Caso Tesla

MHE-FTR-077-1264124317
APRIL 6, 2023
FRANK T. ROTHAERMEL
Tesla, Inc.
The desire for people to want a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla, not ‘do they
want a Tesla.’
—Elon Musk, Founder, CEO, and Technoking of Tesla1
March 2, 2023. Elon Musk was scrolling through his Twitter feed as the Cybertruck with black armored windows
approached the runway near Giga Texas. Musk thought the Investor Day held the previous evening went well as he
and more than a dozen of his colleagues unveiled Tesla’s Master Plan 3. Musk was on his way to Monterrey, Mexico,
to survey the area where Tesla would build its next Gigafactory, announced just a day earlier. As the Gulfstream
G700 gained altitude, Musk started to check the stock markets and was surprised that investors were not impressed
with Master Plan 3 as Tesla’s stock dropped by 6%.
Tesla, Inc. is a vertically-integrated clean technology company that designs, develops, manufactures, and sells
high-performance fully electric vehicles (EVs) and energy generation and storage systems. In 2022, Tesla had sales
of $81 billion and generated over $12 billion in net income (Exhibit 1). Tesla’s stock market valuation peaked at over
$1.2 trillion in early 2022. Only five other tech companies—Alphabet, Amazon, Apple, Meta (formerly Facebook),
and Microsoft—had previously crossed the one-trillion valuation threshold.2
By spring 2023, Tesla’s market cap had fallen by more than 50% to below $600 billion. Yet, Tesla was still more
valuable than the five largest car manufacturers by volume combined (Toyota, Volkswagen [VW], GM, Ford, and
Stellantis [formerly Fiat Chrysler]). Although the five legacy carmakers produced together 28 times as many vehi-
cles (36 million) in 2022 as Tesla (1.3 million), their combined market cap stood at $429 billion, 26% lower than
Tesla’s.
Elon Musk: Engineer Entrepreneur Extraordinaire

Musk describes himself as “an engineer and entrepreneur who builds and operates companies to solve environ-
mental, social and economic challenges.”3 Elon Musk is motivated by cracking some of humanity’s most challenging
problems, such as addressing climate change, achieving multiplanetarity by establishing a self-sustaining colony on
Mars, enhancing human capabilities with artificial intelligence (AI) and brain-computer interfaces, and solving traf-
fic congestion.4
Professor Frank T. Rothaermel prepared this case based on public sources; it is not any endorsement, source of data, or depiction of effective or ineffective
management. All opinions expressed and all errors and omissions are entirely the author’s. © by Rothaermel, 2023. All rights reserved.
This document is authorized for use only in Luis Ortigueira, Elba Acuña, Alejandro Flores, Eliana Gálvez, José Espinoza, Nancy Rebaza's Diseño Organizacional y Estrategia
A-I at Universidad Del Pacifico from Nov 2023 to May 2024.
The problems Musk focuses on are hard because they require massive investments over long periods to achieve
the necessary vast scale without guaranteeing success. Once Musk hones in on a problem he wants to solve, he cre-
ates an organization and assembles the required resources. Addressing these thorny issues requires Musk to take “big
bets,” repeatedly putting all his wealth on the line. Nonetheless, as of spring 2023, Elon Musk is the world’s richest
person, with an estimated net worth of $200 billion.
Musk has a larger-than-life profile and has been described as “Henry Ford and Robert Oppenheimer in one
person”5 and “Tony Stark, the eccentric inventor better known as Iron Man.”6 The actor Robert Downey Jr. modeled
his role as Tony Stark in the Iron Man movie after Elon Musk, who appeared in the Iron Man 2 movie. In line with
his movie avatar, Elon Musk declared, “I would like to die on Mars. Just not on impact.”7
EARLY LIFE AND EDUCATION
Elon Musk was born in 1971 in Pretoria, South Africa. At 17, Musk emigrated to Canada to avoid being con-
scripted into the army. Says Musk, “I don’t have an issue with serving in the military per se but serving in the South
African army suppressing Black people just didn’t seem like a really good way to spend time.”8
Musk enrolled at Queen’s University in 1990. After receiving a scholarship, he transferred to the University of
Pennsylvania. He graduated in 1995 with bachelor’s degrees in economics and physics, and he then moved to
California to pursue a Ph.D. in applied physics and material sciences at Stanford University.9
ZIP2
Musk quit graduate school after only two days to start Zip2, an online provider of business directories and maps.
Four years later, in 1999, computer-maker Compaq acquired Zip2 for $341 million (and was, in turn, acquired by HP
in 2002).
Still in his twenties, Musk had become a dot.com multi-millionaire. As a treat, he purchased a McLaren F1, a
limited-edition supercar, of which only 106 units were produced with 64 of them road-legal cars, for around $1 mil-
lion. Musk later totaled the McLaren F1 while demoing the car’s speed, with Peter Thiel, a serial entrepreneur and
venture capitalist, in the passenger seat.
X.COM, CONFINITY, AND PAYPAL

After the sales of Zip2, Musk did not rest on his laurels. In 1999, Musk founded X.com, an online payment com-
pany that merged with Confinity, started by by Peter Thiel, Max Levchin, and Luke Nosek, to create PayPal. In 2002,
eBay acquired PayPal for $1.5 billion, netting Musk an estimated $160 million.
SPACEX
With the wealth from the PayPal acquisition, Musk could focus on his passion of exploring space with the goal of
making humans a multiplanetary species to avoid extinction. In 2002, he founded Space Exploration Technologies
Corp., or SpaceX. To make colonization of Mars feasible, Musk needed to develop low-cost, high-powered, reusable
rockets. To generate the required cash flow, he first focused SpaceX on offering vastly reduced space transportation
services to businesses and governments, launching satellites and supplying the International Space Station (ISS).
2 Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of
McGraw Hill Education.
In 2019, SpaceX began offering Starlink, a satellite-based internet constellation, providing high-speed internet
access to every location on Earth. In 2020, SpaceX made history by shuttling NASA astronauts to and from the
International Space Station in the first crewed orbital spaceflight from the U.S. since the Space Shuttle program’s
retirement in 2011. In 2022, when Russia invaded Ukraine, Musk donated Starlink equipment and internet services
to Ukraine to enable critical communications for the defense forces, emergency services, government operations,
and civilians. Providing the Starlink equipment and services to Ukraine cost SpaceX $100 million during the first
year of the war.
SOLARCITY
In 2006, Elon Musk co-founded SolarCity, a renewable energy services company, with his cousins, Lyndon and
Peter Rive. The clean-tech startup’s mission was to provide affordable solar energy to homeowners, businesses, and
government organizations.
OTHER VENTURES
Hyperloop: In 2013, Elon Musk published a white paper proposing the Hyperloop, a high-speed transportation
system using near-vacuum tubes for reduced air resistance, allowing passenger and cargo pods to travel at speeds of
over 700 mph. Musk’s research motivated others to develop the technology.
OpenAI: In 2015, Elon Musk co-founded OpenAI, a research organization to develop safe and beneficial artificial
general intelligence (AGI). To avoid a conflict of interest with Tesla’s AI work, Musk stepped down from OpenAI’s
board of directors in 2018. OpenAI partnered with Microsoft the following year, which subsequently invested $10
billion in the new venture. Microsoft’s goal is to advance OpenAI’s ChatGPT, which the software giant plans on
embedding in its offerings.
Neuralink: In 2016, Musk founded Neuralink, a neurotechnology company focused on developing brain-computer
interfaces. Neuralink’s goal is to enable direct communication between the human brain and computers, with poten-
tial applications in fields such as prosthetics, robotics, medicine, education, and military.
The Boring Company: In 2016, after being frustrated by traffic in Los Angeles, Elon Musk founded The Boring
Company to build underground tunnels for transportation. The startup’s goal is to alleviate traffic congestion in
urban areas by creating a network of underground tunnels that electric vehicles can traverse at high speeds.
TWITTER
Musk’s larger-than-life personality frequently spills over into his Twitter feed which has over 132 million followers.
Elon Musk has had several run-ins with the Securities and Exchange Commission (SEC). 10 The SEC claims that
some of his tweets contain material information that has no basis in fact, and cross the line into securities fraud. The
issue came to the fore when Musk tweeted in 2018: “Am considering taking Tesla private at $420. Funding secured.”11
The SEC filed securities fraud charges against Musk, claiming that his social media statements were false and
misleading investors. In 2019, the suit was settled without Musk admitting any wrongdoing.
For quite some time, Musk has been concerned with Twitter’s commitment to free speech, tweeting (in 2022):
“Free speech is essential to a functioning democracy. .. Given that Twitter serves as the de facto public town square,
failing to adhere to free speech principles fundamentally undermines democracy.”12 In the same year, Elon Musk
Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of 3
purchased Twitter, a social media platform, for $44 billion. With this transaction, Musk transformed Twitter from a
publicly-traded stock company into a private one.
Immediately after taking over Twitter, Musk fired the company’s entire leadership team. After an initial exodus of
advertisers, Musk laid off some 75% of Twitter’s staff to stem losses. Among Musk’s strategic initiatives to make Twit-
ter profitable is the introduction of a subscription service, Twitter Blue, for $8 per month to verify users. Musk and
his new team also focused on removing automated bots and adult content from the platform and reinstated some
high-profile users who were banned by Twitter’s former content moderation team.
Brief History of Tesla, Inc.

