W1.

Market Dominance Strategy

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Table of Contents

1 Action Plan

2 External Analysis

3 Internal Analysis

4 Framework

5 Strategy 1

6 Strategy 2

7 Strategy 3

8 Executive Summary

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1. Action Plan

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 1 ACTION PLAN

Project Action Plan

Project Approach
1 Week
Key 1 Analyze Tesla and the externalities 2 Strategize solutions that allow Tesla to resolve
Milestone the company is exposed to their fundamental problems

Key
> External Factors Analysis > Problems-Strategies Justification
Activities
– What external factors have been impacting Tesla? – What needs should be done to solve the problems instead of merely reacting to
them?
– How can the factors be categorized?
– What are the systematic issues that underlie the problems?
– What conclusion can be drawn from these factors?

> Strategies Establishment

> Tesla Analysis
– How has Tesla been impacted by external factors?
– What do the impacts imply?

> Problem Identification

– Given the external situation and Tesla’s capabilities and weaknesses,
what is one goal that Tesla should focus on the most?
– What is the direction of the strategies to achieve that goal?

Upon examining Tesla and the externalities the company is exposed to, we will identify the primary goal.
We will then provide strategies that respond to these problems both in the short and long term.

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2. External Analysis

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2 EXTERNAL ANALYSIS

PEST Analysis
Socio-Cultural Economic
2021 Auto Business Ads Expenses U.S. Citizens’ High Expense Trajectory Global EV Sales Growth Global EV Expected Sales Growth
Market Share (mn, USD)
Tesla 0 Expense High
20M 15.3
Honda willingness
15% Spent
on car
Toyota 15M
on Cars consumption
Stellantis [Source] Case
10M
Ford COVID-19 55%
Increased car China
5M 3.1
GM demand due to
2019 →2020
42% social
(mn, USD) 0 1000 2000 3000 Total Car Sales distancing 2015 2016 2017 2018 2019 2020 2021 1,246,000
[Sources] EV Volumes & Global EV Outlook 2022 [Source] TrueCar Sales [Sources] EV Volumes & Global EV Outlook 2022 [Source] S&P Global

Technological Political
Technological Hurdles/Concerns Battery Improvement Direct EV Purchase Subsidies in Major Markets Dealership lobby
2021, (USD)
China Pushed states to pass laws on
Uncertainty about longevity, independent dealerships recognized
U.K. by the dealership Association
resale value, and safety
- Canada “Active EV Adoption”
South Korea
Lack of charging stations France Under pressure from dealers, the
- and infrastructure Germany
U.S.
Texas legislature passed a law to
block Tesla from using independent
sales network
Public & Private Charging ⚫ Charge in 10 minutes, less likely to catch on fire 0 4K 8K 12K
Federal direct Proposed unionized Proposed domestic
Stations increasing
+ ⚫ Alternative power source: hydrogen fuel cells subsidy/tax credit Labor bonus manufacturing bonus
[Source] Bloomberg

Despite technological hurdles, EV market is keep expanding especially in China with the technological foundation developing.
2 EXTERNAL ANALYSIS

Competitors

• • • Started out as a battery company

• Released high-end line EVs
• Using self supplied in-house
batteries for EV production

Other • NIO (high-performance EV)

Chinese • Wuling (extremely low price EV)
Enterprises • Great Wall
• GAC
• Saic
• € •

• •
• •
• •

Tesla has multiple rising competitors, especially in the Chinese market, while automobile firms form joint ventures.

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3. Internal Analysis

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3 INTERNAL ANALYSIS

Company Overview

Financial Overview Regional Production & Sales

Growing Total Revenue (mn, USD)
31,536
(mn, USD)
24,578 Key Points
Automotive
21,461 Revenue - USA sales account for
Revenue Cost of 48% of total sales
Energy Generation Revenue R&D Operating
& Storage SG&A Income
- Sales in China increased
Services & Other 123% YoY

High cost of revenue, R&D/SG&A - Gigafactories ramped up

2018 2019 2020 lead to low income from operations to shorten trajectory
[Source] Exhibit 13a and increase delivery

Main Models
Model(LR) Cost Type Strength (units)
Vehicle Deliveries
Mid-size
Production Location Vehicle Models Regional Revenue (mn, USD)
Model 3 $46,990 Low price 2019 2020
sedan (5) Model S / Model X /
11% Fremont Factory
Model 3 / Model Y
Compact 18%
USA
12,653
Model Y $49,990 Low price 15,207
SUV (7) Gigafactory Texas Model Y / Cybertruck
Mid-size High 2,979 123% YoY ↑
Model X $89,990 89%
Gigafactory Nevada Tesla Semi China
82% 6,662
SUV (7) performance 2019
Gigafactory Shanghai Model 3 / Model Y
High 8,946 2020
Full-size Other
Model S $79,990 performance Gigafactory Berlin- 9,667
sedan (5) Model S & X Model S & X Model Y
Model 3 Model 3 & Y Brandenburg
[Sources] Exhibit 5b & 7 [Source] Tesla 10-K, 2020

While Tesla’s revenue shows positive growth, its returns are low due to high costs.
Tesla differentiates its model and ramps up its production by region.

