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Program : MBA
Semester : 3rd
Group : S6
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Tesla Business Model
Tesla, Inc. (formerly known as Tesla Motors, Inc.) is an American automotive, lifestyle and energy
company that was originally founded in July of 2003.
The company launched its products specifically in the automotive industry and began to design and
supply lifestyle products as well.
The company was originally found by engineers Martin Eberhard and Marc Tarpenning prior to
changing its name to just Tesla, Inc. in February of 2017.
During the Series A funding phase, Elon Reeve Musk, J. B. Straubel, and Ian Wright were also
accredited with the recognition as the founding fathers of Tesla Motors.
Elon Reeve Musk is currently the serving CEO of the company, overlooking all the operations and
the structures of the business.
In August of 2015, Tesla, Inc. aimed its focus towards on safety, autopilot, charging networks and
motors.
Tesla operated a combination of 260 galleries/retails across the United States in 2016. One of the
most exciting years for Tesla was 2017.
Tesla was able to focus its markets in the Germany sectors, providing a Dutch RDQ-issued Whole
Vehicle type approval (WVTA) which should be accepted as a legal compliance document, without
grounds to a national type of approvals in EU members States.
This significantly reduced any compliance check and excelled deliverance exponentially, since the
vehicle was already under Germany vehicle standard compliance.
In the same year, Tesla launched additional international locations in Dubai and South Korea, which
increased its brand visibility and helped increase revenue streams.
During that year Tesla had a budget of $52 million as a marketing budget and used a referral
program and a word of mouth tactic to help attract customers that would be interested in purchasing
a Tesla vehicle.
By 2018, Tesla, Inc. was ranked as the bestselling plug-in passenger car manufacturer in the electric car
industry. It sold over 245,240 units in total. With over 200k+ units sold, Tesla was responsible for capturing
the market shares of 12% in the electric-plug-in vehicle industry.
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Tesla Business Model
The following is the complete Tesla Business Model Canvas report and how it is different from the rest of
its competition.
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Tesla Business Model
Tesla’s engineers and designers have designed vehicles appropriate for every customer groups.
Vehicle class type is based on the following segments:
High-end Luxury (Sedan or SUV)
Mid – price range
Commercial Vehicles – targeted towards transportation and shipping businesses
Green Community
Fast sports car enthusiast
Autopilot
Tesla Followers
Elon Musk Followers
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Tesla Business Model
Toyota and Tesla, Inc. joined forces announcing to the public that they are to build an alliance that
would be dedicated to developing electric vehicles, parts and production systems for electric cars
and accessories.
In return, Toyota bought $50 Million of Tesla stocks and Tesla purchased an assembly factory in
California to continue its endeavor towards facilitating the process of manufacturing electric
vehicles.
“Tesla has quite a clear business strategy for developing a better battery,” said Osamu Nagata,
president, and CEO of Toyota Motor Engineering & Manufacturing North America. “
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Tesla Business Model
existing customers – an example that demonstrates the increasing need for electric vehicles in the
industry.”
Major Suppliers
Tesla, Inc. is commonly responsible for manufacturing the electric car’s basics, which include the
electric motor, the battery pack and the charger. Rest are provided by suppliers from the US, Europe,
and Asia.
The following are Tesla’s main designers and suppliers:
AGC Automotive: windshields
Brembo: brakes
Fisher Dynamics: power seats
Inteva Products: instrument panel
Modine Manufacturing Co. battery chiller
Sika: acoustic dampers
Stabilus: liftgate gas spring
ZF Lenksysteme: a power steering mechanism
Other suppliers include:
ADAC
ABC Group
Angell-Demmel
Argent
Gentex
Harada
Hitachi Cable America
Hope Global
MacLean-Fogg
Magna International
Methode Electronics
Multimatic
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Tesla Business Model
Panasonic
Plastomer
PSM International
Riviera
T1 Automotive
Zanini Auto Group
Dana Holding
Dana Holdings provided Tesla, Inc. with Dana Cooling Technology for further
implementation of the Tesla engine and the overall cooling system design.
Panasonic
Panasonic’s current lithium-ion batteries showed to serve sufficiently; Tesla confirms that it
is seeking more batteries for its Model S in which Panasonic is currently supplying.
In this effort, Panasonic is collaborating to build Tesla’s Gigafactorys – a large scale battery
and solar cells manufacturing plant in Nevada and New York.
Government
Government-funded Tesla with a $465 Million loan for its electric Sedan
$365 Million of the loan shall be allocated towards the production of it’s Model S Sedan.
Remaining $100 Million will be allocated towards its electric power train manufacturing
plant in California.
Due to Tesla’s Electric Vehicle development and improvements, the US government
provides federal tax incentives of about $3750 to customers depending upon the state.
R&D
R&D helped Tesla attain its milestones by providing breakthrough technologies and innovational
designs that were in association with the engine design of Tesla vehicles.
Design
Tesla’s innovative design helped to produce reliable electric plug-in cars made affordable for all.
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Tesla Business Model
Modern design that includes lightweight body, durable and long-lasting battery life
Designs range from small, to classy, to luxurious classes – there is a vehicle type for every
customer segment at different price points.
Innovational Leap
Tesla continues to work around the building blocks of Tesla vehicles to better improve and
sufficiently design vehicles that are built with eco-friendly materials, ensure future
sustainability and invoke reliability of its line of manufacturers.
Software Development
One of the most crucial movements for Tesla was its dedication towards the vital software
programs that helped shaped the electric vehicle industry to what it is today.