Tesla Motors, Inc. (TSLA) was founded in 2003 in San Carlos, California, to accelerate the world’s transition to
sustainable transport by designing and manufacturing all-electric automobiles. Indeed, GM’s EV1 electric vehicle
program in California in the 1990s, which the Detroit automaker shut down in 2003, inspired the founders. Although
many industry reports lump all new energy vehicles (NEV) together, there are essential differences between all-
electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), see Exhibit 2.
The EV company is named after Nikola Tesla, the engineer and physicist who invented the induction motor and
alternating-current (AC) power transmission. He was granted a patent in 1888 by the U.S. Patent and Trademark
Office. The Serbian-born inventor was a contemporary of Thomas Edison. Indeed, Edison, the prolific inventor of
the light bulb, phonograph, and the moving picture (movies), was at one point Tesla’s boss. The two geniuses fell out
with one another and feuded for the rest of their lives. Edison won the famous “War of Currents” in the 1880s (DC
vs. AC) and captured most of the limelight. Nikola Tesla’s invention of the alternating-current (AC) electric motor
was neglected for much of the 20th century, and he did not receive the recognition he deserved in his lifetime. Elon
Musk is not just commercializing Tesla’s invention but also honoring Nikola Tesla with the name of his company.
Tesla Inc.’s all-electric motors and powertrains build on Nikola Tesla’s original designs.
From day one, Elon Musk was the controlling investor in the original company, Tesla Motors, Inc., providing $7
million from his personal funds to get the company started. Tesla confronted a major cash crunch in 2007, which put
the future viability of the company into question. Musk stepped up and invested over $20 million in this round to
keep the company afloat, and his dream of transition to sustainable transport alive. In total, Musk provided $50 mil-
lion from his money to fund Tesla in its early days because finding any outside funding was not feasible for a new car
company during the global financial crisis (2008–2010).13
On June 29, 2010, Tesla had an initial public offering (IPO), with a valuation of $1.7 billion. Exhibit 3 shows
Tesla stock price performance and key events over time.
TESLA’S MASTER PLAN 1

In a blog entry on Tesla’s website in 2006, Elon Musk explained the startup’s initial master plan:14
1. Build a sports car.
2. Use that money to build an affordable car.
3. Use that money to build an even more affordable car.
4. While doing the above, also provide zero-emission electric power generation options.
Step 1. In 2008, Tesla introduced its first car: the Roadster, a $110,000 sports coupe with faster acceleration than
a Porsche or a Ferrari. The initial Roadster was an Elise model by British sports carmaker Lotus, retrofitted with an
electric motor and drivetrain. This is the reason why the manufacturing process was not scalable, with a peak pro-
duction rate of no more than two cars per day. Tesla built 2,500 Roadsters, and sold all of them.
Step 2. In 2012, Tesla discontinued the production of the Roadster to focus on Step 2 of its Master Plan. It
designed the Model S from scratch with the idea to create the best possible EV that is also scalable for mass produc-
tion. The Model S is a four-door family sedan with an initial base price of $73,500. With a somewhat greater market
appeal, the Model S allows for larger production runs to drive down unit costs. The Model S was named the Motor
Trend Car of the Year and received the highest score (99/100) of any car ever tested by Consumer Reports.
In 2012, Tesla also unveiled the Model X, a crossover between an SUV and a family van with futuristic falcon-
wing doors for convenient access to second- and third-row seating. The Model X has a similar range as the Model S,
with between 250-330 miles per charge. Technical difficulties with its innovative doors, however, delayed its launch
until the fall of 2015. The initial base price of the Model X was $80,000, with the signature premium line ranging
costing up to $144,000, thus limiting its mass-market appeal.
Step 3. In 2016, it unveiled the Model 3, an all-electric compact luxury sedan with an envisioned starting price for
the entry version of $35,000. Many people who wanted the new Model 3 stood in line overnight, eagerly waiting for
Tesla stores to open so they could pay their $1,000 deposit and secure a spot on the waiting list for a car they had
never seen, let alone taken for a test drive. As a result of this consumer enthusiasm, Tesla received more than
500,000 preorders for the Model 3, for a total of $500 million in interest-free loans.
Despite Tesla’s initial difficulties in scaling up production, Model 3 deliveries began in 2017. The average selling
price for the Model 3 in 2018 ranged between $50,000 and $60,000. In 2019, Tesla launched the Model Y, a compact
SUV with the entry version starting at an envisioned $39,000. Deliveries of the Model Y began in 2020, with an
average selling price of around $60,000.
The Models 3/Y were critical for Tesla to break into the mass market. In 2022, Tesla sold 1.3 million vehicles
worldwide (Exhibit 4), with Models 3/Y accounting for 96% of sales.
Step 4 of Musk’s master plan aims to provide zero-emission electric power generation options. To achieve this
goal, Tesla acquired SolarCity, a solar energy company, for more than $2 billion in 2016.

