Our Choice of Industry: The Plug-In Electric Car

Our Choice of Industry: The Plug-in Electric Car

The electric car is over a hundred years old. At the beginning of the 20th century, electric cars were considered to be "ideal" by the New York Times . Unlike their gasoline powered counterparts, they were clean, easy to drive and they did not vibrate nor did they smell. However, the electric car required a heavy battery packs that took long to charge, greatly limiting its effective range. At the turn of the century, there was a need for automobiles that could accommodate the American infrastructural landscape. Highways that connected American cities required vehicles that could travel great distances and the gasoline car, which could refuel easily at any gas station, eventually came to dominate the automotive industry. The electric car disappeared until the 1990s when interest was rejuvenated by the Californian government's policies forcing automobile manufacturers to create and sell them. But a short time later, the policies were retracted and the electric car once again disappeared from the market place.

More recently, we are witnessing a resurgence of the electric vehicle (EV). Big auto manufacturers have invested heavily to bring to production cars like the Nissan Leaf, the Mitsubishi i MiEV and the Renault Kangoo Z.E. But is the electric car here to stay this time? We want to examine factors that contributed to past failures of the electric car industry. It will be interesting to look at whether the political and technological constraints still exist today and what companies today are doing differently. Certain aspects of consumer behaviour such as the motives that drive the distaste or interest for electrics cars would be examined and how companies could overcome these obstacles. We also want to examine how the industry can compete against traditional gas powered cars and other technologies currently in development such as hydrogen powered cars and hybrids. While the market for EVs is an exciting issue in itself, we are also interested in the environmental aspect, including the potential impact on global warming and air pollution because corporate social responsibility plays such an important role in corporate strategy in today's environmentally conscious culture. At the end of our analysis, we hope to be able to conclude that EV performance will continue to improve, their prices will continue to fall to match gasoline cars and that the EV will grow to become much more than a niche car for green consumers.

Should the electric car become accessible to the masses, we would also like to analyze how the value chain would be affected. The value chain does not end when the automobile is driven off the lot, but continues through the life of the car. Service companies, gas stations, and repair shops will all have to change their strategies to accommodate the electric models. The advent of the electric will bring a drastic change to the automobile value chain.

Our Choice of Competitor: Tesla

Tesla is a particularly interesting competitor to examine because it is a small start up that only offers electric vehicles. On May 28, 2013 Tesla's stock price closed at an all time high of 110$, more than three times its stock price at the same time last year and more than five times its July, 2010 IPO price. Tesla and its sporty Roadster model has become a symbol for a sexy "new" industry of plug-in electric vehicles. In an industry where scope and scale give enormous competitive advantages and where barriers to entry are extremely high, it seems hard to believe that a small Silicon Valley start up could gain so much success in the short 9 years of its existence. Moreover, though it is currently not making a profit, with an EPS of -2.84, its stock price and 12.75B market cap indicate that investors are very optimistic about its future.

We want to examine how Tesla has been able to grow and compete in an industry completely dominated by the Big Three (Ford, GM and Chrysler), since the last American independent automaker, American Motors, was acquired by Chrysler 1987. We also want to identify the factors that will be crucial in contributing to its long term survival. We feel that there are important lessons to be learned on how to create a market where none exists as well as how to break into a market with extremely high barriers to entry.

Planned Table of Contents:

1. Industry Analysis

a) Brief Summary and History of the Electric Auto-Industry

b) Past Failures and Recent Successes

i. An analysis of why the EV had previously entered and disappeared from the marketplace.

ii. An analysis of why the EV can be expected to stay for good this time.

2. Competitor Analysis

a) Tesla's Role in the Resurgence of EV popularity:

i. Brief Summary and History of Tesla.

b) Reasons for Success: How Tesla Creates Value for Stakeholders

i. Product Differentiation

* A value chain analysis of Tesla's products.

* And comparison of Tesla's products against competitors'.

ii. Tesla's Direct-to-Consumer business model

* A look how Tesla's business model differs from competitors including the advantages and challenges the model faces.

iii. Tesla Management & Strategy

* An analysis of Elon Musk's management style and how closely Tesla has been following the strategy outlined in its 2010 prospectus.

c) What the Future holds for Tesla

i. Tesla's ability to meet market expectations and its own lofty goals against industry giants.

Timeline

Research Tools to be Utilized:

 Tesla Website: Investor Information Section

o To look for statements