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 3 INTERNAL ANALYSIS

Tesla Value Chain

Inbound Logistics Operations Outbound Logistics

Raw Materials Sourcing In-house Operations COVID-19 Related Logistic Issues

Material required for 20mn vehicles (mn, t)

Pivot to Complete In-house Operations
• 90% of Model-S manufactured in-house
Nickel 0.67

Problem
• Powertrain molded & assembled
Copper 1.80 simultaneously
Aluminum 6.60
Cobalt 0.06 Unconventional Manufacturing Process Manufacturing Administrative Employment
• Utilizing robotics Closure Impediments Adjustment
Lithium 0.75 • Not aligned with conventional
automakers manufacturing lines
Material sourcing issue arises as demand • High initial manufacturing cost
increases and supply fails to follow Partnership

Solution
Risk Mitigation System
China Model 3 reportedly
equipped with locally produced LG Renegotiate Cost Suspend
Investigate supply chain environment
chemical cells Supplier-vendor Reduction Non-critical
Arrangement Initiative Operations
Establish The primary supplier of batteries for
due diligence cars produced in the U.S

Mission
Industry system Management Secure battery cell supply in Ramp up logistic modules to
Initiatives China accommodate increasing demand
Collaborate
[Source] Adams Intelligence [Source] Case Study [Source] Tesla 10-K, 2020

Costs are increasing due to logistic problems of supplying materials and delivering end products.
Tesla’s unique operations further exacerbate the already-high cost of EV production.

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 3 INTERNAL ANALYSIS

Tesla Value Chain

Marketing & Sales Service Technology

Self Sales Center System Superchargers Global Location Total Expenditure on R&D per Car in 2020
(USD)
• General: dealerships and services centers are owned and operated Tesla 2,984
separately from the brand itself (Ford, GM, and almost every other car
manufacturer)
Ford 1,186 Higher R&D
expenditure than the
average market
Toyota 1,063
Zero Dollar Marketing
• Tesla: operates all of its own • Products are marketed through
GM 394
service centers internet and social media R&D spend per car sold [Source] Statista
platforms like Twitter, Facebook,
and Instagram
• Relies heavily on word-of-mouth
(/kWh)
Lithium-ion battery cost in 2020
Total expenditure on
• Direct sales without any Advertisement per car in 2020 • As of March 2020, 137
Nations Superchargers 150
middleman reduces price for 115
Tesla operates 16,103
the end-customers Tesla 0 (USD) U.S 908 100
• Better control over the
Superchargers in
Telsa Average
customer’s buying experience Europe 520 1,826 stations
Lithium-ion battery cost [Source] Case study
Ford 468 worldwide.
• Customers complaints about Asia/Pacific 398
delayed deliver and a lack of Toyo
454 Canada 98 • Allow Tesla vehicles to
ta
vehicle stocks be fast-charged and
• Traveling distances to get to Mexico 16 are often located near
the nearest service centers GM 878
[Source] superchrage.info restaurants with Enable vehicles to connect
Shares its car data with Autopilot & Full
Ad spend per car sold restrooms and other telecommunication partners with maintenance centers and Self-driving (FSD)
[Source] Statista commerce areas. the supercharger network

Costs are increasing due to the price increase of materials used by Tesla. Superchargers are being expanded for the convenience of consumers.

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4. Framework

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4 FRAMEWORK

Problem Analysis
EXTERNAL FACTORS IMPACT ON INDUSTRY TESLA’s
CAPABILITIES & WEAKNESSES STRATEGIES
Conventional
Difficulty in Securing Market Share
Automakers The Leader of Global EV Market
Competition Chinese A) On-Demand
Overall Market Scale Up
Start-ups Online Purchasing Platform Production & Sales
Joint Ventures Plummeting Global Car Purchase
Innovative EV Technology
Socio-Cultural COVID-19
Increased EV Sales
Gigafactory in China, Europe, US
Battery B) Chinese Start-ups
Improvement Decreased EV Sales
Technological
Joint Venture
Technological High Dependency on Partners
Hurdles High Consumers’ Skepticism

Top 3 EV Seller in China

EV Market Active Government Subsidies
Economic
Growth
Elon Musk PR Issues C) Supercharger
EV Promotion China as the No.1 EV Market Augmentation
Political
Dealership Zero Dollar Marketing
Lobby Potential Sino Protectionism
Focus on Market Share Dominance

Upon analyzing the external factors and its impact upon the company, we have identified 1 primary goal and 3 strategies.

