Case 5: Tesla

1. Conduct a five forces analysis of the electric car industry. Evaluate

and summarize the findings in a table in which you provide a short
description of every 'force' and assess their impact level as either
low, medium or high.

Internal Rivalry

Seller If we define the market based on the electrical vehicle market, we can
concentration assume that there will be a low seller concentration because of the
many competitors. The seller concentration depends on the definition
used to define a market.
Industry They mention that the electric vehicle market will grow from 2013 to
growth 2020 with 31.5%.
Excess There are indications that Tesla needs to invest and become more
capacity efficient to increase their output. So we can conclude that they don’t
have excess capacity.
Switching The switching costs are very low because of the oversupply of key raw
costs materials. The switching costs for customers are high because Tesla
would invest to install battery swap stations next to the existing
Supercharger locations.
Observability Tesla announced it would soon begin to add lower-priced vehicles
of prices
Exit barriers Exit barriers are present because Tesla has made a lot investments to
enter the market.

Entry

Economies of At the moment they don’t have economies of scale but they aim to
scale achieve it.
Experience- Even if Tesla is an entrant they are the only company that uses lithium
based batteries at the moment.
advantage of
incumbents
Government Tesla did get a loan of the government but everyone that produces
protection of electric vehicles gets a loan so, there isn’t an advantage.
incumbents
Expectations The incumbents don’t use a predatory pricing strategy, there are no
about Post persevering price wars and they don’t have excess capacity so we can
entry conclude that the post entry competition will be low.
Competition