In 2016, Elon Musk unveiled the second part of his strategy to continue the pursuit of Tesla’s vision to accelerate
the advent of sustainable energy. Again, Tesla’s CEO and co-founder Elon Musk detailed a set of stretch goals:
1. Create stunning solar roofs with seamlessly integrated battery storage.
2. Expand the electric vehicle product line to address all major segments.
3. Develop a self-driving capability that is 10 times safer than manual via massive fleet learning.
4. Enable your car to make money for you when you aren’t using it.
Step 1. With the acquisition of SolarCity, Tesla morphed from EV car company into an integrated clean-tech
energy company that combines solar power, power storage, and transportation. To capture this ambition more
accurately Tesla changed its vision to accelerate the world’s transition to sustainable energy. In 2017, Tesla dropped
“Motors” from its original company name to be known simply as Tesla, Inc.
Tesla offers energy generation and storage for both residential and commercial customers. It provides energy
generation via solar roofs that look like regular roofing shingles but last longer and cost less, all things considered.
Tesla also offers the Powerwall (a pack of rechargeable lithium-ion batteries), making it possible to store solar energy
captured for later use. Energy generation therefore becomes decentralized. Consumers can generate and use energy
without being dependent on a utility company and can sell their excess energy to utility providers. Should there be a
power outage in the central utility grid, the Powerwall provides electricity to a home for one week.
Step 2. Tesla is planning to expand the EV lineup to address all major market segments. Tesla has introduced the
Cybertruck (in 2019), with mass production planned for 2024. In 2017, Tesla introduced a heavy-duty semitruck,
designed to offer long-range hauling capabilities with minimal operating costs due to its aerodynamic design and
electric drivetrain. Although Tesla has delivered several dozen semitrucks to PepsiCo., mass production has yet to
commence.
Step 3. Tesla is developing its vehicles’ self-driving capabilities. The goal is to make self-driving vehicles 10 times
safer than cars driven manually, thus increasing the demand for fully autonomous cars. Many industry observers
expect commercial trucks to be the first fully autonomous vehicles. Autonomous semitrucks can be operated
as convoys on interstate highways and can be on the road 24/7; they would only need to stop to recharge their
batteries. Exhibit 5 depicts the stages of automation required for fully autonomous vehicles (Level 5).
Step 4. Fully self-driving capabilities are required for Tesla to fulfill Step 4 of the new master plan: Turning a car
into an income-generating asset. The idea is to offer an Uber-like service composed of Tesla vehicles without drivers.
On average, cars are used less than three hours a day. A self-driving Tesla will be part of a shared vehicle fleet when
the owner is not using it. This new business model would drastically reduce the total cost of ownership of a Tesla
vehicle. Similarly, Tesla might build and operate a fleet of fully autonomous robotaxis.

Earth can and will move to a sustainable energy economy and will do so in your lifetime. It doesn’t require destroying
natural habitats. It doesn’t require us to be austere and stop using electricity and sort of be in the cold or anything.
—Elon Musk15
During the 2023 Investor Day, Elon Musk introduced Tesla’s Master Plan 3. In classic fashion, Musk set ambi-
tious goals that can only be achieved over long time horizons with significant investments. In line with Tesla’s pur-
pose to accelerate the transitions to sustainable energy, the overarching theme of Master Plan 3 is to “Eliminate
Fossil Fuels.” Musk’s intent was to convey a message of hope and optimism that a transition to a sustainable energy
future is possible without sacrificing continued economic growth.
Musk began the presentation by emphasizing that 80% of the world’s energy comes from fossil fuels, exacerbating
climate change. Worse, only about 25% of the total amount of fossil fuels consumed delivers useful power, and the
rest is wasted along the process from fossil fuel extraction and conversion to final use. To achieve a successful transi-
tion to a sustainable energy economy, Musk outlined five steps (with the percentages in parentheses indicating each
step’s contribution to eliminating fossil fuels):
1. Repowering the existing grid with renewable energy (35%)
2. Switching to electric vehicles (21%)
3. Switching to heat pumps in homes, businesses, and industry (22%)
4. Electrifying high-temperature heat delivery and development of hydrogen for industrial processes (17%)16
5. Fueling ships and airplanes with sustainable energy (5%)
With its energy generation and storage business, Tesla contributes to repowering the existing grid with renewable
energy (Step 1). Although most steps in Master Plan 3 are decade-long ambitions (∼2050), the most explicit goal
that Musk presented is Tesla’s plan to make and sell 20 million EVs by 2030 (Step 2). Exhibit 6 depicts Tesla’s actual
(2012–2022) and projected vehicle deliveries (2023–2030), while Exhibit 7 presents a forecast of new vehicle regis-
trations in the U.S. by type of powertrain (internal combustion engine [ICE] vs. EV).
Yet, switching to heat pumps will impact achieving energy sustainability more than electrifying the world’s vehicle
fleet (Step 3). As such, Musk hinted at the possibility of Tesla offering heat pumps for commercial and residential
uses. Musk and his group of executives did not provide much detail concerning Steps 4 and 5 of Master Plan 3.
Tesla’s Corporate Strategy