Tesla does not follow the long development software product lifecycles that many automotive
specialists follow; instead, Tesla worked around these hurdles to create diverse software
programs that improved the sufficiency of each of their model make series.
Tesla uses agile principles like “scrums” or also known as regular meetings that are designed to
work and improve the structures of its core software.
Through this breakthrough, it has aided Tesla to minimize errors and bring innovation into
progressing leaps.
Tesla, Inc. regularly evaluates customer experience and feedback that helps to pave the next
generation in improving its software spectrum and the sufficiency of its vehicles.
Technological errors are expected but shall improve in the long run to perfection.
Tesla invests heavily in executing its sales and marketing efforts, which includes
establishing company-owned stores, galleries and service centers known as “Service Plus.”
Building & Maintenance of Charging Stations Network
Tesla has been building an extensive network of the supercharger and destination recharge
stations around the world to expand the widespread adoption of its Electric Vehicles.
There are 1441 Supercharger stations worldwide with 12,888 superchargers and thousands of
destination charging stations at hotels, restaurants, shopping centers, parking garages, office
building, etc.
MOAT – A Tesla, Inc. project that is geared to provide EV charging stations
Tesla, Inc. plans on launching a network specifically for other automaker brands for EV
charging supply. However, this is still to happen.
First to launch a portable home charger that costs about $500
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Tesla Business Model
Tesla provides digitally driven Omni-channel experience (stores, website, social media) to its
customers.
Company Owned Stores – Tesla utilizes direct to customer sales model. Tesla sells its cars to
customers directly through its stores and galleries, instead of selling through auto dealers. It
provides an enhanced level of shopping experience for customers.
Self Service website – Often times, customer place orders directly on the Tesla website.
Customers can build their own car, add features, choose different color combinations, various
financing options; which is an again a unique shopping experience.
Brand
Tesla is considered as a luxury brand in the automotive industry. For those that know about
Tesla, and what it stands for understands the value and quality that it provides to loyal customers.
Reputation
Due to the continuous innovation and the design, Tesla has built a reputation unlike any other
technology in the EV automobile industry.
Customers feel that Tesla is well ahead in its innovation and production electric vehicle
ecosystem that is like no other competitors in the industry.
High-Performance Vehicle
Pollution & Noise free Vehicle
Super-Fast vehicle
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Tesla Business Model
B- Engine components:
Inverter
Comparison Chart
Battery System
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Tesla Business Model
Effective Cooling
The use of small individual cells is a guarantee of sufficient cooling, instead of using a few big
batteries
This also increases the battery duration and lifeline.
Glycol is used as the cooling medium that is bypassed through the gaps between the rows of the
cells in each of the 16 lithium-ion compartments.
Battery alignment and frame offers the vehicle side skirt support from a vehicle collision.
Induction motor. (Rotor Speed < RMF Speed) Uniform induction, power, and speed.
Brushless and requires no magnets.
Inverter system = 3 phase. Ac power input.
Speed is dependent on the amount of voltages that are fed to the 3-phase AC power Input.
Speed can range from 0-18000 RPM.
No Transmission required a direct mount of the engine to the axel is sufficient
Big Data
Another positive aspect of Tesla that helped progressed its success is the reliability of its big
data, which is derived from its in-vehicle software, and strategic partnerships.
Through channeling new departments, opportunities and the new business operations, Tesla was
able to generate potential clients and aim at different business endeavors successfully such as
solar energy systems, retail merchandise, etc.
7- Channels of Tesla
The following are the set of channels that Tesla utilizes to channel and market its technology:
Retail stores & galleries – Tesla, Inc. retail stores and galleries are designed and built to
showcase Tesla vehicles and maximize customer experience. There are over 200 Tesla stores
worldwide, out of which 112 Tesla stores are in the United States.
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Tesla Business Model
In 2018, with a revenue of $21.46 Billion, and the cost /expense of about $ 22.5 Billion. Tesla had a
net income or net loss of about a (- $1 Billion).
Cost of material, labor & manufacturing overhead (COGS): $ 17.4 Billion, 81% of the
revenue
Selling, general & administrative Cost: $ 2.8 Billion, which is 13% of the revenue
Research & development Cost: $ 1.46 Billion, which is 7% of the revenue
Restructuring Cost: $ 135 Million, which is 1% of the revenue
Interest expense, taxes and others: about 3 % of revenue
Tesla not only sells Electric vehicles but also has created an eco-system of a top of the line green
vehicles. Also, it has introduced solar energy systems, and lifestyle products for its loyal customers
and the fans of Tesla, Inc;
Here is a high level break down of Tesla’s revenue. In 2018, the total annual revenue of Tesla was $
21.4 Billion.
Automotive Segment revenue – it includes sales of all vehicle models, access to charging network,
software updates, after – sales services, sales of EV components, retail merchandise, etc. Here is a
further breakdown in the automotive segment.
It includes sales of solar energy systems and storage products such as solar roof panels, etc.
Total: $ 1.55 Billion
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Tesla Business Model
Final Word
Tesla, Inc. started its business as offering reliable ways of providing transportation. By reviving the
theory of utilizing electric vehicles instead of gasoline combustion chamber engines helped to pave
the recognition of sufficient EV system, which also contributed to revolutionize the automobile
industry from mechanical drives to all smart computer driven electric vehicles.
Because of the strategic steps taken to design a sound EV engine system, the possibilities of
actualizing an electric car that serves sufficiently and safely, Tesla, Inc. is one of the most successful
EV company in today’s automobile industries and continues to develop and innovate the methods of
transportation.
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