Tesla Motors Case Study

Case Study: Tesla Motors

Tesla Motors began with the original concept of creating a fully electric high performance vehicle. The idea of the Tesla Roadster was originally developed by Martin Eberhard and Marc Tarpenning. It wasn't until 2004 when Elon Musk took an active role in the company that the Tesla Roadster began to take shape. The Tesla Roadster changed the idea that electric cars had to be slow and awkward looking. In this case study I will be exploring the development of Tesla Motors in the automotive industry as well as a detailed analysis of the challenges this company faces in becoming the next mainstream automaker.

Although at the innovative forefront of EV technology, Tesla Motors is facing many challenges in becoming a successful auto manufacturer. The main challenge is that Tesla Motors has yet to earn any profits to date. This is due in part to the high cost of research and development of their electric power train. Another challenge the company faces is the cost of expanding marketing and sales operations. Under Tesla's current business model vehicles are sold directly to the customer via the internet or corporate owned Tesla Stores. This is a challenge because most states in the U.S. do not allow auto manufacturers to sell their vehicles directly to consumers. Most states require that vehicles be sold through independent dealerships or have a physical presence in that state. The largest challenge that Tesla faces is creating an efficient and low cost manufacturing system. Management at Tesla admits that it has no experience in high volume manufacturing and does not know if they will be able to sustain such a system. A problem relating to this challenge is securing reliable sources of components. Tesla is reliant on few suppliers, so they are limited in manufacturing components and resources.

Tesla's retail model and manufacturing system was developed by its current board and management team, some decisions in implementing these aspects of their operation has presented the company with their current challenges. The decision to sell production vehicles directly to consumers has so far hindered the company's ability to reach the consumer due to restrictions in most states, although their intent was to gain a better relationship with their customers and use customer feedback to further develop their product. Also basing their initial product, the Tesla Roadster, on a design from Lotus has put a limit on how many models they can produce. Tesla's contract with Lotus was to produce only 2400 "gliders" (the chassis vehicle). Tesla's production future greatly depends on securing a new supply of chassis either by manufacturing "gliders" themselves or renewing a contract with Lotus.

Tesla has been met with natural and societal environmental factors that both have a negative and a positive impact on the company. Developing efficient alternative energy vehicles that have zero emissions has become a worldwide goal in order to reduce pollution and reduce dependency on oil. This shift to creating clean alternatives creates an opportunity for Tesla and is a positive societal environmental factor. However, with world economies still feeling the effects