Tesla has two distinct business units: 1) automotive and 2) energy generation and storage. Of the $81 billion in
revenues generated in 2022, the automotive unit contributed $77 billion (95%), and the energy generation and stor-
age business $4 billion (5%). In 2022, sales of the automotive unit grew by 52% and the energy business by 40%.
VERTICAL INTEGRATION
Unlike more traditional car manufacturers that outsource most components and tend to rely heavily on third-
party suppliers, Tesla is a highly vertically integrated company. Tesla’s value chain combines upstream research and
development, battery and electric vehicle manufacturing, downstream battery software, hardware chip and software
design for full self-driving (FSD) capability, and a dense network of supercharging stations as sales and service—all
done in-house.
Over time, Tesla significantly increased vertical integration, ranging from software development and manufactur-
ing to supply chain management. Tesla executives emphasize that a high degree of vertical integration allows them
to reduce costs, improve quality, and increase the speed of innovation. Tesla does not only innovate with the prod-
ucts and services it offers but also with the underlying manufacturing processes, supply chain management, and even
in the back office.
Tesla made several multi-billion-dollar commitments when building super large manufacturing facilities, dubbed
Gigafactories. Elon Musk describes a Gigafactory as the machine that builds the machine. The Gigafactories allow
for a high degree of vertical integration, for instance, by co-locating battery and vehicle manufacturing, and for large-
scale manufacturing, critical to driving down per-unit costs.
Battery Production. Tesla has vertically integrated to produce battery packs, electric motors, and powertrains for
its vehicles by partnering with Panasonic at its Gigafactory in Nevada. Giga Nevada is a 2,000 acre facility near Reno
and produces 150-gigawatt hours (GWh) Of battery packs per year. If each EV battery pack has 75-kilowatt hours
(kWh), then the output is sufficient for 2 million battery packs (one for each EV). The joint venture with Panasonic
enables Tesla to secure a consistent supply of high-quality batteries, reduce costs, and collaborate on battery
technology advancements with the industry leader.
Exhibit 8 shows how the cost per kWh of lithium-ion battery packs, traditionally the most expensive component
in EVs, has declined. Tesla uses similar lithium-ion battery technology for both its electric vehicles and energy stor-
age products, such as the Powerwall and Powerpack.
Tesla developed its batteries, such as the 4680 battery cell (in 2020), to further enhance its control over battery
technology and production. The new battery cell is simpler to produce and requires less investment and less factory
space. As such, the 4680 battery cell improves the power-to-weight ratio, streamlines manufacturing, and lowers cost.
Vehicle Manufacturing. Tesla is vertically integrated into vehicle manufacturing. The EV maker focuses on build-
ing ultra-high volume car manufacturing factories. The completion of Giga Shanghai (in 2019) in less than one year
was a turning point for Tesla because the company was facing bankruptcy in 2018 (Exhibits 1 and 3). The develop-
ment and manufacturing costs of the luxury Models S/X were much higher than anticipated, leading to huge losses.
Giga Shanghai is a vast factory, equal in size to the Tesla car manufacturing facility in Fremont, California, com-
bined with its Gigafactory in Nevada.
The vast size of Giga Shanghai affords Tesla the production of batteries and cars on a large scale and in the same
location. Large scale and co-location of critical tasks allow Tesla to lower the price of Models 3/Y further. Giga
Shanghai services the European market and the Chinese market, the largest electric vehicle market globally. The
costs of Models 3/Y at Giga Shanghai are an estimated 40% lower than the costs for these models when made in the
United States, with no loss in quality.
In 2022, Tesla opened Giga Berlin, a $4 billion factory, and Giga Texas (near Austin), a $3 billion investment to
further expand production capacity. As of 2023, four Gigafactories are up and running, with an estimated total out-
put of two million vehicles annually. On Investor Day, Tesla announced it would build its newest Gigafactory in
Mexico.
Tesla even integrated into the building of Gigafactories. Tesla’s construction team manages the entire building
process from start to finish and does so in record time. The team is responsible for site selection, permitting, hiring
subcontractors, budget and project management, and quality control. This approach enables Tesla to not only build
super large factories in record time on a tight budget but also allows for best practices, such as the optimal layout of
vehicle assembly lines, to be transferred across plants.
By controlling its manufacturing process, Tesla can ensure quality, make design changes quickly, and maintain a
lean and efficient production system that lowers cost—Tesla employs 129,000 people, with more than one-half
(65,000) in manufacturing.
Sales and Service. Unlike traditional automakers relying on a franchised dealership network, Tesla is forwardly
integrated into sales and service. Tesla uses a direct-to-consumer sales model where customers order vehicles online
(www.tesla.com). The EV maker facilitates online ordering by providing limited choices in colors, interiors, wheels,
and a few other customization options. Unlike more traditional carmakers, streamlining options simplify online
ordering and reduce manufacturing complexity as permutations are limited.
Tesla operates 685 company-owned service locations in 45 countries. Forward integration into sales and service
enables Tesla to control the customer experience, maintain pricing control, and collect customer data to inform
future product development.
Software Development. Tesla started out as a technology and software company that had to learn large-scale
manufacturing by going through “production hell,” which refers to the significant difficulties and challenges that
Tesla faced during the ramp-up of production for its Model 3 sedan to meet high customer demand. In contrast,
Tesla is leading in developing and integrating software and hardware systems, including the infotainment system via
its super large touch screens, vehicle control software, and Autopilot, its advanced driver-assistance system and full-
self driving (FSD).
Since 2012, Tesla has used over-the-air (OTA) software updates to control and enhance critical vehicle features
such as Autopilot and driving range. The tight integration of software and hardware allows for a seamless customer
experience. In contrast, traditional automakers have just recently begun to offer OTA updates. Since 2016, Tesla has
been designing its semiconductors for full-self driving (FSD) to address the unique challenges autonomous driving
poses. As of 2023, Tesla is the only carmaker that designs its semiconductors.
Supply Chain Management. Tesla pursues an innovative supply chain management approach by reaching deep
into multiple tiers of its partners. For instance, Tesla monitors the inventory level of each of its suppliers, not just for
tier 1 suppliers but several layers deep. This approach allows Tesla to anticipate crises such as the semiconductor
shortage during the Covid-19 pandemic. While the other automakers lost significant production because of persis-
tent chip shortages, Tesla was the only carmaker able to accelerate production during the pandemic. Moreover, Tesla
prefers insourcing critical components and materials to reduce its reliance on external suppliers.
Energy Generation and Storage. Tesla produces solar panels, solar roofs, and energy storage solutions like the
Powerwall (residential use) and Powerpack (commercial use). The Powerwall makes storing solar energy captured
on the roof for later use possible. Energy generation, therefore, becomes decentralized. Consumers can generate and
use energy without dependence on a utility company and sell their excess energy to utility providers. Indeed, users
can generate enough energy to power their Tesla cars and their entire house. Should there be a power outage in the
central utility grid, the Powerwall provides electricity to a home for one week. As an integrated company, Tesla can
offer customers comprehensive clean energy solutions from energy generation and storage to transportation.
Recycling and Sustainability. Tesla is working toward implementing a closed-loop system for its batteries. This
project aims to recycle used batteries and recover valuable materials, which would help reduce waste and further
lower production costs.
HORIZONTAL DIVERSIFICATION
Vehicle Lineup and Platforms: Many traditional automakers, such as GM, moving into the EV space unveiled
plans to offer dozens of vehicle models. In contrast, Tesla focuses on the highest possible volume with a small num-
ber of models. Tesla produces five vehicles on three different platforms. An automotive platform is a shared set of
components, systems, and design elements that are the foundation for multiple vehicle models. The purpose of a
shared car platform is to reduce development costs, share components, parts, and technologies across various mod-
els, and enhance manufacturing efficiency and speed, thus further driving down per-unit cost. All Tesla vehicles are
designed from scratch on a fully-dedicated electric vehicle platform optimized for range, efficiency, scalability, safety,
and FSD.
The original Roadster served as a prototype to demonstrate that electric vehicles (EVs) can be more than mere
golf carts. It was a handcrafted car put together at a former Ford dealership near the Stanford University campus.
Tesla learned that it is better to build an electric vehicle from scratch than to retrofit a given car platform created for
internal combustion engines (ICE). Ultimately, the Roadster 1 had no more than 7% of parts in common with the
Lotus Elise.
Models S/X: Tesla’s first mass-produced vehicle platform was for the Models S/X. Both vehicles use a common
platform that leverages electric vehicle-specific design elements and shares several features, including a skateboard
architecture,17 battery pack, electric motors and drivetrains, and air suspension.
Although the Models S/X were designed as EVs from scratch, Tesla followed the industry practice of using a lin-
ear process in three steps: 1. Design, 2. Engineering, and 3. Manufacturing. Indeed, when Franz von Holzhausen,
senior designer at Tesla, came up with the Model S, the company didn’t even have a manufacturing facility. Tesla also
followed industry practices in other areas. For instance, Tesla relied on industry standards, including the standard
12-volt architecture for the electrical system. This system controls the car’s lights, infotainment, and climate control.
Tesla designed 20%-40% of the controllers for the 12-volt system in-house. Tesla sourced 3,400 parts from Tier 1 and
21,000 parts for its first vehicle platform from Tier 2 suppliers.
The Models S/X are Tesla’s premium, luxury vehicles, with prices in 2023 ranging from $90,000 to $135,000,
depending on vehicle specifications. Regarding unit sales, Models S/X make up no more than 5% of total annual
vehicle sales.
Models 3/Y: Tesla developed the second-generation vehicle platform for Models 3/Y. Learning from the difficul-
ties in using a linear development process, Tesla integrated design, engineering, and manufacturing into one function
to develop its second car platform. Tesla designed 56%-61% of the controllers in-house compared to the first automo-
tive platform. And Tesla sourced fewer parts externally. The number of parts from Tier 1 suppliers fell by almost 40%
to 2,100 and from Tier 2 suppliers by 10% to 19,000.
Yet, Tesla encountered significant problems in ramping up production for Model 3, which was released before the
Model Y. Musk’s goal was to automate the production process entirely. Still, the Model 3 was designed for a tradi-
tional car manufacturing process, combining automation and manual labor. Implementing a highly automated pro-
duction process for the Model 3 was much more complex and challenging than anticipated. Tesla had to course
correct and re-introduce more manual labor into the production process to increase output. Tesla faced other issues
in ramping up production for the Model 3, including manufacturing bottlenecks for battery components, supply
chain constraints, labor disputes, and quality issues. Elon Musk described this phase as “production hell,” which
almost bankrupted the company.
Tesla overcame production hell and achieved a 50% cost reduction from the S/X platform to the 3/Y platform.
Over time, Tesla was able to reduce production costs further. A Model 3 built in 2022 had a 30% lower cost than the
same model made in 2018 while improving the product.
Cybertruck: For its third vehicle platform, Tesla integrated all four functions (design, engineering, manufacturing,
and automation) into one unit, reporting to one unit head. The first result was the Cybertruck, an all-electric pickup
truck. Designed to combine a pickup truck’s utility with an electric vehicle’s performance and efficiency, the Cyber-
truck has a distinctive futuristic design. Its angular appearance resembles an armored vehicle.
Rather than using a separate car frame and body, the Cybertruck is built around an exoskeleton of stainless steel.
The truck’s exterior and structural framework is the exoskeleton, providing superior strength and durability. The
Cybertruck looks the way it does because its form follows function, emphasizing a production process focused on
reducing production costs and increasing utility, efficiency, and safety. Unlike traditional pickup trucks (or cars), the
Cybertruck has no stamped parts but is created from a single flat sheet of steel. The steel is not painted, drastically
reducing cost. It also doesn’t chip or rust. Further increasing vertical integration, Tesla designed 85% of all control-
lers for the new truck in-house. The simplified manufacturing process allows Tesla to increase production output and
offer the Cybertruck for $40,000–$70,000, depending on vehicle specifications.
The first customer deliveries for the Cybertruck are scheduled for late 2023, with mass production up and run-
ning in 2024. Some 1.5 million want-to-be owners of the Cybertruck put down deposits to reserve a spot on the wait-
ing list. Tesla will likely use its third vehicle platform for future variants, such as a van and an SUV.
NextGen Vehicle Platform: In 2023, Tesla introduced its newest vehicle platform, dubbed NextGen. Tesla further
revolutionized car manufacturing by moving from the old-line linear production process to a new modular one.
Rather than moving an entire car along the production line with multiple steps that are replicated (such as putting
on doors for painting, removing them for work on the car’s interior, and then reattaching the doors as part of final
assembly), Tesla is using parallel production of modular components such as structural battery pack serving as the
vehicle’s floor, and front and back casting modules of the car.
Tesla calls this new production process “unboxing.” It claims the modular approach reduces production costs by
another 50% over its latest Model 3 platform. Moreover, the unboxing process requires 44% less factory floor space
and increases efficiency by 30%. Tesla’s new Giga Mexico factory will be the first to implement the NextGen vehicle
platform. The goal is to produce an attractive EV for $25,000. This low-priced EV would open up a vast global mar-
ket for Tesla. Once Tesla achieves full-self driving, the new vehicle platform is likely the basis for its robotaxi fleet.
Summarizing Tesla’s production process improvements, Karn Budhiraj, vice president supply chain, stated, “Get-
ting to 40,000 cars per week was hard. Going to 400,000 cars per week doesn’t faze us.”18 By spring 2023, Tesla had
produced a cumulative 4,000,000 vehicles. It took Tesla 12 years to reach the first million; 18 months to get the
second million; 11 months to reach the third million, and only 7 months to reach the fourth million. Every 45 sec-
onds, a new Tesla vehicle rolls off the production line.
OTHER PRODUCTS AND SERVICES

