Q1) Which PESTEL factors are the most salient for the electric vehicle segment of the car

industry?
Do you see a future for electric vehicles in the United States? Why or why not?

PESTLE denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal, and E for
Environmental and the factors that we think are the most salient for electric vehicle segment of car
industry are,

Economic - In the coming future the quantity of petrol/diesel would decrease and the rate would
increase therefore electric vehicle would be a better option.

Technological – Comparing to technology of electric vehicle of Tesla and its competitor they are
ahead of them and they majorly focuses to develop that in future too.

Environmental – Electric vehicle are eco-friendly which cannot be beaten by non-electric vehicle in
terms of environmental factors.

Although in case it is given that, One of the biggest PESTEL factors impacting the all-electric car
market, however, is that the price for crude oil declined steeply from over $110 per barrel in the
summer of 2014 to about $40 by spring 2015. With it, prices for a gallon of regular gas in the United
States fell from over 2. Lo $4 in the summer of 2008 to less than $2 by 2015. With low gas prices,
Americans prefer to buy large SUVs and ind trucks, which benefits GM, Ford, and Chrysler. In
addition, several states are reducing or phasing out tax credits for alternative-fuel vehicles.

But keeping the above future option which electric vehicle provide we come to the conclusion that
electric vehicle has a scope in the coming future.

Q2) Looking at Porter's five forces of competition, how would you assess the profit potential of the
U.S. car industry?

The US auto and car industry contributes around 3.5% of the overall GDP output of the United States
of America and is one of the most important industries in the country. The industry is a source of
employment for around 1.7 million people in the country while a total of 4.5 % of the US population
is indirectly employed by it. The auto market in the USA is oligopolistic nature and is dominated by
few prominent manufacturers including Ford, General Motors and Chrysler. The industry in a state of
transition as greener and more fuel-efficient technologies are being explored.

As all the car industry are focused towards moving to eco-friendly and technological advance cars
which would create more job opportunity in the car industry. Therefore there is great profit
potential for the U.S. car industry.

Q3) Using the five forces model, what implications can we derive for how Tesla Motors should
compete in the U.S. car industry? What would be your top three recommendations for Elon Musk?
Support your arguments.

The five forces that can form the various sectors and their systems include the five forces bargaining
power possessed by suppliers, bargaining power of the buyers, competitive rivalry within the
industry, threats posed by substitutes, and threats posed by new entrants.

Bargaining Power of Car Buyers - The US car industry to remain competitive and profitable, it needs
to adopt the price-sensitive approaches and strategies, look for greener and fuel-efficient options,
and shift its focus from the SUVs and trucks to the new more low-price and fuel-efficient models.
Bargaining Power of Suppliers - In car industry the suppliers remain more vulnerable to the
manufacturers' specifications and demands. Within this section, the only exception is the world price
of steel raw materials.

Competitive Rivalry - Competitive rivalry is high in the car Industry as each segment vehicle has a
competitor in one or the other term. To reduce the competition each company invest in their
research and development sector to modify the existing model and make new too.

Threats of New International Entrants – New threats in the electric vehicle of Tesla would be tough
as the brand image with the attached name of Elon Musk could not be generated easily by the new
entries. As the cars have gained more importance for consumers and are now more than a status
symbol.

Threat of Substitutes - The thread substitution to the electric vehicle are from the external sources
such as solar vehicle, public transport. Solar vehicle can be more pocket friendly as solar energy is
free to all whereas public transport can be cheap as compare to private electric vehicle.

Our top three recommendations for Elon Musk are to focus on Bargaining Power of Supplier, Threat
of Substitutes and technology advancement.

Q4) Draw a strategic group map for the U.S. automotive industry. What are your conclusions?

Q5) Why do you think that Tesla's market capitalization (Share price x Number of outstanding
shares) is roughly 50 percent that of GM, while GM's revenues are more than 50 times larger than
that of Tesla Motors?

Tesla share price is more than its competitor but its revenue is less than its competitor main reason
is it is selling less number of cars then its competitor but its future plants is much better.

They are investing to fulfil it by invest more in lithium battery, self-driven car and its manufacturing
plants. Moreover due to visionary mentality of Elon Mask to improve the product to the best is the
key because of which he gets good funding from the market.

Therefore gradually it will increase the market value of tesla in coming future.