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5. Strategy 1

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5 STRATEGY 1

On-Demand Production

Market Segmentation Lowering Vehicle Price Option Diversification

Select Best Sellers by Geography Lower Vehicle Price by Cost Management Diversified Option Examples
Global EV Purchase Considerations Design Driving Assistance
Average EV Manufacturing Cost Tesla Manufacturing Cost

$17,000 < $34,000

Ways to Minimize Margin Loss

In-House Capability Buildup
1 • Direct Sourcing of Materials Additional Function Consumables
• Mitigating dependency on partnerships
• Economies of Scale
Sales per Model YoY (units)

Model S & X Model 3 & Y Unboxed Process

2 • Fusion of Serial & Parallel Assembly Process
66,600 56,920 300,600 442,000 • Gigafactory Productivity Enhancement
Cheaper models are more popular globally • Single-Body Casting & Streamlined Process

Expected Outcome • Satisfy a more diversified customer needs (economic to luxurious) within reasonable price settings
• Increase gross margin and obtain streamlined manufacturing process

In order to increase global market share, Tesla should adjust the overall price setting of models considering each region.

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6. Strategy 2

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 6 STRATEGY 2

Partnering with Chinese EV Startups

Objective Partnership Expected Outcomes

High Battery Cost
1.35

1.25

1.15

1.05

0.95
0 1 2 3 4 5 6 7 8 9

Stability that remains after action

China Market Opportunities & Risks
Maximum profit that can be acquired

Availability to exit
Rising
Possibility to avoid redundancies Reducing Cost
Productivity
Safety for patented technology & designs

→ Tesla should primarily consider “Stability” and

“Flexibility” in Chinese market Acquiring another Technological
channel for battery Value

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7. Strategy 3

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 7 STRATEGY 3

Public Superchargers, the Key for EVs

Problem Lacking number of Supercharger stations (10 vehicles/station) results in 1. Low EV market preference 2. Bottleneck phenomenon

Strategy 1. Increase Superchargers according to Population Density Strategy 2. Commercializing DC Fast Charging Technology

Destination Charging
Residential Fleets
High Efficient use of waiting hrs The Greatest Concern Regarding
• Private • Car Sharing
Population Semi-Public Stations
• Home Charging • Public Transport Density
Battery Powered EVs
ex) Convenient Stores

En-Route Charging
EV
Charging Urban fast-charging hubs

Segments
En-Route Charging
Around Town En-Route Low Distant travels
• Kerbside • Urban hubs Population Motorway Service
: On Road : Fast Charging
Density
• Destination • Motorways
Remote Areas
RV parks
Tourist Attractions Fast and Efficient Charging

• • • Increased EV purchase (Range Anxiety Alleviation)

: Few Public Charger Necessary (ex. East Europe) : 43,000USD / charger • Reduced charging hours, waiting lines
• •
: Research Stations with particularly long lines : 70% of installation cost support • Resolved Bottleneck phenomenon

Tesla must expand public Superchargers and improve charging technology to maintain users and to allure new customers.
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8. Executive Summary

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 8 EXECUTIVE SUMMARY

Executive Summary
External & Internal Analysis Strategies Expected Outcome

Focus on Market Share Dominance

Market Share Threat Online
by Competitors Purchasing Platform • Satisfy a more diversified
customer needs
A) On-Demand • Streamline manufacturing
1
Rising Eco-Friendly Innovative EV Production & Sales
Purchase Trend Technology & BI

• Reduce costs
• Acquire new battery
High Dependency on MARKET
China Market Potential procurement channel
Few Partners B) Chinese Start-ups • Increased productivity DOMINANCE
2
Joint Venture • Develop technological value

Positive EV Market Gigafactory & Top 3

Growth Potential China Market Leader
• Increase EV purchase
C) Supercharger • Reduce charging hours
3 • Resolve bottleneck
Active Government Extra Budget From Augmentation
phenomenon
Support Zero Dollar Marketing

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E.O.D

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