Besides Tesla’s two main automotive and energy business segments, the company offers several other products
and services, some with the potential to have a material impact on firm performance.
Supercharger Network: To help consumers overcome range anxiety (i.e., running out of battery charge), Tesla built a
global network with over 40,000 superchargers. Although about 50% of charging for Tesla vehicles takes place at home,
superchargers allow drivers to add up to 200 miles of range in 15 minutes. As a fully vertically integrated company,
Tesla builds, installs, and maintains its charging network. Users pay by kWh, and the cost varies by location and time of
day. In 2023, Tesla opened up its charging network to non-Tesla owners to qualify for subsidies in the Inflation Reduc-
tion Act. The EV maker also started subscriptions for unlimited overnight charging at home for Tesla owners in Texas.
Mobile Service: Tesla offers a mobile service program where specially trained technicians perform maintenance
and repair tasks on-site at the customer’s preferred location (often at home or the office). This program eliminates
the need for customers to visit service centers, making the ownership experience more convenient. It also reduces
the load of the Tesla service centers. A customer can schedule the service conveniently via their Tesla app.
Insurance: Since 2019, Tesla has offered its insurance services in about a dozen U.S. states, with others pending.
Because all its vehicles are connected, Tesla has a log of each driver’s trips, including how many miles driven and
when and where. Tesla also knows whether the driver obeys speed limits and other traffic rules. Lower insurance
premiums correlate with more use of the autopilot-driving mode, a safer way of driving. Leveraging vast amounts of
real-time data allows Tesla to provide micro-targeted pricing for car insurance to Tesla owners. Lacking these data,
traditional car insurers can only make an informed guess on what insurance premium to offer Tesla drivers. Such
estimates are generally less competitive than Tesla’s insurance premiums.
Software Subscriptions and Upgrades: Tesla vehicles are computers on wheels. As such, the software is the brains
of Tesla cars. Not only does Tesla provide OTA software updates, which keeps older models current, but it also offers
additional software services such as subscriptions to Full Self-Driving (FSD), which enable advanced driver-
assistance features. Tesla plans to have FSD master autonomous driving (Level 5) in the future. Tesla also offers a
Premium Connectivity (5G) subscription, which provides access to fast data connections for live traffic
visualization.
These services promise a reoccurring subscription-based revenue stream, with FSD earmarked for a substantial
profitability boost once mastered. Tesla also offers one-time payments for software upgrades such as unlocking addi-
tional range on vehicles or outright purchasing enhanced Autopilot features and FSD.
GEOGRAPHIC SCOPE
Tesla sells its vehicles in dozens of countries, including North America, Europe, Asia, Australia, and the Middle
East. In 2022, Tesla’s Models 3/Y were the most popular EVs worldwide, selling more than 1.2 million vehicles
together. The Model Y is the most popular EV globally, followed by the Model 3.
The American EV maker operates four Gigafactories (Austin, Berlin, Freemont, and Shanghai) on three conti-
nents to manufacture its vehicles. The combined vehicle output of the four Gigafactories per year is estimated to be
around 3.5 million when achieving full capacity. In 2023, Tesla announced the building of a Gigafactory in Mexico.
With the new “unboxing” production method, the vehicle output of Giga Mexico is expected to be significantly
higher than that of the other factories.
United States. In 2022, the total number of cars and light truck sales in the U.S. was 14 million. The average sell-
ing price for a new car in the U.S. crossed the $48,000 threshold, a new record, and is a function of Americans’
preference for SUVs and pickup trucks.
The share of EVs in new car sales was 10% in 2022, up fivefold from a mere 2% in 2019. Tesla held a 65% market
share in the EV segment, followed by Ford (8%), Hyundai-Kai (7%), GM (5%), and VW (5%). The average selling
price of an electric vehicle was $66,000 in 2022.
Electric vehicle sales are expected to increase further, in part due to the federal tax credit of $7,500 for the pur-
chase of new EVs. To qualify for the federal tax credit, cars must cost less than $55,000, while trucks and SUVs
cannot exceed a price of $80,000. In addition, there are income limits to qualify for the federal EV tax credit
($150,000 for individuals and $300,000 for joint filers).
In 2022, California, the most populous state in the U.S., passed legislation banning the sale of new ICE vehicles
starting in 2035. California has been a regional leader in climate policy. Following the Golden State’s lead, 17 other
states have enacted laws that require them to follow California’s emission policies. At this point, Washington, New
York, and Massachusetts have also implemented ICE bans, but this is likely to change with climate change becoming
an ever more pressing concern.
The growth of the EV industry in 2022 was helped by significant increases in the price of gasoline and traditional
fuels used in ICE vehicles (Exhibit 9). The more expensive gasoline makes EVs comparatively more attractive, as elec-
tricity prices have risen much less. Although retail gasoline prices have increased by nearly 50% since 2020, electricity
prices have remained much steadier, rising by only about 17% during this same time. Moreover, the total lifetime costs
of ICE vehicles are generally higher than those of EVs because ICE vehicles require fuel and more repairs and main-
tenance. Indeed, the operating costs of an ICE vehicle over its lifetime frequently exceed the initial purchasing price.
China is the largest car market globally, with an estimated 25 million vehicles sold in 2022. Roughly 20% are
electric vehicles, partly due to government incentives such as subsidies for EV purchases. Many metropolitan cities
such as Beijing provide further incentives such as waiving certain fees and issuing registration faster for zero-emission
vehicles because of the high level of air pollution. Overall, China tightened vehicle emission rules, making it progres-
sively harder to meet them with ICE vehicles.
The estimated average sales price of new vehicles in China is significantly lower than in the U.S. The largest EV
makers by volume in China are (in rank order) Tesla, BYD, SAIC (a joint venture with GM), and VW. Tesla was the
first foreign carmaker to be allowed to have fully-owned subsidiaries in China. The Chinese government waived the
requirement of having a local partner to accelerate the development and adoption of electric vehicles, reduce air
pollution, and become a global leader in clean energy technologies.
Less than a year after the groundbreaking for Giga Shanghai in January 2019, Tesla vehicles (first the Model 3,
with the Model Y added later) started to roll off the assembly line. Roughly two-thirds of the cars produced in China
are exported, mainly to Europe.
Europe. In 2022, some 11 million vehicles were sold in Europe, with 12% fully electric vehicles, a more than ten-
fold increase from the 1.5% share in 2019. In the same year, the European Parliament mandated that all new cars,
vans, and light trucks must be zero-emission vehicles by 2035, thereby outlawing the sale of new ICE vehicles.
Tesla is the market leader in Europe in terms of the most popular EV models in 2022, taking both the number
one and number two spot with the Models 3/Y. Regarding the total number of EVs sold in Europe in 2022, the
leader is VW (because it has more EV models in its lineup than Tesla), followed by Tesla, Stellantis, Hyundai-Kia,
and the Renault Group.
Tesla and the Competition
ELECTRIC-VEHICLE PURE PLAYS

