ITT, “Gigafactory Attachment,” , accessed on March 12, 2014 Tesla Motors, Form 10-K Annual Report for FY 2013, , accessed on March 3, 2014 Tesla Motors, Prospectus Filed Pursuant to Rule 424, , accessed on March 3, 2014 Voelcker, John, "2013 Nissan Leaf gets 75-mile range (actually 84) in new EPA test," Green Car Reports, Feb 26, 2013, , accessed on March 15, 2014 Woodall, Bernie, et al. “Insight: GM's Volt: The ugly math of low sales, high costs,” Reuters, Sep 10, 2012, < http://www.reuters.com/article/2012/09/10/us-generalmotors-autos-voltidUSBRE88904J20120910>, accessed on March 4, 2014