Tesla Motors Harvard Case Solution & Analysis

Tesla Motors


Tesla Motors is an American company that is engaged in the manufacturing, designing and selling of electric cars and electric power-train vehicle as well. The company was founded by a famous group of brilliant and innovative silicon engineers in 2003. According to those engineers, these electric vehicles can be the best alternative of gasoline products and cars. The services of the company include marketing, designing and production of electric cars, but it is also involved in providing power train components. These electric power train vehicles are then sold to other automakers as Toyota and Daimler. The company is headquartered in California along with its subsidiaries that are wholly-owned and are based in Asia, North America and Europe. Currently, the human resource of the company includes 2000 employees.

Problem Identification:

The company is planning to launch a new model for its car named as; the model X. Previously, the company has launched its first mass-produced car that was the model X and received positive reviews about it. The company was planning to become the first company to enter in a US market and was skeptical about the success of the company. Moreover, the company was taking orders from the customers for its upcoming model, the model X and worried about the success or failure rates of the model.

External Analysis:

General environment:


The main target market of the company is the upper middle class who can afford the expensive and luxurious cars and the individuals with high income. As the economy is growing, the inequality in the distribution of income is increasing, and more and more cash is going to the rich individuals who already have excess income. In addition to that, these wealthy individuals are only 10% of the world population.


Because of the great recession in United States, the unemployment rate in U.S has been continuously increasing. Increase in the unemployment rate resulted in less spending from the individuals as they become more conservative in spending money because of the limited income. Tesla Motors faced a decrease in the demand of luxurious cars because of the adverse economic conditions but still the company has a competitive edge in making electric vehicle because the price of gasoline is continuously increasing.


Legal authorities and government are optimistic and are appreciating the concept of EV. In addition, they are helping those companies that are engaged in the production of electronic vehicle. According to the regulatory body of U.S, this form of transportation technology will be a good alternative as it promotes the concept of zero gas emissions. The government is providing policies in terms of subsidies that help the producers of electric vehicles. With the help of these kinds of subsidies, the government is motivating the producers to work more on technological advancements in the automobile industry.


In the 20th century, one of the major concerns for every individual is increase in global warming and gasoline along with gas related products are a primary reason for these excess gas emissions. In order to reduce global warming, manufacturers and producers of automobiles are putting their efforts to decrease the gas emissions. Gradually, companies are becoming aware of the negative consequences of the gasoline products and are trying to make their products more environment-friendly.

Industry Analysis:

Porter’s five force analysis has been done to analyze the automobile industry.

Bargaining power of buyers:

For Tesla Motors, bargaining power of buyers is found to be low because the company has positioned itself as a premium and luxurious brand. This sort of positioning is due to the high cost for its advanced technology. The prices traded in the market will not be affected to a large extent by the demand in the market. The company often needs to increase the price according to the market in order to cover the cost of production just to achieve the break-even level.

Bargaining power of suppliers:

The bargaining power of suppliers for Tesla Motors is found to be very high because of several reasons. One of the major reasons for high bargaining power of suppliers was because the goods supplied by supplier were not of a commodity type. As the equipment used in Tesla Motors automobile is of a wide variety, therefore; it needs to maintain good relationships with different suppliers to maintain the manufacturing process. The company often comes in pressure of suppliers because of limited suppliers for its automobile parts thus; suppliers are at an advantage to rule the prices of the goods.

Threat of new entrants:

Threat of new entrants in the automobile industry is found to be low. The reason behind low threat of new entrants is because of the more substantial investment required for the entrance. The companies required high initial investment because the industry is full of technological advancement. In addition to that, customers always analyze and think about the quality of the cars in order to make a decision regarding the purchase of an automobile; thus their judgments are mostly affected by the brand ....................................

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