Rivian Automotive, Inc: Rivian designs, develops and manufactures fully-electric pickup trucks, sport utility vehi-
cles (SUVs), and commercial delivery vans. On November 10, 2021, Rivian had its IPO, going public at $78 per
share, with a market cap of $67 billion. A few days later, Rivian’s market cap peaked at $153 billion. At that time,
Rivian’s stock market valuation was almost as high as the combined market cap of the legacy carmakers GM ($91
billion) and Ford ($79 billion). To put Rivian’s stock market valuation in perspective, the year the electric vehicle
startup went public (2021), it produced just over 1,000 vehicles. GM and Ford sold 10 million cars, 10,000 times
more than Rivian.
From its peak, Rivian’s market capitalization had fallen to $18 billion, down almost 90%. In 2022 alone, Rivian’s
stock had dropped 82% while the tech-heavy Nasdaq-100 index had fallen 34%. In 2022, Rivian lost close to $7 bil-
lion, bringing the new venture’s total losses to over $13 billion.
CEO RJ Scaringe had initially promised that Rivian would produce 50,000 adventure vehicles in 2022. However,
in spring 2022, the CEO needed to backtrack and adjust the number to 25,000 vehicles. The company fell short even
after cutting Rivian’s production forecast by half. In total, Rivian delivered 24,337 vehicles in 2022. At the same
time, CEO Scaringe announced that Rivian would produce 50,000 pickup trucks and SUVs in 2023.
Lucid Group, Inc: (aka Lucid Motors) is another U.S. pure-play EV competitor focusing on high-performance
luxury EVs. It began production at around the same time as Rivian. Lucid positioned its first vehicle, the Lucid Air,
upmarket from Tesla’s Model S. The price for the Lucid Air ranges from a base of about $80,000 to $180,000,
depending on options and trim package. Lucid Motors is also attempting to introduce an SUV model in 2023. Like
Rivian, Lucid has had difficulties scaling up production, slashing its 2022 production outlook from 20,000 vehicles
to around 6,000 and producing far fewer vehicles than Rivian.
BYD Company: (“Build Your Dreams”) is China’s leading maker of new energy vehicles (NEV), with around 2
million units sold in 2022. BYD sells NEVs, including battery-electric cars and plug-in hybrids, each making up
roughly 50% of the total volume. BYD focuses on mass-market vehicles and commercial offerings, such as buses for
public transportation.
BYD is also the third largest producer of EV batteries and has in-house chip production capabilities, giving them
significant resilience in supply chain issues. BYD has developed the proprietary blade battery system, a low-cost and
long-lasting EV battery pack that it hopes to leverage and sell to the rest of the industry. BYD has only expanded its
bus offerings to the U.S. but is planning on eventually bringing its consumer EVs there. In 2022, BYD began offering
EV sedans in Europe. The BYD midsize sedan (Han) and SUV (Tang) each cost about $75,000.
LEGACY CARMAKERS
General Motors (GM): In 2021, GM CEO Mary Barra announced that the company would phase out ICE cars
and trucks and sell only zero-emission vehicles by 2035. She also promised that GM would be carbon-neutral by
2040. CEO Barra pledged to invest $35 billion in electrification and autonomy by 2025, exceeding GM’s invest-
ments in ICE vehicle development. In spring 2023, GM’s market cap was $47 billion.
Although GM sells hundreds of thousands of EVs in China with its partner SAIC, in the U.S., GM sold less than
40,000 in 2022. For instance, GM sold some 38,000 Chevy Bolts and less than 900 Hummer EVs, starting at
$113,000. The best-selling SAIC-GM car is the Wuling Hong Guang Mini EV, starting at around $4,400.
Ford Motor Company plans to invest $22 billion in electrification through 2025. Ford also set up the Blue Oval
charging network, with over 75,000 chargers throughout the U.S. In spring 2023, Ford’s market cap was $46 billion.
In 2021, Ford launched the Mustang Mach-E, a crossover SUV and direct competitor to Tesla’s Model Y. Ford
sold some 40,000 Mach-Es in 2022, with a price of $58,000, compared to $55,000 for the long-range Model Y.
In 2022, Ford released an electric version of America’s best-selling vehicle, the F-150 Lightning. Ford received
over 200,000 reservations for the F-150 Lightning and ceased taking them. Ford started delivering the F-150 Light-
ing to customers in 2022 and produced 20,000 EVs that year. Ford’s new EV truck range is about 240 miles per
charge. The prices range from $56,000 for the base model to $100,000 for the Platinum Extended Range model. For
2023, Ford plans a production run of 150,000 F-150 Lighting EV trucks. Ford benefits from spillovers with its ICE
F-150 truck. Both F-150 factories are collocated to share resources such as the aluminum body for the pickup truck.
In 2023, Ford announced a change to its corporate structure. It created three new strategic business units: Model
e (EV business), Ford Blue (the traditional part of the company focused on ICE and plug-in hybrid vehicles), and
Ford Pro (commercial vehicle division). In 2022, Ford Blue and Ford Pro were profitable, bringing in $6.8 billion
and $3.2 billion, respectively. The Model e division lost $3 billion due to significant investments in scaling up EV
production, including building battery cell factories and new plants for EV manufacturing.
Stellantis. Chrysler, the iconic American carmaker, has been, since 2021, part of Stellantis as a result of the
merger of the Italian-American conglomerate Fiat Chrysler Automobiles (FCA) and the French PSA Group. In
spring 2023, Stellantis’ market cap stood at $54 billion.
Stellantis is a late-comer to the EV segment. It did announce (in 2021) that all of its new passenger vehicles would
be zero emissions in Europe by 2030. In the U.S., Stellantis aims to have 50% of all its new cars and light trucks be
EVs by 2030. Stellantis plans to offer an electric version of the Ram 1500 pickup truck in the U.S. in 2024; the
iconic Jeep brand is next in line for electrification. Stellantis has announced plans to offer more than 75 battery-
electric vehicles, reaching 5 million units by 2030. To accommodate the 75+ EV models, Stellantis is developing four
fully dedicated EV car platforms.
Towards A Sustainable Energy Economy

