Lower price and drastically increase profit

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lower price, and drastically increase profit possibilities), there is a chance that prices for all electric automobiles will have to be lowered. If this happens, the cost of manufacturing would be significantly higher than the selling point and profit margins would become nonexistent for many companies in the Page 2
Tesla Case Studyindustry, including Tesla. Fortunately, threat of new entry in this industry is low; it would take incredibleinvestments in R&D to produce electric vehicles with competitive price points faster than Tesla could theoretically. Power of Suppliers: For electric vehicles, the battery remains the most expensive part of the car and is subject to deterioration over its lifetime. Many experts claim that problems that exist in the production of batteries could be number one constraint for the electric-car industry. Unless U.S. put serious researchand resources into developing a cutting-edge battery very soon, “the nation may achieve a Pyrrhic victory, breaking an addition to imported oil through the use of electric cars but replacing it with a dependence on imported batteries. This dependence would give phenomenal power to first-mover suppliers. BYD Motors has developed lithium iron phosphate batteries which has accomplished several electric car feats. Tesla has “committed to building a facility in Nevada to build its own lithium-iron battery intended to produce 500,000 battery packs a year” but they are still currently at a disadvantage (page 9).Threat of Substitutes: Tesla vehicles are very specialized, customized, and have won numerous awards for their quality throughout the years. As far as pure-electric vehicles are considered, there is no better substitute and virtually no other options. (There is a high risk of complements on the other hand according to the general consumer. Hybrid electric vehicles are selling at an increasing rate since 2011.)Rivalry Among Existing Competitors: Tesla has worked very hard to position itself as a high quality provider of top-of-the line electric vehicles. As aforementioned, other companies have entered the market with hybrids, ethanol, and other forms of alternative fuel sourced vehicles, but as far as maintaining pure-electric as their niche, Tesla has protected it well. How should Tesla position itself?Taking into account all of these factors, Tesla should focus on strengthening their weak spot – power of suppliers. They should (as they plan to) work hard to ensure their 2017 plan to produce a lithium ion production plant comes to fruition to lessen their vulnerability to disruptions and increased costs in production. If they can successfully scale their business and ensure mass production of batteries, they can roll out vehicles much faster and much cheaper allowing them to capture the entirety of the pure-electric market. Tesla could also consider making vehicles for the average consumer to lessen the power of buyers.

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