Tesla Motors, Inc. Business Case

Tesla Motors, Inc. Business Case
Question #1
The electric vehicles (EV) are not comparable to the internal combustion engines (ICE) technology vehicles. The ICE vehicles depend on imported oil, thereby subjecting the car owners to unpredictable fuel prices, and cause environmental pollution through carbon emission. Unlike the EV, oil is not used for the vehicle motion, and, therefore, no carbon emission is associated with these types of vehicles (Lu et al., 2013). Furthermore, the car owners are not affected by the fluctuating prices of fuel across the globe. Also, the EVs can easily contribute to the achievement of the additional scale of economies to a company that manufactures them. This is possible because the company can lower the target market price by reducing the battery prices. On the other hand, Lu et al. (2013) explain that when comparing the charges per mile, depending on the electricity costs, the average fuel cost of the EVs is 3.5 cents per mile, while that of the ICE is about 16 cents or more a mile. Similarly, the EVs can be recharged at night, and their maintenance costs are also reduced because they do not require belts, oil, and filters as with the ICE (Lu et al., 2013). However, sin the oil prices vary, during the periods of lower prices of fuel, the competitive advantage of EVs in regards to the operating costs is reduced as the EVs’ savings over ICE rely on prices of fuel.
EVs also represent a disruptive technology. With the innovative electric powertrain technology, there can be a technological transformation through the production of the EVs.

The vehicles have gained a competitive edge in the automotive industry due to the advantages it presents. The advantages have made the vehicle to capture a significant market share of the other types of vehicles, including the ICE and hybrid vehicles. One of the advantages it presents is that it can cover over 1500 miles without any replacements or repairs (Lu et al., 2013). The product line consists of different types of cars like the Tesla Roadster that has exceptional properties such as superior performance, zero emissions, high-quality and attractive design and structure, and industry-best extended scale. Others have reduced car weight and lower center of gravity that improves the car balance when in motion. The EVs comprise advanced technologies that are almost incomparable with other vehicles, enabling it to gain access to larger and new markets. It also has software and autopilot system that enhance the operations of the car, including the real-time traffic-centered navigation (Lu et al., 2013).
Question #2
The motivations behind the EVs purchase over the ICE vehicles are numerous. Firstly, due to the volatility of the fuel and oil prices, customers are inclined to incur extra costs when the oil prices are higher (Lu et al., 2013). Thus, because the EVs are not impacted by the changing fuel and oil prices, customers will consider fuel charges as a factor when purchasing. Secondly, the maintenance and operating costs can also be a factor. The EVs can be purchased more likely than the ICE vehicles because they can cover a longer distance without any replacement or repairs. They are stronger and more efficient than the ICE. Therefore, with the electricity charges kept low, customers will consider the maintenance and operating cost as another factor when purchasing the vehicles (Lu et al., 2013). Another factor that can be considered is the benefits and conveniences that the EVs bring over the ICE vehicles. The EVs have the superior performance, no environmental pollution, and carbon discharge, their battery can be recharged, and they have integrated software that offers additional services such as concurrent traffic-based navigation (Lu et al., 2013).
The implications for these considerations are important for Tesla Company. The implication for Tesla concerning the customers’ consideration to purchase the EVs over the ICE vehicles is that they have to improve and maintain the superior performance of these vehicles to match the customers’ needs (Lu et al., 2013). They have to be keen on the fuel charges reductions that can reduce the savings that EVs have over the ICE vehicles. Furthermore, they have to ensure that they reach the new market segments where they can sell to the customers situated in areas with the ICE vehicles. In other words, Tesla must execute ways of expanding its new markets and increase the number of vehicles produced to match the rising demand for them. Finally, the sales and marketing personnel of the company should come up with new marketing strategies to obtain the required sales volume and profits as a result of the customer preferences of the EVs over the ICE vehicles.
Question #3
Tesla should apply the direct sales business model to increase its profits and sales revenue. This should be done via the establishment of an international system of firm-owned showrooms and galleries in large cities across the globe. The product development and improved customer buying experience can be realized through the ownership of the sales channel. The customers will contact Tesla sales and service personnel that operate in the 159 sites of the company, including the showrooms, service facilities, and service plus locations. The future sales under this model are forecasted to be 525,000 by the year 2020. The number includes 400,000 for Model 3 vehicle, 56,000 for Model X, and 69,000 for Model S (Lu et al., 2013).
With the combination of the direct sales business model and effective sales strategies, Tesla is most likely to achieve long-term success. For example, Lu et al. (2013) clarify that depending on the car model; the sales alternative can generate additional revenue per vehicle, between $8,000 and 15,000 per car. One of the sales strategies in place is the network of battery charging stations that have free refueling in Europe and the US, to receive 50% battery recharge for 20 minutes (Lu et al., 2013). The locations of these superchargers are convenient for the drivers along the highways. The investment in production and R&D will enable the company to cover up the unit costs via increasing sales volumes and economies of scale.
Question #4
The traditional auto companies can react by modifying their vehicles to meet the requirements of the customers. The aspects of performance, maintenance and operating costs, additional services like real-time traffic navigation, and covering long distances without repairs, can be incorporated into the traditional vehicles to put them in a better competitive position in the industry. They can also manufacture cars that consume lower amount of fuel to meet the criteria made by customers when they purchase the cars. Besides, the traditional auto vehicles can also pose a threat to Tesla in regards to the market share and the number of customers. With the relatively cheaper ICE vehicles as compared to the EVs and the circumstances of reduced operating and maintenance cost due to lower prices during the periods of reduced fuel and oil prices, the traditional auto firms can cause a threat to Tesla (Lu et al., 2013). A significant number of customers can divert their purchases towards the traditional vehicles.
Question #5
To achieve the long-term success, Tesla needs to adopt new ways of conducting its business. Accordingly, it should consider using the Internet sales so that the clients can customize and buy the products online. It can also expand its sales and service center where customers can charge and service their cars. The mobile technicians can also assist these customers in servicing their cars from their premises. These steps can boost the company’s sales volume and customer demand. Ultimately, the supercharger networks can also contribute to the success of Tesla (Lu et al., 2013). The supercharger stations will also facilitate the frequency of adoption for electric vehicles. This will make the consumers easily use the vehicles as charging them will not be a concern.

References
Lu, L., Han, X., Li, J., Hua, J., & Ouyang, M. (2013). A Review on the Key Issues for Lithium-Ion Battery Management in Electric Vehicles. Journal of Power Sources, 226, 272-288.