While the Gulfstream jet was gliding smoothly through the skies, Musk’s reign at Tesla and the other companies
he led has been anything but smooth. While the self-proclaimed Technoking of Tesla was looking forward to survey-
ing the location of the newest Gigafactory, he worried about his promises. In classic Musk fashion, he reiterated
during the Investor Day presentation that Tesla would produce 2 million vehicles in 2023 and then increase its pro-
duction rate by 10x to reach 20 million EVs annually by 2030.
And when introducing Master Plan 3, Musk and his team also proclaimed that Tesla would play a prominent role
in transitioning the global economy to sustainable energy.
Exhibit 1 Tesla Financial Data, 2018–2022 ($ millions, except EPS data)
Fiscal Year 2022 2021 2020 2019 2018
Cash and short-term investments 22,479 18,052 19,622 6,514 3,878

Receivables (total) 3,123 1,997 1,912 1,324 949
Inventories (total) 12,839 5,757 4,101 3,552 3,113
Property, plant, and equipment (total, net) 36,635 31,176 23,375 20,199 19,691
Depreciation, depletion, and amortization (accumulated) 11,499 8,691 6,518 2,154 1,888
Assets (total) 82,338 62,131 52,148 34,309 33,664
Accounts payable 15,255 10,025 6,051 3,771 3,404
Long-term debt 3,761 6,916 10,888 11,634 9,454
Liabilities (total) 36,849 31,116 29,073 26,842 23,982
Stockholders’ equity-total 45,489 31,015 23,075 6,618 4,923
Sales (net) 81,462 53,823 31,536 24,578 21,461
Cost of goods sold 56,862 37,306 22,351 18,355 17,419
Selling, general, and administrative expense 7,021 7,110 4,679 2,646 2,834
Income taxes 1,132 699 292 110 57
Income before extraordinary items 12,556 5,519 721 −862 −976
Net income (loss) 12,556 5,519 721 −862 −976
Earnings per share (basic), excluding extraordinary items 4.02 5.60 0.74 −4.92 −5.72
Earnings per share (diluted), excluding extraordinary items 3.62 4.90 0.64 −4.92 −5.72
Source: Tabulation of publicly available data.
Exhibit 2 All-Electric Vehicles vs. Plug-in Hybrids
Electric Vehicles (EVs). All-electric vehicles use batteries as the sole power source to supply the electric
energy needed for propulsion. As electric motors can also act as generators, electric vehicles utilize regenera-
tive braking to save a significant portion of the energy expended during acceleration, thus increasing the
vehicle’s energy efficiency. Pure electric cars have a higher torque over a larger range of acceleration speeds
than internal combustion engines (ICE). Running and servicing costs of EVs are significantly lower than their
gasoline-based counterparts because electric motors and powertrains have relatively few moving pieces com-
pared with the hundreds of precision-engineered parts necessary for an internal combustion engine. All-
electric vehicles are also quiet and zero-emission.
The battery in all-electric vehicles remains the most expensive part of the car and is subject to deterioration
over its lifetime. All-electric vehicles tend to be heavier and thus wear out tires quicker. Given a limited energy-
to-weight ratio, the driving range of electric cars remains somewhat limited, although it has been improving
over time. The cost of lithium-ion battery packs is predicted to come down over time due to economies of
scale and an estimated 72% learning curve. This rate of learning implies that each time the output doubles,
per-unit cost ($/kWh) falls by 28%.
EVs need to rely on a network of charging stations to overcome range anxiety by consumers; many mass-
market electric vehicles cannot drive as far on one charge as gasoline-powered cars can with a full gas tank.
Gas stations are basically on any street corner in cities and every couple of miles on highways.
Plug-in Hybrid Electric Vehicles (PHEV). Plug-in hybrid electric vehicles rely on hybrid propulsion, which
combines an electric motor with an internal combustion engine. PHEVs attempt to combine pure electric
vehicles’ advantages but avoid the range-restriction problem by using an additional gasoline-powered internal
combustion engine. PHEVs contain a battery that stores electricity for the electric motor and can be recharged.
Because the battery shares the propulsion load, hybrid engines are significantly smaller than their traditional
gasoline counterparts, reducing vehicle weight. The most popular PHEV globally is the Toyota Prius, with over
15 million cars sold since first introduced in 1997. Toyota’s then-President, Akio Toyoda, viewed hybrid tech-
nology as a critical halfway step toward a zero-emission transportation system.
In contrast, Tesla’s CEO Elon Musk is a strong opponent of hybrid vehicles because he believes that
PHEVs combine the disadvantages of electric and gasoline-powered vehicles, more than offsetting each type’s
advantages.1 Musk argues that hybrids are “bad electric cars” because they must carry around an additional
engine and drive train, adding weight, cost, and additional parts to maintain and repair. As such, the Prius in
EV mode only has a range of no more than 25 miles. Musk also criticizes the combustion engines as too small,
anemic, and inherently less efficient than full-size engines. Moreover, combining these technologies in a single
vehicle adds to the technological complexity, which increases cost, error rates, and maintenance.
1 Malone, M. (2009), “Uber Entrepreneur: An Evening with Elon Musk,” April 8 http://bit.ly/2uv2HTI [1:32:58]
Exhibit 3 Tesla Stock Price Changes and Key Events vis-à-vis the Nasdaq-100 Index, 2010–2023*
Tesla Inc (TSLA) Price % Change Nasdaq-100 (^NDX) Level % Change

30,000%
01/03/2022 04/14/2022
Tesla’s market cap Elon Musk
peaked at $1.2tn announces to buy
Twitter for $44bn;
deal closes on
08/02/2006 06/29/2010 Sept. 2015 07/07/2017 Dec. 2020 10/28/22
20,000% Musk posts Tesla IPO at a First Model X First Model 3 First Model Y
Master Plan 1 valuation of rolls off rolls off rolls off 2024
on Tesla blog $1.7bn Fremont factory Fremont factory Giga Shanghai Mass production of
Cybertruck in Giga Texas
06/22/2012 07/20/2016 12/30/2019 Jan. 2020 11,900%

10,000% First Model S Musk posts First Model 3 First Model Y
rolls off Master Plan 2 rolls off rolls off 03/01/2023
Fremont factory on Tesla blog Giga Shanghai Fremont factory Musk unveils
Master Plan 3
during Investor
Day at Giga Texas
0% 590%
2010 2012 2014 2016 2018 2020 2022 2023
*To allow for direct comparison, Tesla stock price changes and changes in the Nasdaq-100 index are normalized.
Source: Author’s depiction of publicly available data.
Exhibit 4 Tesla Total Vehicle Deliveries, 2012–2022
1,400,000
1,314,000
1,200,000
1,000,000 935,950
800,000
600,000
499,000
400,000 367,200
244,900
200,000
75,900 103,100
22,400 32,000 50,000
2,600
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Depiction of publicly available data.
Exhibit 5 Stages of Automation (Autonomous Vehicles)
Level 0: No Automation. A human control all the critical driving functions.

Level 1: Driver Assistance. The vehicle can perform some driving functions, often with a single feature, such
as cruise control. The driver maintains control of the car.
Level 2: Partial Automation. The car can perform one or more driving tasks simultaneously, including steering
and accelerating, but still requires the driver to remain alert and in control.
Level 3: Conditional Automation. The car drives itself under certain conditions but requires the human to
intervene with sufficient time to respond upon request. The driver is not expected to remain alert constantly.
Level 4: High Automation. The car performs all critical driving tasks, monitors roadway conditions throughout
the trip, and does not require the human to intervene. Self-driving is limited to specific driving locations and
environments.
Level 5: Full Automation. The car drives itself from departure to destination. A human driver is unnecessary.
Indeed, human intervention would introduce more errors than fully automated driving. The fully-autonomous
vehicle is as good as or better than a human. Steering wheels and pedals are no longer needed in full
automation.
Source: Author’s adaptation from definitions provided by U.S. National Highway Traffic Safety Administration.
Exhibit 6 Tesla Actual Vehicle Deliveries (2012–2022) and Projected Vehicle Deliveries, 2023–2030*
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
19
20
12
13
16
18
22
15
*
14
21
17
23
24
25
26
27
28
29
30
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
*2012–2022 are actual deliveries; 2023-2030 are projected deliveries based A on Tesla’s Compound Annual Growth Rate (CAGR) from
2012–2022, which is 40%.
Source: Depiction of publicly available data and author’s calculations.
Exhibit 7 Forecast of New Vehicle Registration in the U.S. by Type of Powertrain (ICE vs. EV), 2020–2040
ICE EV
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
20
39
29
30
40
26
28
22
23
32
33
36
38
25
35
21
24
31
34
27
37
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Exhibit 8 Cost per kWh of Lithium-Ion Battery Pack, 2020–2030*
$1,400
$1,200
$1,000
$800
$600
$400
$75 per kWh
EV price parity
$200
with ICE vehicles
$75
$0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Observed Prices Estimated Prices

Assumption: 10% learning rate
Observed learning rate in 5 most
recent prior years was 13%–23%
*In inflation-adjusted, real 2020 dollars.
Source: Author’s depiction of publicly available data.
Exhibit 9 Average Annual Gasoline Price in the United States (dollars/gallon), 01/2000–03/2023*
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
19
00
09
10
20
02
03
06
08
12
13
16
18
22
23
05
15
01
04
11
14
21
07
17
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
*Calculated based on weekly U.S. regular all formulations retail gasoline prices provided by U.S. Energy Information Administration. Prices are
in absolute dollars. Trendline added.
A note on sources. This case draws on several books, podcasts, and official company materials for background
information, including:
Books
• W. B. Carlson (2013), Tesla: Inventor of the Electrical Age, (Princeton, NJ: Princeton University Press).
• A. Vance (2015), Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future,” (New York: Ecco).
• C. Davenport (2018), The Space Barons: Elon Musk, Jeff Bezos, and the Quest to Colonize the Cosmos, (New York:
PublicAffairs).
• E. Niedermeyer (2019), Ludicrous: The Unvarnished Story of Tesla Motors, (Dallas, TX: BenBella Books).
• T. Higgins (2021), Power Play: Tesla, Elon Musk, and the Bet of the Century, (New York: Random House).
Podcasts
• B. Gilbert and D. Rosenthal (2018, July 16), “Tesla,” Acquired Podcast, Season 3, Episode 1, https://bit.ly/3K1bcd7
[2:00:14].
• B. Gilbert and D. Rosenthal (2020, May 26), “SpaceX,” Acquired Podcast, Season 6, Episode 7, https://bit.
ly/3TCXiBa [2:40:28].
Tesla, Inc. Company Materials

• Annual reports, various years.
• Quarterly reports, various years.
• Tesla Investor Day Presentation, March 1, 2023, slide deck, https://bit.ly/3JzZUeb.
• Tesla Investor Day Presentation, March 1, 2023, video, https://bit.ly/407SAO8 [3:46:52].
Endnotes
1 Tesla Investor Day, March 1, 2023.
2 Globally, only one other firm (Saudi Aramco) is valued at more than $1 trillion.
3 E. Howell and E. Howell (2019, Aug. 20), “Elon Musk: SpaceX Founder and Revolutionary Private Space Entrepreneur,” Space.com http://
bit.ly/37Jur4n
4 This section draws on A. Wu and G. Calic (2022, Jul. 15), “Does Elon Musk Have a Strategy?” Harvard Business Review, https://bit.ly/3ZSdOPQ.
5 M. Malone (2009, April 8), “Uber Entrepreneur: An Evening with Elon Musk,” Interview available on YouTube http://bit.ly/2uv2HTI [1:32:58]
6 G. Fowler (2013, Mar. 9), “Being Elon Musk, Tony Stark of SXSW,” The Wall Street Journal.
7 On-stage interview at the South by Southwest (SXSW) conference in Austin, Texas, March 8, 2013.
8 M. Belfiore (2007), “Chapter 7: Orbit on a Shoestring,” in Rocketeers (New York: HarperCollins), 166–195.
9 This section draws on J. Davis (2009, Sept. 27), “How Elon Musk Turned Tesla Into the Car Company of the Future,” Wired Magazine; and
M. Malone (2009, April 8), “Uber Entrepreneur: An Evening with Elon Musk,” http://bit.ly/2uv2HTI.
10 D. Michaels and T. Higgins (2019, April 26), “Musk, SEC Reach Deal to End Court Fight Over Tesla CEO’s Tweets,” The Wall Street
Journal.
11 Elon Musk, Twitter post, August 7, 2018, https://bit.ly/3Z11mfr.
12 Elon Musk, Twitter posts, March 25 and March 26, 2022, https://bit.ly/3Tt4H5Z.
13 Sony Pictures Classics (2011), Revenge of the Electric Car, Film Documentary.
14 E. Musk, “The Secret Tesla Motors Master Plan (Just Between You and Me),” Tesla, last modified August 2, 2006, http://bit.ly/29Y1c3m
16 In this step, Elon Musk is referring to “green” hydrogen, which is hydrogen produced from renewable energy sources such as wind or solar
power.
17 In a skateboard architecture, the battery pack, electric motors, and powertrain components are placed low within the chassis of the vehicle.
This approach affords a low center of gravity, improving handling and stability while also maximizing interior space.

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MHE-FTR-077-1264124317

—Elon Musk, Founder, CEO, and Technoking of Tesla1

Elon Musk: Engineer Entrepreneur Extraordinaire

EARLY LIFE AND EDUCATION

X.COM, CONFINITY, AND PAYPAL

Brief History of Tesla, Inc.

TESLA’S MASTER PLAN 1

TESLA’S MASTER PLAN 2

TESLA’S MASTER PLAN 3

Tesla’s Corporate Strategy

OTHER PRODUCTS AND SERVICES

Tesla and the Competition

ELECTRIC-VEHICLE PURE PLAYS

Towards A Sustainable Energy Economy

Fiscal Year 2022 2021 2020 2019 2018

Cash and short-term investments 22,479 18,052 19,622 6,514 3,878

Source: Tabulation of publicly available data.

Tesla Inc (TSLA) Price % Change Nasdaq-100 (^NDX) Level % Change

06/22/2012 07/20/2016 12/30/2019 Jan. 2020 11,900%

2010 2012 2014 2016 2018 2020 2022 2023

Source: Author’s depiction of publicly available data.

Source: Depiction of publicly available data.

Level 0: No Automation. A human control all the critical driving functions.

Source: Depiction of publicly available data and author’s calculations.

Source: Depiction of publicly available data.

Observed Prices Estimated Prices

*In inflation-adjusted, real 2020 dollars.

Source: Author’s depiction of publicly available data.

Source: Depiction of publicly available data.

Tesla, Inc. Company Materials

1 Tesla Investor Day, March 1, 2023.

11 Elon Musk, Twitter post, August 7, 2018, https://bit.ly/3Z11mfr.

15 Tesla Investor Day, March 1, 2023.

18 Tesla Investor Day, March 1, 2023.

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